1. John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP
So. California Prosperity . . .
John Husing, Ph.D.
Economics & Politics, Inc.
Chief Economist, IEEP

2. Now What?
After Losing 8.71 Million Jobs … Now At A Record Level of Jobs U.S. Jobs Long Slow Growth - Not Over-Heating

3. Unemployment Rates: Full Employment
18.0%
10.6%
9.1%
4.4%

4. Cut Taxes … Increase Spending
Lower Taxes
Massive Increase in Spending on Infrastructure
Result: Increased Deficit Spending Increased Upward Pressure on Employment
Increased Pressure On Prices
FED Rate Increase Needed to Reduce Economic Pressure

5. Interest Rate History 10 year Fixed Rate

7. California Job Gains/LossesUp
1,064,038
6.7% Up
2007
15,844,325
2016
16,908,363
Recovery
2,243,097
Great
Recession
-1,179,058

8. Southern California

9. 9 Southern County Economy Gaining Strength!

10. Job Quality: Split

11. California’s Fastest Growing Metropolitan Areas in 2015!

12. Unemployment Rates

13. The Issue: Poverty

14. Gold Mine Theory
Secondary Tier
Primary Tier

15. Sophisticated Warehousing Operations

16. Value of the Dollar: Helps Imports & Hurts Exports
100.0 %

17. Port Container Volumes On Pace To Tie 2nd Highest Import Level

18. Place Tariffs on Imports
Imports More Expensive
Lower Foreign Imports & Hurts the Inland Empire
Reduced U.S. Jobs Handling Imports
Improve U.S. Manufacturing Jobs except for Automation Losses
Higher Prices At Retail Stores

19. Corporate Taxes Based on U.S. Sales not Income
Retailer Buys U.S. Goods for $80 … Sell in U.S. For $100 … Pay Taxes on $20
Retailer Buy Imports for $80 … Sell in U.S. For $100 …
Pay Tax on $100
Mfg. Makes U.S. Goods for $80 … Sells Abroad for $100 … Pay $0 Taxes
Removes Incentive to Put HQ Abroad to Avoid U.S. Taxes
Discourages Imports & Hurts the Inland Empire
Encourages Exports
Could Bring Billions of Dollars Back to the U.S.

20. E-Commerce Growth Rates Year Over Year by Quarter
1.1%
8.4%

21. Net Industrial Space Absorption
19.4 Million Sq. Ft.

22. Industrial Overwhelmingly In The Inland Empire

23. Industrial Vacancy Rate Low Everywhere!
2005/ Q Q3
San Diego % % %
Inland Empire 2.7% % 4.3%
Central Valley NA NA 2.0%
Orange Co % % 1.4%
L.A. Co % % 1.0%
Source: CB Richard Ellis

24. Industrial Asking Price Per SF/Mo.
Central Valley $0.36
Inland Empire $0.52
Ventura $0.65
Los Angeles $0.74
Orange $0.84
San Diego $0.85
Source: CB Richard Ellis

25. Logistics Powerful Job Growth
10.7% of New Jobs
Median Pay $45,456

26. Manufacturing: Should Be A Major Growth Source

27. California Manufacturing Job Growth Just 4.8% of U.S. Growth

29. Manufacturing Jobs
1.8% of Job Growth
Median Pay $52,000

30. Construction: Finally Coming Back

31. Massive Infrastructure Spending
Tariffs Affect Imports
Potential For Higher Interest Rates
Privatize Fannie Mae & Freddie Mac But Leave FHA Alone
Dollars For Freeways, Airports Transit, Harbors, Rail Lines
Greater Union Construction Job Growth
CA Opposition to Trump & CA Environmental Policies
Reduced Construction of Logistics Facilities
Lower Construction Job Growth
Fed Already Discussing More Rate Rises In 2017 Due to Hot Economy
Housing More Expensive
Dampen Home Sales & Residential Construction Jobs
All Mortgages Rates Act Like Jumbo Rates – Some Increase in Rates
Housing More Expensive
Still Have Lower Down Payments For Qualifying Homes
Dampen Home Sales & Residential Construction Jobs

