California Economic Condition
& the Health of Regions
John Husing, Ph.D.
Economics & Politics, Inc.
1. General Economy’s Problems
Starting To Recede
After Losing 8.74 Million Jobs …
U.S. Job Creation Is Crawling Back
Pattern of Likely Recovery
VU
Congressional Madness
Fiscal Cliff
U.S. Economy???
Worst National Unemployment Rates
U.S. 8.6% CA 10.9%
Pattern of Likely Recovery
VU
Congressional Madness
Fiscal Cliff
U.S. Economy???
U.S. & California Unemployment Rates
Trend is Down
Unemployment History
U.S. & California, 2001-2012
14.0%
U.S.
13.0%
California
12.0%
11.0%
10.0%
10.4%
9.0%
8.0%
7.0%
8.2%
6.0%
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Source: U.S. Bureau of Labor Statistics, CA Employment Development Department
Worst National Unemployment Rates
U.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
Defense
Cutbacks
Dot.Com
Great
Recession
CA Sector Growth & Decline
August 2011-2012
Exhibit 8.-Job Growth Advantages & Disadvantages
California Job Growth, August 2011-2012
Mgmt & Professions
Health Care
Employment Agcy
Eating & Drinking
Retail Trade
Distribution & Transport
Publish, telecom, Other
Construction
Admin. Support
Financial Activities
Higher Education
Accommodation
Agriculture
1,650
Social Assistance
938
Mining
613
463
Utilities
(650)
Amusement
(763)
Manufacturing
Other Services
(2,988)
Local Government
(8,538)
Federal & State
(9,850)
Other Education (12,700)
46,163
34,775
32,100
30,825
28,950
18,100
17,113
15,475
15,150
11,500
9,838
8,875
272,525
-35,488
Source: CA Employment Development Department
Sacramento I-80
4.
11.4%
Bay Area
Unemployment
by Market Area
1.
8.4%
Avg. Jan-Aug 2012
Central Valley
5.
15.1%
CA = 10.6%
Central Coast
2.
9.6%
So. California
3.
10.6%
Sacramento I-80
Where Are
Job Gains
5.
6,413
0.63%
2.7%
Bay Area
2.
75,317
2.40%
31.6%
Avg. Jan-Aug 2012
Central Valley
Central Coast
4.
16,430
3.00%
6.9%
3.
19,085
1.52%
8.0%
CA = 238,196
1.64%
So. California
1.
105,197
1.33%
44.2%
Gold Mine Theory
Secondary Tier
Primary Tier
Economic Drivers
What’s The Status of
C
D So. California’s
“Gold
B Mines?”C
Bottom
Construction
B
$ Helps
Motion Pictures
AStrong
Computer Games
Unstable
Regulators
Manufacturing
ADollar
Agriculture
B
Strong
Bio-Tech
Inventory
Trade
Inventory
Logistics
Incomplete?
Unstable
Regulators
Green
C$ May Help
Tourism
B
Strong
Information
ABoomers
Health Care
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
Northern
FY 2009 to FY 2012
Assessed Valuation
% Change
2.
-2.2%
Sacramento I-80
6.
-12.1%
Bay Area
CA
-3.8%
1.
-1.3%
Central Valley
5.
-5.4%
Central Coast
3.
-2.6%
So. California
4.
-3.6%
Northern
FY 2009-2012
Assessed Valuation
Decline
6.
-$2.0 B
1.1%
Sacramento I-80
Bay Area
4.
-$14.2 B
8.2%
2.
-$47.0 B
27.3%
CA
-$172 Billion
Central Valley
3.
-$15.2 B
8.8%
Central Coast
5.
-$4.9 B
2.8%
So. California
1.
-$89.0 B
51.7%
Percent AV Gains
FY 2009 to FY2012
Colusa
San Francisco
Trinity
Humboldt
Kings
Santa Barbara
Mendocino
Napa
Del Norte
Marin
Siskiyou
Kern
San Mateo
$679,666,840
$17,375,259,586
$106,696,930
$671,453,335
$244,293,626
$1,545,095,906
$204,025,240
$532,896,981
$29,494,143
$722,357,955
$25,072,560
$425,051,297
$428,634,777
25.8%
12.3%
9.3%
6.3%
2.8%
2.5%
2.1%
2.0%
1.7%
1.3%
0.6%
0.5%
0.3%
Largest Percent AV Losses
FY 2009 to FY2012
Shasta
San Bernardino
Placer
Madera
Sacramento
Yuba
Plumas
Solano
Stanislaus
San Benito
Riverside
San Joaquin
Merced
Calaveras
($1,713,831,183)
($19,646,919,334)
($6,445,290,638)
($1,459,832,632)
($16,766,074,365)
($692,994,373)
($557,756,508)
($6,481,892,146)
($5,630,188,000)
($996,855,852)
($37,655,720,162)
($10,790,493,651)
($3,522,361,333)
($1,363,977,244)
-10.4%
-10.6%
-10.9%
-11.9%
-12.3%
-12.9%
-13.0%
-14.1%
-14.1%
-14.9%
-15.6%
-17.0%
-17.7%
-19.1%
Residential Markets: When Is The End?
