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California Economic Condition & the Health of Regions John Husing, Ph.D. Economics & Politics, Inc.

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Presentation on theme: "California Economic Condition & the Health of Regions John Husing, Ph.D. Economics & Politics, Inc."— Presentation transcript:

1 California Economic Condition & the Health of Regions John Husing, Ph.D. Economics & Politics, Inc.

2 1.General Economy’s Problems Recede Starting To Recede

3 After Losing 8.74 Million Jobs … U.S. Job Creation Is Crawling Back

4 V Pattern of Likely Recovery U x x

5 Congressional Madness

6 U.S. Economy??? Fiscal Cliff

7 Worst National Unemployment Rates U.S. 8.6% CA 10.9%

8 V Pattern of Likely Recovery U x x

9 Congressional Madness

10 U.S. Economy??? Fiscal Cliff

11 Down U.S. & California Unemployment Rates Trend is Down 200120022003200420052006200720082009201020112012 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0% 10.0% 11.0% 12.0% 13.0% 14.0% U.S.California Source: U.S. Bureau of Labor Statistics, CA Employment Development Department Unemployment History U.S. & California, 2001-2012 8.2% 10.4%

12 Worst National Unemployment Rates U.S. 8.6% CA 10.9%

13 CA Has Lost Every Job Created Since Mid-1999 Back to 2003 CA Legislature Seems To Have Little Interest In This Fact

14 California’s Job Creation/Losses Defense Cutbacks Dot.ComGreat Recession

15 CA Sector Growth & Decline August 2011-2012 18,100 15,475 (763) Distribution & Transport Construction Manufacturing 32,100 30,825 28,950 8,875 1,650 938 (650) (2,988) Employment Agcy Eating & Drinking Retail Trade Accommodation Agriculture Social Assistance Amusement Other Services 463 (8,538) Mgmt & Professions Local Government 46,163 9,838 613 (9,850) Higher Education Mining Utilities Federal & State 34,775 17,113 15,150 11,500 (12,700) Publish, telecom, Other Admin. Support Financial Activities Health Care Other Education Source: CA Employment Development Department Exhibit 8.-Job Growth Advantages & Disadvantages California Job Growth, August 2011-2012 272,525 -35,488

16 Unemployment by Market Area Avg. Jan-Aug 2012 CA = 10.6% So. California Central Coast Bay Area Sacramento I-80 Central Valley 3. 10.6% 2. 9.6% 1. 8.4% 4. 11.4% 5. 15.1%

17 Where Are Job Gains Avg. Jan-Aug 2012 CA = 238,196 1.64% So. California Central Coast Bay Area Sacramento I-80 Central Valley 1. 105,197 1.33% 44.2% 4. 16,430 3.00% 6.9% 2. 75,317 2.40% 31.6% 5. 6,413 0.63% 2.7% 3. 19,085 1.52% 8.0%

18 Gold Mine Theory Primary Tier Secondary Tier Economic Drivers

19 Green ConstructionManufacturing Tourism Trade Bio-Tech Logistics Motion Pictures Computer GamesHealth Care Information Agriculture “Gold Mines What’s The Status of So. California’s “Gold Mines?” D Bottom C Unstable Regulators B Inventory C Inventory B $ Helps Incomplete? Unstable Regulators B Strong A- Strong B Strong C- $ May Help A- Boomers A- Dollar

20 The Great Economic Threat California Grabbing Money From Local Government

21 Long Term: Strangling Growth CA

22 2. Tax Base Considerations Assessed Valuation CAO/City Manager Counseling

23 So. California Central Coast Bay Area Northern Sacramento I-80 Central Valley 4. -3.6% 3. -2.6% 1. -1.3% 6. -12.1% 2. -2.2% 5. -5.4% FY 2009 to FY 2012 Assessed Valuation % Change CA -3.8%

24 So. California Central Coast Bay Area Northern Sacramento I-80 Central Valley 1. -$89.0 B 51.7% 5. -$4.9 B 2.8% 4. -$14.2 B 8.2% 2. -$47.0 B 27.3% 6. -$2.0 B 1.1% 3. -$15.2 B 8.8% FY 2009-2012 Assessed Valuation Decline CA -$172 Billion

25 Gains FY 2009 to FY2012 Percent AV Gains FY 2009 to FY2012 Colusa$679,666,84025.8% San Francisco$17,375,259,58612.3% Trinity$106,696,9309.3% Humboldt$671,453,3356.3% Kings$244,293,6262.8% Santa Barbara$1,545,095,9062.5% Mendocino$204,025,2402.1% Napa$532,896,9812.0% Del Norte$29,494,1431.7% Marin$722,357,9551.3% Siskiyou$25,072,5600.6% Kern$425,051,2970.5% San Mateo$428,634,7770.3%

26 Losses FY 2009 to FY2012 Largest Percent AV Losses FY 2009 to FY2012 Shasta($1,713,831,183)-10.4% San Bernardino($19,646,919,334)-10.6% Placer($6,445,290,638)-10.9% Madera($1,459,832,632)-11.9% Sacramento($16,766,074,365)-12.3% Yuba($692,994,373)-12.9% Plumas($557,756,508)-13.0% Solano($6,481,892,146)-14.1% Stanislaus($5,630,188,000)-14.1% San Benito($996,855,852)-14.9% Riverside($37,655,720,162)-15.6% San Joaquin($10,790,493,651)-17.0% Merced($3,522,361,333)-17.7% Calaveras($1,363,977,244)-19.1%

