1. Inland Empire’s Economy 2012 … Finally Recovery Underway! John Husing, Ph.D. Economics & Politics, Inc.

2. After Losing 8.74 Million Jobs … U.S. Job Creation Is Crawling Back 30% of Jobs Regained

3. V Pattern of Likely Recovery U x x

4. Inland Empire Job Growth/Destruction 200720082009201020112012 (110,000) (100,000) (90,000) (80,000) (70,000) (60,000) (50,000) (40,000) (30,000) (20,000) (10,000) 0 10,000 20,000 30,000 Source: CA Employment Development Department Wage & Salary Job Creation/Destruction Inland Empire, 2007-2011

5. Job Growth Comparison: December 237,200 144,700 92,500 CaliforniaNo. CaliforniaSo. California 26,900 24,800 22,700 12,100 San Diego Co.Orange Co.Inland EmpireLos Angeles Co. Source: CA Employment Development Department Average Job Change, California Markets California Markets, December, 2010-2011 Finally!

6. 12.2% In Dec-2011, Inland Empire’s Unemployment was 12.2%, CA was 10.9%, U.S. 8.3 %

7. Still Tough Unemployment Rate December

8. There is Some Good News Locally

9. Quarterly Industrial Absorption, 1991-2011 20 million Sq.Ft.

10. Industrial Vacancy Rate 12.8% 6.3% 2.7%

11. Change In Container Flows -25.4% 15.3% 1.6 1.7 1.8 2.1 2.3 2.7 3.1 2.8 3.1 3.3 4.8 5.0 5.7 6.0 6.8 7.2 8.2 8.0 7.2 6.0 6.9 7.1 200020012002200320042005200620072008200920102011 ImportExport Source: Port Import Export Reporting Service (PIERS), collected from Vessel Imported & Exported Container Volume, 2000-2011 Ports of Los Angeles & Long Beach (mil. teus)

12. Fourth Highest Total Container Volume

13. 2. Ports On West Coast Nearest Asia Los AngelesLong Beach

14. 8,000-Container Post-Panamax Ships 3. Deep Water Ports As Ships Draw Over 50 feet of Water

15. Issue: Panama Canal Diversion Suez

16. Strongest Job Growth Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 (6,000) (4,000) (2,000) 0 2,000 4,000 6,000 (6,000) (4,000) (2,000) 0 2,000 4,000 6,000 LogisticsHealth Care Sourec: CA Employment Development Department Inland Empire Logistics & Health Care Job Changes January 2010 to December 2011 Health Care Logistics

17. International Trade 112.2 72.8 -35.1% Dollar Down: U.S. Goods Cheaper 2002 $1,500 2012 $2,027 2002 $180 2012 $117

18. Manufacturing

19. Manufacturing Orders: Aggressive to Neutral to Growing

20. Inland Empire Mfg. Goes To Neutral

21. Export Container Volume 2011 YTD 6.8% All-Time Record

22. Inland Empire Manufacturing Coming to Life

23. Industrial Situation Goods Movement Strength As No Where Else To Build Facilities Strength Due To Long Term Growth of Trade Manufacturing Returning With U.S. Economy Aided By Low Value of the Dollar CA Regulation A Huge Issue

24. Blue Collar Job Losses Have Ended or Are Close to Ending 19911992199319941995199619971998199920002001200220032004200520062007200820092010 2011ytd (26,000) (22,000) (18,000) (14,000) (10,000) (6,000) (2,000) 2,000 6,000 10,000 14,000 Manufacutring JobsLogistics JobsConstruction Jobs Source: CA Employment Development Department 2011=Jan.-November Average Blue Collar Job Changes Inland Empire, 1991-2011e

25. Two Sectors Are Dominating Inland Empire Job Growth of Late 25.6% 13.7% 60.8% 5,800 3,100 13,800 LogisticsHealth CareAll Other New JobsShare Sourec: CA Employment Development Department Inland Empire Job Creation December 2010-2011 39.2%

26. Why Blue Collar Jobs Important 13.2% 18.6% 20.3% 29.2% 29.0% 30.8% 36.5% 33.7% 58.4% 48.5% 46.2% 44.6% 41.9% 36.7% 34.6% 34.0% ImperialSan BernardinoRiversideLos AngelesSo. CaliforniaVenturaOrangeSan Diego High School or LessPercent Bachelors or Higher Source: 2010 Census Educational Levels, Adults 25 & Over Southern California Counties, 2010

27. Policy Conflict: Environment vs. Blue Collar Jobs

28. Public Health Asthma & Cancer Blue Collar Sectors Bring Rising Asthma & Cancer Risk From Airborne Toxics

29. California Solution Single Issue Regulatory Agencies CA Air Resources Board South Coast Air Quality Management District CA Environmental Protection Agency CA Water Resources Control Board & More

