Beyond the Headlines Economic Outlook and Forecast
RobertA.Kleinhenz,Ph.D.Economist/Execu:veDirectorofResearch,BeaconEconomics,LLC
HighDesertAssocia:onofREALTORS
September21,2016
Outline
• U.S.Economy
• CaliforniaEconomy
• HighDesert/InlandEmpire
• Conclusion
2
HeardintheHeadlines
• FedTightening:WhenandLikelyImpact?
• The“R”Word:Aren’tWeDueforOne?
• Elec:on2016:EffectsontheEconomy?
3
U.S. Economy
4
TwoViewsofGDP
-2
-1
0
1
2
3
4
5
6
2013I II III
IV
2014I II III
IV
2015I II III
IV
2016I II
GrossDomes)cProduct 2013 2014 2015
GDP 1.7 2.4 2.6 Final Demand 1.2 3.3 3.3
Consumption 1.5 2.9 3.2 Goods 3.1 3.9 4 Services 0.6 2.3 2.8 Investment 6.1 4.5 5
Structures 1.4 10.3 -4.4 Equipment 4.6 5.4 3.5 Intellectual Property 3.4 3.9 4.8 Residential 11.9 3.5 11.7 Change Inventories 43.9 -26.7 45.6
Net Exports 2.4 -0.1 -4.5 Exports 3.5 4.3 0.1 Imports 1.1 4.4 4.6 Government -2.9 -0.9 1.8 Federal -5.8 -2.5 0 State and local -0.8 0.2 2.9
5
ConsumerSpending-FlywheelofEconomy
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
AnnualAutoLightTruckSales
0
1
2
3
4
5
6
7
8
9
Apr-11
Oct-11
Apr-12
Oct-12
Apr-13
Oct-13
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
YOYCh
ange(%
)
RealSpendingonGoodsMA(3)
RealGoods(BEA) NominalRetail(Census)
Aug‘16YTD:+0.5%
6
KeySectorsofMacroeconomy
Consumer/Households ↑Business/CapitalExpenditures ?Government ↑Interna:onalTrade ↓OtherMacroIndicatorsLaborMarket ↑Infla:on !
7
InternationalTrade
Exports Imports Bal. Total -104.4 -87.3 -17.1
Canada -28.8 -45.8 17 Netherlands -2.8 -3.9 1.1 Belgium -0.6 -1.2 0.6 India 0.3 -0.1 0.4 Germany 0.2 0.3 -0.1 Taiwan -0.5 0.1 -0.6 Japan -3.5 -2.7 -0.8 France -1.1 0.6 -1.7 UK 2.8 4.5 -1.7 Italy -0.9 1.7 -2.6 Korea, South -0.6 2.8 -3.4 Mexico -3.6 1.3 -4.9 Brazil -10 -2.3 -7.7 China -5.7 17.8 -23.5
ChangeinNominalGoodsTrade2014to2015
17001800190020002100220023002400250026002700
2010.1
2010.3
2011.1
2011.3
2012.1
2012.3
2013.1
2013.3
2014.1
2014.3
2015.1
2015.3
2016.1
Exports Imports
RealImportsandExports
8
UnemploymentDown,OpeningsUp
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
U-6 Headline
Unemployment
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
Jan-05
Mar-06
May-07
Jul-0
8Sep-09
Nov-10
Jan-12
Mar-13
May-14
Jul-1
5
JobOpeningRate
9
LaborMarket/IndustriesonTrack
0
50
100
150
200
250
300
350
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15
Jan-16
May-16
MonthlyChangePayrollJobs By Sector 15-Jul 16-Jul % Total Nonfarm 142,001 144,448 1.7 Construction 6,437 6,652 3.3 Health Care 18,614 19,191 3.1 Professional/Business 19,707 20,257 2.8 Leisure 15,125 15,546 2.8 Administrative 8,832 9,054 2.5 Financial 8,137 8,299 2.0 Management 2,226 2,267 1.9 Retail Trade 15,671 15,960 1.8 Educational 3,462 3,523 1.8 Other 5,631 5,691 1.1 Information 2,756 2,783 1.0 Logistics 4,857 4,895 0.8 Wholesale Trade 5,876 5,922 0.8 Government 22,022 22,176 0.7 Manufacturing 12,336 12,305 -0.3 NR/Mining 812 682 -16.0 10
2.5%
1.1%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Annual % Change in Hourly Wage Annual Inflation Rate
MuchNeededWageGainsvs.InNlation
KyserCenterforEconomicResearch
11
HotIssue:HouseholdIncomeGrowth
57.9 57.4
53.7
56.5
40
45
50
55
60
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Median HH Income in Thousands of 2015 Dollars
12
U.S.Outlook• Con:nuedUSEconomicGrowth:~2.0%• Domes:cSpendingIntact:
– Consumers– Businesses– Government
• USIsola:onLimitsGlobalSpillovers• OilPricePlunge:OilGlut• FinancialMarketVola:lity/FedRateHikes:SavingsGlut
• SecularStagna:on
13
California Economy
14
0%
2%
4%
6%
8%
10%
12%
14%
Jan-
90
Jan-
91
Jan-
92
Jan-
93
Jan-
94
Jan-
95
Jan-
96
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15
Jan-
16
U.S.: 4.9% CA : 5.5%
CAUnemploymentRateFallingQuicklyUnemployment Rate, Seasonally Adjusted
15
CAAddingJobsFasterthanU.S.