27 Residential Markets: When Is The End?

28 Underwater Homes San Francisco14% Santa Clara19% San Mateo20% Orange24% Los Angeles30% Alameda31% San Diego34% Riverside51% San Bernardino52% Fresno53% Madera54% Sacramento55% Tulare57% Kern58% Imperial59% San Joaquin59% Merced61%

29 San Bernardino78 Solano (Vallejo)77 Merced77 Kings75 Madera74 Sacramento74 Fresno71 Riverside65 Monterey55 Napa50 Sonoma49 Los Angeles49 Ventura48 San Diego44 San Luis Obispo41 Alameda38 Orange35 Santa Cruz34 Santa Clara32 Santa Barbara32 Marin27 Contra-Costa26 San Francisco24 San Mateo23 Affordability

30 So. California Central Coast Bay Area Central Valley Feb-2012 Median Price Coast vs. Inland Sacramento I-80 3. $272,611 2. $291,312 1. $371,182 4. $175,855 5. $170,635 6. $125,584 North

31 Underwater Inland Empire Homes

32 When Does Foreclosure Crisis End? If No Demand Growth, No Gov’t Solution

33 How This Ends: A Housing Shortage 106,230 During 2008 thru 2011 California Population Grew by 1,026,471

34 Office Vacancy Weak Almost Everywhere! 20092012 2005/200620092012 24.3% 26.9% Inland Empire10.5% 24.3% 26.9% 21.4% 22.7% Sacramento13.5%21.4% 22.7% 18.0% 20.8% Orange County 8.0%18.0% 20.8% 15.6% 17.8% Oakland16.5%15.6% 17.8% 16.3% 16.0% Los Angeles County12.2%16.3% 16.0% 19.2% 15.5% San Diego 9.0%19.2% 15.5% 13.8% Fresno 13.8% 14.9% 9.7% San Francisco13.0%14.9% 9.7% 20.5% 9.0% Santa Clara16.0%20.5% 9.0%

35 Industrial Vacancy Rate Down Almost Everywhere! 20092012 2005/200620092012 12.3% 13.4% Sacramento10.5%12.3% 13.4% 9.8% Fresno 9.8% 12.0% 9.9% San Diego 7.0%12.0% 9.9% 13.9% 7.6% Silicon Valley 14.4%13.9% 7.6% 12.8%6.6% Inland Empire 2.7% 12.8%6.6% 8.9% 5.1% Oakland 6.0% 8.9% 5.1% 6.5%3.5% Orange County 5.4% 6.5% 3.5% 3.2% 2.7% Los Angeles County 2.1% 3.2% 2.7%

36 Assess Valuation Future FY 2013 A Mixed Year

37 3. Tax Base Considerations Sales Taxes: A Serious Problem CAO/City Manager’s Office

38 Gold Mine Theory Primary Tier Secondary Tier Retail Sales

39 So. California Central Coast Bay Area Sacramento I-80 Central Valley 3 6.7% 4. 6.3% 2. 7.5% 1. 7.9% 4. 6.3% 2 nd Qtr. 2011-2012 Change In Retail Sales CA = 6.8%

40 So. California Central Coast Bay Area Sacramento I-80 Central Valley 1. $752.2 B 53.2% 5. $49.7 B 3.5% 2. $310.7 B 22.0% 4. $100.7 B 7.1% 3. $137.1 B 9.7% 2 nd Qtr. 2012 Total Retail Sales CA = 1,413.0 B 6.8%

41 Retail Sales Future 2012 Continued Improvement Still Below Highs

42 4. Economic Development It is A Competition

43 Who Was Hurt By The Recession Least Hurt = 12 4. So. California 1. Central Coast 2. Bay Area 3. Northern 6. Sacramento I-80 5. Central Valley 45 28 30 52 41 48 Environmental Issues Take Precedence Job Worries Take Precedence

44 California Governing Philosophy Command & Control Markets Vs.

45 California Ranks Last in the U.S. For Business Location - Forbes -

46 Unstable Regulatory Commands If A Business Can’t Plan, They Won’t Come or Stay

47 Exhibit 72.-State Taxes, 2011 Business IncomeIndividual Income State/Local Sales Tax Gasoline Tax Property Tax per capita California 8.84%9.55%8.25%46.1$1,397 Oregon 7.90%9.00%0.00%25.0$1,167 Arizona 6.97%4.24%6.60%19.0$1,139 New Mexico 6.40%4.90%5.13%18.8$589 Utah 5.00%0.00%5.95%24.5$846 Colorado 4.63% 2.90%22.0$1,322 Nevada 0.00% 6.85%33.1$1,344 Texas 0.00% 6.25%20.0$1,600 Washington 0.00% 6.50%37.5$1,257 State Taxes Highest 2nd Highest

48 Electrify Southern California? Electrical Rates

49 Electrify Southern California? Natural Gas Rates

50 State Mandated Costs Not Found Elsewhere In U.S. Overtime After 8 Hours … Not 40 Hour Week Mandatory Family Leave

51 Dysfunctional State Government California Bond Rating Drops Lower Than Any Other State's

52 Lack of Investment In Aging & Missing Infrastructure Grade Separations

53 Transit Oriented Housing Not Without Tax Increment Financing!

54 Modestly Trained Labor Force K-12 Performance38 th Pew Center for States Share of Adults: No College44.9% Census Bureau, 2010 Education Funding Per Capita27 th Public Policy Institute

55 How Minnesota Can Avoid the "California Spiral"

56 CA Long Term Future? Command & Control Markets Vs. ?

57 While Waiting For Complete Recovery….

58 www.johnhusing.com


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