Inland Empire Economic Growth . . .
John Husing, Ph.D.
Economics & Politics, Inc.
Chief Economist, IEEP

-664,000 Government Jobs
+8,221,000 Private Sector (94.1%)

Unemployment Falling, But High

Worst U.S. Metropolitan Area
Unemployment Rates

How Regional Economies Work
Secondary Tier
Economic Development … Increase The Economic Base!
Primary Tier

Three Step Growth Process
Based On Interaction Of:
• Population
• Preferences
• Dirt
Prices Force Decisions

Southern California Population Growth,
2000-2012

People Prefer To Live Near The Coast

As a homeowner, would you prefer to move closer to work if it involved a townhouse or condo?
(I-15 & Sr-91 Commuters, 2008)
87.5% No
Answer stable over 5 years
Same question to Renters:
72.3% No

• People forced to move inland for affordable homes
• Population Serving Jobs Only
• High Desert & I-215 South are current examples

Commuting Bad, But Stable Over Time
1,650,384 Total Jobs
1,156,313 Inside IE
494,071 Commute Outside County
154,845 Between IE Counties
339,226 Outside IE
20.6% Commute Outside the IE
16.3% Orange County Commuters

Construction: Finally Some Hope

Share of Underwater Homes Plunging
4Q 2012 to 3Q 2013
333,720 to 170,768
-48.8%

Home Price Trends
49.5% less for
Existing home
32.3%
-39.2%
52.8%

Long Term Competitive Price Advantage Still Exists

Permits: Finally Some Optimism

Firms Prefers The Coastal Counties

Stage 2: Strong Industrial Growth

Vacancy Nearing Historic Lows

Undeveloped Land …
Industrial Prices Much Lower In Outlying Areas
Exhibit 13.-Industrial Space Costs Differences
Southern California, Sub-Markets, March 2013
156.6%
Price Per Sq. Ft.
Price with 20% Cubic Factor
.
Difference
% Difference
$0.56
84.2% $0.63
107.2%
$0.78
$0.38
$0.30
Inland Empire Los Angeles Co.
Orange Co.
San Diego (non-R&D) nnn=net of taxes, insurance, common area fees
Source: CB Richard Ellis

Workforce Needs Jobs Without
Educational Barriers

Workers Will Work
For Less Not To Commute
Exhibit 82.-Median Wage & Salary Percent Difference
Inland Empire vs. Coastal Counties, 2010
459 Common Occupations, Under $70,000
Weight Median Pay Percent IE Pay Is Lower
$33,240
$34,656 $34,089
$35,173
4.26%
5.81%
2.55%
0.0%
Inland Empire San Diego Los Angeles Orange
Note: Occupations in common weighted by Inland Empire Jobs
Source: CA Employment Development Department, Occupational Wage Survey, Economics & Politics, Inc. calculations

Logistics Flow of Goods

Port Container Volumes

Fulfillment Centers

17 Firms Looking For Space
7 Are Fulfillment Centers
1,500,000
1,000,000
1,000,000
800,000 to 1,000,000
700,000 to 1,000,000
500,000 to 800,000
700,000 to 900,000
850,000
700,000
700,000
700,000 to 800,000
600,000
600,000 to 700,000
500,000
450,000
300,000 to 400,000
350,000
Source: Jones LaSalle

Inland Empire Logistics Jobs
32.5% of All Inland Jobs …
Jan-Nov. 2012-2013

Manufacturing:
Could Be A Major Growth Source

Manufacturing Orders Irregular

U.S. v. California Manufacturing Jobs

Manufacturing Slowing

Regulatory Environment Aimed At
“Dirty” Blue Collar Sectors Impacts
Construction, Manufacturing, Logistics

