Regional Overview and Outlook 2018 10/11/17 Regional Overview and Outlook 2018 Robert A. Kleinhenz, Ph.D. Economist & Executive Director of Research Beacon Economics, LLC Thank you for joining me today. PIMCO’s time-tested investment process combines top down macro-economic analysis with bottom-up security selection. That macro-economic view is developed at the firm’s annual Secular Forum. I’d like to spend a few minutes explaining to what the Forum is and then share with you the findings from this year’s meeting and the implications for your clients. SoCal Visitors Industry Outlook 2018 29th Annual Conference October 20, 2017

Outline U.S./CA Economy So Cal Economy So Cal Visitors Industry Conclusion/Looking Ahead

US/CA Economy

CA Labor Market at Full Employment 10/11/17 CA Labor Market at Full Employment Unemployment Rate, Seasonally Adjusted *UPDATED http://www.bls.gov/news.release/empsit.nr0.htm 9/20/17 Beacon Economics/KLEINHENZ

CA Adding Jobs Faster than U.S. 10/11/17 CA Adding Jobs Faster than U.S. YTY % change in nonfarm jobs, seasonally adjusted Source: ChrisbookNew, tab “National” and tab “Emp” May need to manually compute YoY % Change Updated: 9/20/17

GDP ~2%, Consumer Exp Steady 10/11/17 GDP ~2%, Consumer Exp Steady Contributions to Change in GDP 2015 2016 2017Q2 GDP % Chg 2.9 1.5 3.1 Contributions in % Consumer 2.5 1.9 2.2 Investment 0.9 -0.3 0.6 Net exports -0.7 -0.2 0.2 Government 0.1 0.0 Chart – updated 10/10/17 Table – Updated 10/10/17 Source: GDP Chart: BEA Table 1.1.1.

Gross State Product: YTY % Changes CA Among Fastest Growing States 10/11/17 Gross State Product: YTY % Changes CA Among Fastest Growing States Clarissa: Updated

Inflation Historically Low But Rising 10/11/17 Inflation Historically Low But Rising Rak 9/25/17 CPI Headline RAte Kyser Center for Economic Research

Southern California Outlook 10/11/17 Southern California Outlook

Overall Job Growth Slowing… 10/11/17 Overall Job Growth Slowing… Updated 9/20/17

…and Across Industries (LA County Shown)

Southern California Visitor/Hospitality Industry 10/11/17 Southern California Visitor/Hospitality Industry

Hospitality-Leading Industry Cluster Traded Industry Clusters-Los Angeles County: US Rank and Employment Visitor Industry… Among the top clusters in nation!! LA #3 in U.S. OC #5 “ SD #6 “ IE #18 “

Leisure & Hospitality 2017 YTD: Aug ’17 IE: +4.4% LA: +2.1% OC: +1.5% 10/11/17 Leisure & Hospitality 2017 YTD: Aug ’17 IE: +4.4% LA: +2.1% OC: +1.5% VN: +4.3%

Job Opening Rates by Industry, US

Occupancy Rates Leveling Out

Hotel Picture Positive

Taxable Receipts in CA- Hotels and Food

Airport Traffic Trending Higher Total Airport Traffic by County Region Traffic (June 2017) 1-year % change 3-year % change Los Angeles County 7,663,678 4.5 18.2 Orange County 860,713 -1.7 7.9 San Diego County 1,881,099 11.9 20.2

Conclusion

2018 Outlook Now at full-employment locally, statewide & nationally --- positions harder to fill US & CA growth steady – NO RECESSION Leading industries: health care, construction, leisure and hospitality, trans/warehousing, pro/sci/tech 2018 Visitor Industry Outlook – steady improvement

10/11/17 Thank You! Our Services Economic & Revenue Forecasting Regional Intelligence Reports Business & Market Analysis Real Estate Market Analysis Ports & Infrastructure Analysis Economic Impact Analysis Public Policy Analysis To view or download this presentation or for further information, visit: www.BeaconEcon.com Contact Robert Kleinhenz Robert@BeaconEcon.com 310-571-3399