Southern California’s Economy

2012 … Finally Recovery Underway!

Economics & Politics, Inc.

After Losing 8.74 Million Jobs …U.S. Job Creation Is Crawling Back

30% of Jobs Regained

VV Pattern of Likely Recovery

UUxx

So. California Job Growth/Destruction

2007 2008 2009 2010 2011 2012

(700,000)(650,000)

(600,000)

(550,000)

(500,000)

(450,000)

(400,000)

(350,000)

(300,000)(250,000)

(200,000)

(150,000)

(100,000)

(50,000)

0

50,000

100,000

150,000

Source: CA Employment Development Department

Wage & Salary J ob Creation/DestructionInland Empire, 2007-2011

Inland Empire Job Growth/Destruction

2007 2008 2009 2010 2011 2012

(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/DestructionInland Empire, 2007-2011

Job Growth Comparison: November

75,000

San Diego Co.Inland EmpireOrange Co.Los Angeles Co.Ventura Co. Imperial Co.So. California

Source: CA Employment Development Department

Average Job Change, California MarketsCalifornia Markets, November, 2010-2011

Still Tough Unemployment Rate

U.S. Unadjusted

8.2%

There is Some Good News Locally

Industrial Vacancy Rate Declining Again!

Inland Empire 2.7% 11.9% 6.8%11.9% 6.8%

Orange Co. 5.4% 7.0%7.0% 5.3% 5.3%

L.A. Co. 2.1% 3.4%3.4% 3.1% 3.1%

San Diego 6.0% 12.0% 10.7%12.0% 10.7%

500,000 sq. ft. + Facilities … Inland Empire Vacancy = 0.0%

2005/2006 20092009 20112011

Quarterly Industrial Absorption, 1991-2011

20 million Sq.Ft.

Change In Container Flows

-25.4%

15.3%

1.6 1.6 1.6 1.7 1.82.1 2.3

2.73.1

2.83.1 3.3

4.8 5.0

5.76.0

6.87.2

8.2 8.0

7.2

6.0

6.9 6.9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e

Import Export

Source: Port Import Export Reporting Service (PIERS), collected from Vessel

Imported & Exported Container Volume, 2000-2011ePorts of Los Angeles & Long Beach (mil. teus)

Fourth Highest Total Container Volume

2. Ports On West Coast Nearest Asia

Los Angeles Long Beach

8,000-Container Post-Panamax Ships

3. Deep Water Ports As Ships Draw Over 50 feet of Water

Issue: Panama Canal Diversion

Suez

International Trade

112.2

84.0

72.8

-35.1%

Dollar Down: U.S. Goods Cheaper

2002 $1,5002012 $2,027

2002 $1802012 $117

Manufacturing

Manufacturing Orders:Aggressive to Neutral to Growing

Export Container Volume

2011 YTD2011 YTD6.8%6.8%

All-Time Record

Manufacturing Decline Has Stopped

Blue Collar Job Losses Have Ended or Are Close to Ending

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

e(100,000)

(75,000)

(50,000)

(25,000)

0

25,000

50,000

75,000 Manufacturing LOGISTICS Construction

Source: CA Employment Development Department

Blue Collar Employment ChangeSouthern California, 1990-

2011e

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%

Imperial San Bernardino Riverside Los Angeles So. California Ventura Orange San Diego

High School or Less Percent Bachelors or Higher

Source: 2010 Census

Educational Levels, Adults 25 & OverSouthern California Counties, 2010

Policy Conflict:

Environment vs. Blue Collar Jobs

Public Health

Blue Collar Sectors Bring Rising Asthma Asthma & & CancerCancer Risk From Airborne Toxics

California Solution

Single Issue Regulatory Agencies & Processes

CA Air Resources Board

South Coast Air Quality Management District

CA Environmental Protection Agency

CA Water Resources Control Board

CEQA

& More

Two Results

1. Air Quality Is Improving

BlueBlue Collar Collar Work Is Much of Our Workforce’s Best Chance To Reach The Middle ClassMiddle Class

2. Downward Pressure On Blue Collar Jobs

Few Training BarriersFew 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

Results Of Job Suppression

• Unemployment Higher Than It Needs To Be

• Underemployment A Constant Difficulty

• Lack of Access to Jobs Leading to the Middle ClassLeading to the Middle Class

• Health Issues of Poverty

• Divorce

• Spousal Abuse

• Drug & Alcohol Abuse

• Suicide

• Lack of Timely Medical Care

Public Health Issues!