Median Pay By Sector Groups

Air Becoming Cleaner
Exhibit 6.-PM 2.5 Days over National Standard vs.
Total Square Feet of Net Industrial Absorption Since Highest PM2.5 level
Monitoring Sites
Mira Loma-Van
Buren
Riverside-
Magnolia
Riverside-
Rubidoux
Fontana-Arrow
Highway
Ontario-1408
Francis Street
San Bernardino-
4th Street
2006
2007
2008
2009
2010
2001
2002
2003
2004
2005
2011
2012
Change From
Highest
Change
Net Absorptiont
Since Highest
46.2
43.4
*
19.0
8.0
13.0
7.0
*
*
-39.2
-84.8%
86,378,254
88.4
69.7
47.8
*
31.3
*
12.4
6.0
6.3
7.1
*
-81.3
-92.0%
183,911,357
120.2
92.6
78.1
57.3
39.7
15.0
15.1
*
*
4.0
5.0
7.0
-113.2
-94.2%
229,967,544
27.2
*
19.3
6.2
6.6
58.2
73.7
54.3
*
22.9
7.1
10.6
-63.1
-85.6%
183,911,357
19.4
9.0
*
*
3.2
79.5
67.4
62.2
*
25.3
6.8
0.0
-79.5
-100.0%
229,967,544
9.5
6.2
*
*
5.9
80.8
88.9
55.2
*
9.3
*
0.0
-88.9
-100.0%
183,911,357

Poverty
Exhibit 2.-Share & Number of Inland Residents Below Poverty Level
Census Bureau
Year
1990
People In Poverty
306,417
Share of Population in Poverty
11.8%
Population
2,588,793
2000
2012
Changes
477,496
809,234
+164.4%
14.7%
19.0%
+7.2%
3,255,526
4,293,892
+65.9%
African American:
Hispanic:
White:
Asian:
27.2%
23.9%
12.1%
10.4%

Stage 3.-Office Based Firms
Follow Their Workers

Office Absorption Finally Starting to Recover
High-End Jobs
Follow Workers into the Area

Outlying Workers Will Work
For Less Not To Commute
$86,806
Exhibit 98.-Median Wage & Salary Percent Difference
Inland Empire vs. Coastal Counties, 2010
138 Common Occupations, $70,000 & Up
Weight Median Pay
$93,489
Percent IE Pay Is Lower
$94,768 $94,806
7.70%
9.17% 9.22%
0.0%
Inland Empire San Diego Los Angeles Orange
Note: Occupations in common weighted by Inland Empire Jobs
Source: CA Employment Development Department, Occupational Wage Survey, Economics & Politics, Inc. calculations

Office Vacancy Rates Improving
But Still Very High
18.1%

High End Occupations & Office Unstable

Inland Empire’s In-migration From Coastal
Counties Has Not Yet Recovered
-15,538
Not Bringing Skills, Wealth, Income & Spending

Health Care

Health Care Jobs: Continuous Growth
700 600 800

Health Care Demand Set To Explode
People Without Health Insurance (2012): 828,431 (19.0%)
People Will Age, Already Those 55 & Over are 926,696 (21.3%)
Population Growth Will Resume (2000-2013) 1,075,807 (33.0%)
Inland Health Care Workers Handle More People Than CA: (35%)

Federal Job Cuts
Debt Ceiling
Budget Fights

Assessed Valuation
Finally Growing (6.1% for SB County)
-1.0%

Government Remains Weak

How Regional Economies Work
Secondary Tier
Primary Tier

Retail Sales Almost Back

Retail, Consumer Service, Hotel, Amusement
Jobs Gaining Speed

Where Will IE Be In Its Job History?
Exhibit 8.-Wage & Salary Job Change
Inland Empire, Annual Average, 1984-2014e
2011-2013
55,958 of 148,425 lost or 37.7%
2011-2014
90,958 of 148,425 lost or 61.3%
Sources: CA Employment Development Department, U.S. Bureau of Labor Statistics, Economics & Politics, Inc.

Forecast
2014 Better Than 2013
•
Health Care Will Grow
• Logistics Will Grow
• Retail Gaining
• Office Growth Very Slow
• Home Building Starts Back
•
Growth Looks Normal
• Still Well Below Pre-Recession