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California Economic Condition& the Health of Regions
John Husing, Ph.D. Economics & Politics, Inc.
1. General Economy’s Problems Starting To RecedeRecede
After Losing 8.74 Million Jobs …U.S. Job Creation Is Crawling Back
VV Pattern of Likely Recovery
UUxx
Congressional Madness
U.S. Economy???
Fiscal Cliff
Worst National Unemployment RatesU.S. 8.6% CA 10.9%
VV Pattern of Likely Recovery
UUxx
Congressional Madness
U.S. Economy???
Fiscal Cliff
U.S. & California Unemployment RatesTrend is DownDown
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
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 HistoryU.S. & California, 2001-2012
8.2%
10.4%
Worst National Unemployment RatesU.S. 8.6% CA 10.9%
CA Has Lost Every Job Created Since Mid-1999 Back to 2003
CA Legislature Seems To Have Little Interest In This Fact
California’s Job Creation/Losses
DefenseCutbacks
Dot.Com GreatRecession
CA Sector Growth & DeclineAugust 2011-2012
18,100
15,475
(763)
Distribution & Transport
Construction
Manufacturing
32,10030,825
28,950
8,8751,650
938
(650)
(2,988)
Employment AgcyEating & Drinking
Retail Trade
AccommodationAgriculture
Social Assistance
Amusement
Other Services
463
(8,538)
Mgmt & Professions
Local Government
46,163
9,838
613
(9,850)
Higher Education
MiningUtilities
Federal & State
34,775
17,113
15,15011,500
(12,700)
Publish, telecom, Other
Admin. SupportFinancial Activities
Health Care
Other EducationSource: CA Employment Development Department
Exhibit 8.-Job Growth Advantages & DisadvantagesCalifornia Job Growth, August 2011-2012
272,525
-35,488
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%
Where Are Job Gains
Avg. Jan-Aug 2012
CA = 238,1961.64%
So. California
Central Coast
Bay Area
Sacramento I-80
Central Valley
1.105,1971.33%44.2%
4.16,4303.00%6.9%
2.75,3172.40%31.6%
5.6,4130.63%2.7%
3.19,0851.52%8.0%
Gold Mine Theory
Primary Tier
Secondary Tier
Economic Drivers
Green
Construction Manufacturing
Tourism
Trade
Bio-Tech
Logistics
Motion Pictures
Computer Games Health Care
InformationAgriculture
What’s The Status of So. California’s “Gold Mines“Gold Mines?”D
Bottom
CUnstable
Regulators
BInventory
CInventory
B$ Helps
Incomplete?Unstable
Regulators
BStrong
A-Strong
BStrong
C-$ May Help
A-Boomers
A-Dollar
The Great Economic Threat
California Grabbing Money From Local Government
Long Term: Strangling Growth
CA
2. Tax Base Considerations Assessed Valuation
CAO/City Manager Counseling
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 2012Assessed Valuation
% Change
CA -3.8%
So. California
Central Coast
Bay Area
Northern
Sacramento I-80
Central Valley
1.-$89.0 B51.7%
5.-$4.9 B2.8%
4.-$14.2 B
8.2%
2.-$47.0 B27.3%
6.-$2.0 B1.1%
3.-$15.2 B
8.8%
FY 2009-2012Assessed Valuation
Decline
CA -$172 Billion
Percent AV GainsGainsFY 2009 to FY2012FY 2009 to FY2012
Colusa $679,666,840 25.8%San Francisco $17,375,259,586 12.3%Trinity $106,696,930 9.3%Humboldt $671,453,335 6.3%Kings $244,293,626 2.8%Santa Barbara $1,545,095,906 2.5%Mendocino $204,025,240 2.1%Napa $532,896,981 2.0%Del Norte $29,494,143 1.7%Marin $722,357,955 1.3%Siskiyou $25,072,560 0.6%Kern $425,051,297 0.5%San Mateo $428,634,777 0.3%
Largest Percent AV LossesLossesFY 2009 to FY2012FY 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%
Residential Markets: When Is The End?