-8
-6
-4
-2
0
2
4
Jan-08
Jun-08
Nov-08
Apr-09
Sep-09
Feb-10
Jul-1
0
Dec-10
May-11
Oct-11
Mar-12
Aug-12
Jan-13
Jun-13
Nov-13
Apr-14
Sep-14
Feb-15
Jul-1
5
Dec-15
May-16
US:+1.7% CA:+2.3%
YTY % change in nonfarm jobs, seasonally adjusted
16
CAAmongFasterGrowingStates(2.0%)
17
CaliforniaOutlook
• Con:nuedEconomicGrowthinState/Regions
• JobGainsAcrossSpectrumofIndustries
• StrengthinHealthcare,Tech,Medical,
Construc:on,Tourism
• VentureCapitalin2016(firsthalf2016):– CA: $16.6B
– Other49States:$11.4B
18
High Desert/IE
19
JobGainsAcrossCalifornia
2.2%
0.0% 1.0% 2.0% 3.0% 4.0%
Oxnard-ThousandOaks-VenturaMSALosAngeles-LongBeach-GlendaleMetroDiv
SanDiego-CarlsbadMSABakersfieldMSA
Riverside-SanBernardino-OntarioMSASacramento--Roseville--Arden-ArcadeMSA
Oakland-Hayward-BerkeleyMetroDivAnaheim-SantaAna-IrvineMetroDiv
SantaRosaMSAFresnoMSA
SanJose-Sunnyvale-SantaClaraMSAStockton-LodiMSA
YTY%ChangeJobs(Aug.'16)
20
AbsoluteJobGains,SelectedMSAs
Note:SeasonallyAdjustedFiguresbyMSAShown
MSA YTYOxnard-Thousand Oaks-Ventura MSA 3,200Bakersfield MSA 5,200Santa Rosa MSA 6,100Stockton-Lodi MSA 7,500Fresno MSA 10,400Sacramento--Roseville--Arden-Arcade MSA 22,300Oakland-Hayward-Berkeley Metro Div 27,100San Diego-Carlsbad MSA 27,100Riverside-San Bernardino-Ontario MSA 30,100San Jose-Sunnyvale-Santa Clara MSA 34,300Anaheim-Santa Ana-Irvine Metro Div 40,800Los Angeles-Long Beach-Glendale Metro Div 76,100
21
IEJobChangesvs.CA
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
Jan-08
Jun-08
Nov-08
Apr-09
Sep-09
Feb-10
Jul-1
0De
c-10
May-11
Oct-11
Mar-12
Aug-12
Jan-13
Jun-13
Nov-13
Apr-14
Sep-14
Feb-15
Jul-1
5De
c-15
May-16
CA:+2.3% IE:2.2%
YTY % change in nonfarm jobs, seasonally adjusted
22
SouthernCaliforniaUnemploymentRates
0.0%2.0%4.0%6.0%8.0%10.0%12.0%14.0%16.0%
2007.01
2007.06
2007.11
2008.04
2008.09
2009.02
2009.07
2009.12
2010.05
2010.10
2011.03
2011.08
2012.01
2012.06
2012.11
2013.04
2013.09
2014.02
2014.07
2014.12
2015.05
2015.10
2016.03
2016.08
LA:4.3% OC:3.6% IE:5.3%
23
InlandEmpireJobChangesbyIndustry
24
1.8%
2.6%
-10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%
MiningandLoggingFinance&Insurance
Administra:ve&Support&WasteServicesInforma:on
Leisure&HospitalityRetailTrade
RealEstate&Rental&LeasingHealthCare&SocialAssistance
Professional,Scien:fic&TechnicalServicesTotalNonfarm
ManufacturingManagementofCompanies&Enterprises
OtherServicesConstruc:on
WholesaleTradeGovernment
Transporta:on,Warehousing&U:li:esTransporta:on&Warehousing
Educa:onalServicesYTY%(Aug'16)
LaborMarket–HeadlineNumbersImproving
SeasonallyAdjusted Aug2015 Aug2016 Change
California 6.0 5.5 -0.5
NotSeasonallyAdjusted Aug2015 Aug2016 Change
California 6.1 5.6 -0.5
SanBernardinoCounty 6.5 6.2 -0.3
Victorville 7.0 6.7 -0.3
Adelanto 10.9 10.5 -0.4
Hesperia 8.9 8.5 -0.4
Barstow 6.1 5.8 -0.3
25
UNEMPLOYMENTRATES(%)
ContainerThroughputSanPedroPortsonTrackforNearRecordYear
11.813.1
14.215.8 15.7
14.3
11.8
14.1 14.0 14.1 14.6 15.2 15.4
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Aug‘16YTD%Total: +0.9%InboundLoaded: +0.2%OutboundLoaded: +2.7%
26
So.CalTransportation&WarehousingEmployment
0
50
100
150
200
250
300
350
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
VenturaCounty OrangeCounty LosAngeles InlandEmpire