Underwater Homes
San 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%
Affordability
San Bernardino
78
Solano (Vallejo)
Merced
Kings
Madera
Sacramento
Fresno
Riverside
Monterey
Napa
Sonoma
Los Angeles
Ventura
San Diego
77
77
75
74
74
71
65
55
50
49
49
48
44
San Luis Obispo
Alameda
Orange
Santa Cruz
Santa Clara
Santa Barbara
Marin
Contra-Costa
San Francisco
San Mateo
41
38
35
34
32
32
27
26
24
23
North
5.
$170,635
Feb-2012
Median Price
Coast vs.
Inland
Sacramento I-80
Bay Area
1.
$371,182
4.
$175,855
Central Valley
Central Coast
2.
$291,312
6.
$125,584
So. California
3.
$272,611
Underwater Inland Empire Homes
When Does Foreclosure Crisis End?
If No Demand Growth, No Gov’t Solution
How This Ends: A Housing Shortage
During 2008 thru 2011
California Population Grew by 1,026,471
106,230
Office Vacancy
Weak Almost Everywhere!
2005/2006
2009
2012
Inland Empire
10.5%
24.3%
26.9%
Sacramento
13.5%
21.4%
22.7%
8.0%
18.0%
20.8%
Oakland
16.5%
15.6%
17.8%
Los Angeles County
12.2%
16.3%
16.0%
9.0%
19.2%
15.5%
Orange County
San Diego
Fresno
13.8%
San Francisco
13.0%
14.9%
9.7%
Santa Clara
16.0%
20.5%
9.0%
Industrial Vacancy Rate
Down Almost Everywhere!
2005/2006
Sacramento
10.5%
2009
12.3%
Fresno
San Diego
2012
13.4%
9.8%
7.0%
12.0%
9.9%
Silicon Valley
14.4%
13.9%
7.6%
Inland Empire
2.7%
12.8%
6.6%
Oakland
6.0%
8.9%
5.1%
Orange County
5.4%
6.5%
3.5%
Los Angeles County
2.1%
3.2%
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
Secondary Tier
Retail Sales
Primary Tier
Sacramento I-80
1.
7.9%
Bay Area
2.
7.5%
2nd Qtr. 2011-2012
Change In Retail Sales
CA = 6.8%
Central Valley
4.
6.3%
Central Coast
4.
6.3%
So. California
3
6.7%
Sacramento I-80
4.
$100.7 B
7.1%
Bay Area
2.
$310.7 B
22.0%
2nd Qtr. 2012
Total Retail Sales
CA = 1,413.0 B
6.8%
Central Valley
3.
$137.1 B
9.7%
Central Coast
5.
$49.7 B
3.5%
So. California
1.
$752.2 B
53.2%
Retail Sales Future
2012 Continued Improvement
Still Below Highs
4. Economic Development
It is A Competition
Who Was Hurt By
The Recession
3. Northern
41
Least Hurt = 12
6. Sacramento I-80
52
2. Bay Area
Job Worries
30
Take Precedence
5. Central Valley
48
1. Central Coast
28
4. So. California
Environmental Issues
Take Precedence
45
California Governing Philosophy
Command & Control
Vs.
Markets
California Ranks Last in the U.S.
For Business Location
- Forbes -
Unstable Regulatory Commands
If A Business Can’t Plan,
They Won’t Come or Stay
State Taxes
Exhibit 72.-State Taxes, 2011
Highest
Highest
Highest
Individual Income
State/Local Sales
Tax
Gasoline Tax
2ndTax per
Property
capita
Highest
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
Highest
Business Income
California
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 In
Aging & Missing Infrastructure
Grade Separations
Transit Oriented Housing
Not Without Tax
Increment Financing!
Modestly Trained Labor Force
K-12 Performance
38th
Share of Adults: No College
44.9% Census Bureau, 2010
Education Funding Per Capita 27th
Pew Center for States
Public Policy Institute
How Minnesota Can Avoid the
"California Spiral"
CA Long Term Future?
Command & Control
Vs.
Markets
While Waiting For Complete
Recovery….
www.johnhusing.com