30. Two Results 1. Air Quality Is Improving

31. Blue Collar Blue Collar Work Is Much of Our Workforce’s Best Chance Middle Class To Reach The Middle Class 2. Downward Pressure On Blue Collar Jobs

32. Few Training Barriers Few Training Barriers To Beginning Employment Mining ($65,268)Blue Collar Wholesale Trade ($51,156) Blue Collar Manufacturing ($47,933)Blue Collar Logistics ($45,851)Blue Collar Construction ($41,076)Blue Collar Gaming($37,827) Retail Trade($28,824) Agriculture ($24,552) Hotel/Motel($16,026) Eating & Drinking($16,026) Alternative Jobs to Blue Collar

33. Results Of Job Suppression Unemployment Higher Than It Needs To Be Underemployment A Constant Difficulty Leading to the Middle ClassLack of Access to Jobs Leading to the Middle Class Health Issues of Poverty Divorce Spousal Abuse Drug & Alcohol Abuse Suicide Lack of Timely Medical Care Public Health Issues!

34. Clean Air, Asthma & Cancer Are Health & Social Justice Justice Issues Health & Social Lack of Blue Collar Jobs & Poverty Are Health & Social Justice Justice Issues Public Policy Dilemma

35. Concentrating Solely On The Environment After Years Of Focus on Concentrating Solely On The Environment Forgotten Priority! Blue Collar Job Creation Is Our Forgotten Priority!

36. Housing Is Still An Issue Inland economy

37. Foreclosures Issue 1,012,594 Homes In Inland Empire 36.6% All Homes

38. When Does Mortgage Difficulty End? If Rate of Decline of 15,241 Underwater Homes per Quarter Persists

39. Seasonally Adjusted Home Volumes Lack of Foreclosure Sales Has Been An Issue

40. Construction Job Depression 2006-2011 -70,200 -55.1%

41. Is There Any Good Housing News? Last Foreclosure Sold!

42. Demand > Supply & Price Above Lows 9.7%

43. Long Term Price Competitive Advantage Still Exists $41,000 $162,000 $199,000 $306,000 $156,000 $197,000 $318,000 $355,000 $462,000 San Bernardino Co.Riverside Co.Los Angeles Co.San Diego Co.Orange Co. Median All Home PriceSan Bernardino Source: Dataquick & Zillow.com Exhibit 28.-Home Prices, So. California Markets Median Priced New & Existing Home, 4th Quarter 2011

44. Competitive Home Price Gap Over Time 198819891990199119921993199419951996199719981999200020012002200320042005200620072008200920102011 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 Los AngelesOrangeSan Diego Source: Dataquick Exhibit 4.-Gap Between Coastal & Inland County Prices Existing & New Homes, 1988-2011

45. Soaring Housing Affordability Easily Remains At or Near Record Levels 198819891990199119921993199419951996199719981999200020012002200320042005200620072008 200920102011 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% Source: CA Association of Realtors Housing Affordability, So. California Share of Families Afford Median Priced Home, 1988-2011 42% 69% 33% 10-11% 15% Inland Empire Los Angeles San Diego Orange

46. Why Home Buyers Aren’t Responding

47. BUT...

48. Oil Prices Soaring Again 198519861987198819891990 1991 199219931994199519961997199819992000 2001 2002200320042005 20062007200820092010 2011 2012 $0 $15 $30 $45 $60 $75 $90 $105 $120 $135 Source: Federal Reserve Bank of Dallas Exhibit 6.-West Texas Intermediate Crude Oil Prices Monthly Average. 1985-2012

49. Congressional Madness

50. European Debt Crisis

51. Fear Caused Consumers Confidence It Has Recently Begun Rising

52. Office Market Housing Slowdown Hurts!

53. Office Absorption Absorption Fell With Housing Slowdown

54. Office Vacancy Rate Has Jumped Dramatically 7.0% 23.4%

55. Office Vacancy Rates Have Soared! 23.4% Inland Empire 7.3% 23.4% 17.8% Orange Co. 6.9% 17.8% 17.0% L.A. Co. 9.7% 17.0% 17.8% San Diego 9.4% 17.8% 2011 2006 2011

56. Major Office Occupations Job Changes Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 (10,000) (8,000) (6,000) (4,000) (2,000) 0 2,000 (10,000) (8,000) (6,000) (4,000) (2,000) 0 2,000 Sourec: CA Employment Development Department Finance, Insurance, Real Estate, Management, Professions January 2010 to December 2011

57. Office Forecast Now A Permanent Part of the Inland Empire Story Strength from Firms Needing to Serve IE Market 4.3 million people (More than 24 states) 1.3 million jobs Near Term: Weakness From Housing Slowdown Long Term: Housing Firms Will Add Great Strength

58. 2012 Better than 2011 Foreclosures A Continuing Issue Complete Recovery 2015-2016?? 2011 Forecast = 5,200 … Preliminary = 2,800

59. www.johnhusing.com