Clean Air, Asthma & Cancer

Are Health & SocialHealth & SocialJusticeJustice Issues

Lack of Blue Collar Jobs & Poverty Are

Health & SocialHealth & SocialJusticeJustice Issues

Public Policy Dilemma

After Years Of Focus on Concentrating Solely On The EnvironmentConcentrating Solely On The Environment

Blue Collar Job Creation Is Our Forgotten PriorityForgotten Priority!!

Housing Is Still An Issue

Eco

nom

y

Share Underwater Mortgages

20% 19% 18% 18% 18% 18% 17% 18%

27% 26% 25% 25% 25% 24% 23% 23%

33% 32% 31% 30% 29% 29% 28% 28%

55% 54%51%

49% 49%47%

45% 44%

4Q2009 1Q2010 2Q2010 3Q2010 4Q2010 1Q2011 2Q2011 3Q2011

Inland Empire San Diego Los Angeles Orange

Source: CoreLogic

Exhibit 10.-Share of Mortgages UnderwaterSo. California Markets, 4th 2009 - 3rd 2011

How Many Mortgages Underwater?

 3rd-2011

UnderwaterAvg.

Decline/Qtr. Quarters Years Year

Inland Empire 370,960 15,241 24 6.1 2017

Los Angeles 353,427 9,430 37 9.4 2020

San Diego 167,155 2,220 75 18.8 2030

Orange 98,069 4,227 23 5.8 2017

How Much Potential Average Quarterly Competition for New Homes From Underwater Homes?

When Will Underwater Homes Reach Zero At Current Rate of Decline?

Home Sales Volumes Lack of Foreclosure Sales Has Been An Issue

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

e

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

Los Angeles

Orange

San Diego

Inland Empire

Source: Dataquick

All Home Sales TrendsSouthern California, 1988-2011e

IE 63,497LA 57,636SD 25,605OC 21,600

Is There Any Good Housing News?

Last Foreclosure Sold!

Demand > Supply & Price Above Lows

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Los AngelesOrange

San DiegoInland Empire

Source: Dataquick

Price Trends by CountySouthern California, 1988-2011ytd

OC $493,000SD $363,000LA $330,700IE $185,600

2011

Long Term Price Competitive Advantage Still Exists

Soaring Housing AffordabilityEasily Remains At or Near Record Levels

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0%5%

10%15%20%25%30%35%40%45%50%55%60%65%70%75%

Source: CA Association of Realtors

Housing Affordability, So. CaliforniaShare of Families Afford Median Priced Home, 1988-2011

42%

69%

33%

10-11%

15%

BUT . . .

Oil Prices Soaring Again19

85

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

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 PricesMonthly Average. 1985-2012

Congressional Madness

European Debt Crisis

Fear Caused Consumers Confidence It Has Recently Begun Rising

Construction Job Depression

-42.6%-216,122

Housing Slowdown Hurts!

Office Market

Office Vacancy Rates Have Soared!

Inland Empire 7.3% 23.8%23.8%

Orange Co. 6.9% 18.3% 18.3%

L.A. Co. 9.7% 16.6% 16.6%

San Diego 9.4% 20.2% 20.2%

2006 20112011

Forecast

2012 Better than 2011

Foreclosures A Major Continuing Issue

Complete Recovery 2015-2016??

We Need A Housing Solution!

www.johnhusing.com