Underwater HomesSan Francisco 14%
Santa Clara 19%
San Mateo 20%
Orange 24%
Los Angeles 30%
Alameda 31%
San Diego 34%
Riverside 51%
San Bernardino 52%
Fresno 53%
Madera 54%
Sacramento 55%
Tulare 57%
Kern 58%
Imperial 59%
San Joaquin 59%
Merced 61%
San Bernardino 78
Solano (Vallejo) 77
Merced 77
Kings 75
Madera 74
Sacramento 74
Fresno 71
Riverside 65
Monterey 55
Napa 50
Sonoma 49
Los Angeles 49
Ventura 48
San Diego 44
San Luis Obispo 41
Alameda 38
Orange 35
Santa Cruz 34
Santa Clara 32
Santa Barbara 32
Marin 27
Contra-Costa 26
San Francisco 24
San Mateo 23
Affordability
So. California
Central Coast
Bay Area
Central Valley
Feb-2012Median 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
Underwater Inland Empire Homes
When Does Foreclosure Crisis End?If No Demand Growth, No Gov’t Solution
How This Ends: A Housing Shortage
106,230
During 2008 thru 2011California Population Grew by 1,026,471
Office Vacancy Weak Almost Everywhere!
2005/2006 20092009 20122012
Inland Empire 10.5% 24.3% 26.9%24.3% 26.9%
Sacramento 13.5% 21.4% 22.7%21.4% 22.7%
Orange County 8.0% 18.0% 20.8%18.0% 20.8%
Oakland 16.5% 15.6% 17.8%15.6% 17.8%
Los Angeles County 12.2% 16.3% 16.0%16.3% 16.0%
San Diego 9.0% 19.2% 15.5%19.2% 15.5%
Fresno 13.8%13.8%
San Francisco 13.0% 14.9% 9.7%14.9% 9.7%
Santa Clara 16.0% 20.5%20.5% 9.0% 9.0%
Industrial Vacancy Rate Down Almost Everywhere!
2005/2006 20092009 20122012
Sacramento 10.5% 12.3% 13.4%12.3% 13.4%
Fresno 9.8% 9.8%
San Diego 7.0% 12.0% 9.9%12.0% 9.9%
Silicon Valley 14.4% 13.9% 7.6%13.9% 7.6%
Inland Empire 2.7% 12.8%12.8% 6.6%6.6%
Oakland 6.0% 8.9% 8.9% 5.1%5.1%
Orange County 5.4% 6.5%6.5% 3.5%3.5%
Los Angeles County 2.1% 3.2% 3.2% 2.7%2.7%
Assess Valuation Future
FY 2013 A Mixed Year
3. Tax Base Considerations
Sales Taxes: A Serious Problem
CAO/City Manager’s Office
Gold Mine Theory
Primary Tier
Secondary Tier
Retail Sales
So. California
Central Coast
Bay Area
Sacramento I-80
Central Valley
36.7%
4.6.3%
2.7.5%
1.7.9%
4.6.3%
2nd Qtr. 2011-2012Change In Retail Sales
CA = 6.8%
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%
2nd Qtr. 2012Total Retail SalesCA = 1,413.0 B
6.8%
Retail Sales Future
2012 Continued Improvement
Still Below Highs
4. Economic Development
It is A Competition
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
California Governing Philosophy
Command & Control
Markets
Vs.
California Ranks California Ranks LastLast in the U.S. in the U.S. For For Business LocationBusiness Location
- Forbes -- Forbes -
Unstable Regulatory Commands
If A Business Can’t Plan,
They Won’t Come or Stay
Exhibit 72.-State Taxes, 2011Business Income Individual 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% 4.63% 2.90% 22.0 $1,322
Nevada 0.00% 0.00% 6.85% 33.1 $1,344
Texas 0.00% 0.00% 6.25% 20.0 $1,600
Washington 0.00% 0.00% 6.50% 37.5 $1,257
State Taxes
Highest Highest Highest Highest 2ndHighest
Electrify Southern California?Electrical Rates
Electrify Southern California?Natural Gas Rates
State Mandated Costs Not Found Elsewhere In U.S.
Overtime After 8 Hours … Not 40 Hour Week
Mandatory Family Leave
Dysfunctional State Government
California Bond Rating Drops Lower Than Any Other State's
Lack of Investment InAging & Missing Infrastructure
Grade Separations
Transit Oriented Housing
Not Without Tax Increment Financing!
Modestly Trained Labor Force
K-12 Performance 38th Pew Center for States
Share of Adults: No College 44.9% Census Bureau, 2010
Education Funding Per Capita 27th Public Policy Institute
How Minnesota Can Avoid the "California Spiral"
CA Long Term Future?
Command & Control
Markets
Vs.?
While Waiting For Complete Recovery….
www.johnhusing.com