IETrans/Whsg:+8.4:IEWholsale:+5.2%
27
KeyIndustries
EXPORT-ORIENTED• Transporta:on&Warehousing• WholesaleTrade• Manufacturing
LOCALSERVING• HealthServices• RetailTrade• Leisure&Hospitality
28
Real Estate
29
SoCalResidentialOutlook
30
Aug-15 Jul-16 Aug-16 MTM YTY MTM YTYLosAngeles $492,360 $513,700 $517,400 0.7% 5.1% 2.6% 5.4%Orange $714,380 $734,000 $749,000 2.0% 4.8% 8.2% 9.3%Riverside $335,000 $359,900 $355,000 -1.4% 6.0% 0.9% 12.1%SanBernardino $230,530 $248,210 $243,370 -1.9% 5.6% 1.9% 1.4%SanDiego $539,000 $560,000 $563,000 0.5% 4.5% 2.6% 7.6%Ventura $620,150 $644,010 $652,330 1.3% 5.2% -3.4% -5.7%
PriceChange SalesChange
• Leaninventories• DemandDrivers:job/incomegrowth,lowrates,demographics• SupplyDrivers:risingprices,lowrates• Constraints::me,developmentcosts
HDARSales&Prices
02004006008001,0001,2001,4001,6001,8002,000
0
50
100
150
200
250
300
350
400
2000.01
2001.01
2002.01
2003.01
2004.01
2005.01
2006.01
2007.01
2008.01
2009.01
2010.01
2011.01
2012.01
2013.01
2014.01
2015.01
2016.01
Sales MedianPrice
Aug’16:SALES1,020,+3.3%YTY,+0.1YTD,--PRICE$233,300,+15.8%YTYMedianPrice($000s)-LINE Sales-BAR
31
HousingAffordability:%ofHHsAffordingMedianPricedHomeState/Region/County Q2-15 Q2-16LosAngeles 30 30OrangeCounty 21 22RiversideCounty 40 41SanBernardinoCounty 56 56SanDiegoCounty 25 26Ventura 25 29California 30 31
UnitedStates-AllExis:ng 57 57
32
ApartmentRents
33
Wages Rents ShareSantaCruz $46,133 $1,774 46%Sonoma $48,290 $1,465 36%SanJoaquin $42,850 $1,275 36%Orange $59,274 $1,724 35%Monterey $43,463 $1,243 34%Tulare $35,701 $986 33%SantaBarbara $51,015 $1,408 33%SanBernardino $43,094 $1,168 33%Riverside $43,313 $1,168 32%ContraCosta $63,087 $1,701 32%SanDiego $57,702 $1,532 32%SanFrancisco $97,903 $2,517 31%Alameda $68,326 $1,701 30%Fresno $40,473 $885 26%Kern $43,387 $922 26%Sacramento $56,477 $1,063 23%SantaClara $115,437 $2,074 22%
700
900
1100
1300
1500
1700
1900
2100
Q2-05
Q2-06
Q2-07
Q2-08
Q2-09
Q2-10
Q2-11
Q2-12
Q2-13
Q2-14
Q2-15
Q2-16
InlandEmpire LosAngeles(MD)OrangeCounty(MD) SanJose
HousingPermits,SanBernardinoCounty
02,0004,0006,0008,000
10,00012,00014,00016,00018,00020,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Single-family Mul:-family
34
-5.6%YTD(Q2’16)
PaceofConstruction
35
California 4.1 Tulare 4.0Ventura 6.8 LosAngeles 4.0ContraCosta 6.6 Fresno 4.0Sonoma 6.1 SanMateo 3.4Alameda 5.9 Kern 3.0SantaBarbara 5.3 SantaClara 3.0SanBernardino 5.0 Orange 2.8Solano 4.6 Placer 2.1Riverside 4.5 SanFrancisco 2.1SanDiego 4.2 Sacramento 0.7
NewPop/Permits
0
2000
4000
6000
8000
10000
12000
01-06
12-06
11-07
10-08
09-09
08-10
07-11
06-12
05-13
04-14
03-15
02-16
Mul:family SingleFamily
CaliforniaPermits
NonResidentialRealEstate
• Office(Q2-2016)– Vacancyrates:14.1%vs15.6%lastyr– Askingrents:+1.0%YTY
• Industrial(Q1-2016)– Vacancyrates:3.7%vs3.6%lastyr– Askingrents:+22.0%YTY
36
Conclusion
37
HeardintheHeadlines
• FedTightening:WhenandLikelyImpact?
• The“R”Word:Aren’tWeDueforOne?
• Elec:on2016:EffectsontheEconomy?
38
Conclusion
• Continued Economic Growth: US and CA
• Income Gains Support Growth in Spending
• California Outpacing US
• Job Gains in Most Local Industries
• Real Estate/Construction Outlook Mixed
39
40
EmailtheSpeaker:[email protected]
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