32. Residential Prices

33. Share of Local Population Can Afford the Median SFR Home

34. Construction Jobs
9.8% of Job Growth
Median Pay $52,000

35. Health Care

36. Repeal & Replace Affordable Care Act
Repeal Without Replacement Could Unsettle Insurance Market
Impact of Repeal & Replace Together Depends Upon Conditions
Remove Penalty For Not Having Insurance
Previous Medical Conditions Use Subsidized High Risk Pool
Children Stay on Parents Insurance Until 26
Eliminate Mandated Maternity & Mental Health Coverage
End Subsidies & Give Refundable Tax Credits For Coverage If No Employer Coverage
End Federal Subsidies for Medicaid, Use State Block Grants
Create Multi-State Insurance Markets

37. Potential Impact On Health Care Demand & Quality of Life
1,800,482 Drop in Uninsured
-46.5% Drop in Share Uninsured

38. Health Care Jobs: Continuous Growth
11.7% of Job Growth
Median Pay $60,000

39. High Paying Sectors
Jack Dangermond
Ahmad Adel Al-Khatib

40. BA or Higher

41. Office Vacancy Rates Recovering But Remain High!
Inland Empire 7.6% % 13.8%
Ventura NA NA 13.8%
L.A. Co % % 13.4%
Central NA NA 11.9%
San Diego % % %
Orange Co % % 9.7%
2006Q Q Q3
Source: CB Richard Ellis

42. Office Asking Rate Per Sq. Ft./Month
Central Valley $1.44
Inland Empire $1.85
Ventura $2.23
Orange $2.57
San Diego $2.78
Los Angeles $3.07
Source: CB Richard Ellis

43. Professionals & Mgmt. , Higher Ed
Professionals & Mgmt., Higher Ed., Mining Utilities, Information Group Slowly Adding Jobs
8.9% of Growth
Median Pay $75,000

44. Government

45. Shrink Government Expand Military
Continued Decline in Non-Defense Government Jobs
Increase in Civilians & Military Defense Positions
Twenty-Nine Palms Marine Corps, San Bernardino Co.
Fort Irwin, San Bernardino Co.
March Air Reserve Base, Riverside Co.
Naval Surface Warfare Center, Corona; China Lake Naval Test Ctr.
Edwards Air Force Base, Kern County
Naval & Marine Corps Bases, San Diego
Naval Base, Oxnard
Air Force Missile Base, Los Angeles
Skunk Works, Boeing, Other Defense Contractors

46. Federal, State, Local Government
-0.3% of Job Growth
Median Pay $62,000

47. Change In Corporate Tax Code
Hurt Retailers, Who Will Be Taxed on Domestic Sales Not Just Income
Reduced Retail Job Growth Already hurt by E-Commerce

48. Low Paying Job Growth Retail, Consumer & Bus
Low Paying Job Growth Retail, Consumer & Bus. Services, Hotel, Eat & Drink Amusement, Agriculture, Employment Agency
44.6% of Job Growth
Median Pay $30,000

49. Retail Vacancy Rate Inland Empire 8.9% San Diego 5.7% Los Angeles 4.6%
Orange %
Ventura %
Source: CB Richard Ellis

50. Retail Asking Rate Per Sq. Ft./Month
Inland Empire $1.95
San Diego $2.21
Orange $2.25
Ventura $2.30
Los Angeles $2.47
Source: CB Richard Ellis

51. Summary: Look Ahead Trump Impacts Hit Mostly in 2018
Health Care Strong But Under ACA Repeal Threat
Logistics Strong But Under Tariff Threat
Manufacturing Encouraging Except For CA Environment
Infrastructure Construction Helped By More Spending Except For CA Environment
Interest Rates Likely To Rise More Than Anticipated
Residential Market Stabilized But Possibly Hurt By Rates
Industrial Construction Strong But Under Tariff Threat
Office Market Weak Due to E-Commerce & Vacancy Levels
Retailers Modest Growth But Under Threat from Tariffs & E-Commerce