Inland Empire 201011 Start of the Recovery John

Inland Empire 201011 … Start of the Recovery? John Husing, Ph. D. Economics & Politics, Inc.

After Losing 8. 36 Million Jobs … U. S. Job Creation Is Crawling Back

U. S. GDP Grew Dramatically in 4 th Quarter “Normal” Growth In 1 st Qtr. ; Slow in 2 nd Qtr. Why Any Growth?

Empty Shelves!

Where Are Jobs Coming From?

Consumers Confidence Decaying Again! 100. 0 = Normal

California Wage & Salary Employment Back to 1999 Level Every Wage & Salary Job Created In California Since 1998 Has Been Lost Inland Empire Was Responsible for 42. 3% of California’s Job Growth from 2000 -2007

In 2008, the Inland Empire lost – 47, 583 jobs In 2009, it lost another – 92, 692 In 2010, current loss estimate = 28, 444

In Aug-2010, Inland Empire’s unemployment was 14. 8%, 14. 8% Second After Las Vegas (15. 0%) U. S. was 9. 6%, CA was 12. 4% 14. 8%

Gold Mine Theory Secondary Tier Primary Tier Logistics: Blue Collar Manufacturing: Blue Collar Construction: Blue Collar WHY?

Our Labor Force & Inexpensive “Dirt” Has Made Us Blue Collar Dependent

Blue Collar Forecast Port Import Volumes Change In Imported Containers Ports of Los Angeles-Long Beach, 1998 -2010 e (000 of teus) 1, 149 551 670 654 443 349 160 934 788 (164) (882) (1, 068) -25. 4% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 e Source: Port Import Export Reporting Service (PIERS), collected from Vessel, LA-LB for 2009 2010 based on Hackett Associates (28%) reduced to 16%.

U. S. Inventory to Sales Ratio, 1985 -2010 Months of Inventory On Hand At Existing Sales Levels 1. 65 1. 60 1. 55 1. 50 1. 45 1. 40 1. 35 1. 30 1. 25 87 19 88 19 89 19 90 19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 19 19 19 85 86 1. 20 Source: U. S. Census Bureau

Manufacturing Orders Rising

Industrial Market Improvement 12 million sq. ft. gross absorption last four quarters

Construction Difficulties! Some Improvement In Outlook Based on Permits -$10. 3 Billion Hole In IE Economic Base

Shadow Inventory of Foreclosures? 628, 327 Homes Underwater Only 304, 654 Notices of Default 317, 673 Where Are They?

Somebody Has To Take A Major Hit! Homeowners Lose Their Homes Lenders Lose Part of Their Investments Mortgage Backed Security Owners Lose Part of Their Investments Taxpayers Subsidize One of the Above Until This Happens … We Don’t Have A Recovery!

Right Now. . . Housing: Supply & Demand Supply From Foreclosures vs. Demand From Lower Prices

Seasonally Adjusted Home Volumes Lack of Foreclosure Sales Becoming An Issue

Demand > Supply & Price Rising 14. 9 %

Soaring Inland Housing Affordability Sets A Record … Stimulating Demand 59 % 62 % 4. 5 Times 15 %

Dirt Still = Price Advantage

Price Stability? Riverside, up 11. 1% & SB up 16. 8% from Trough

Some Construction Job Gains in 2010 Up 1, 900 Jobs Since February Low Major Activity Awaits 2012, Recovery = 2015 -6

Assessed Valuation Assessed Value Should Rise For FY 2011 -2012 & Positively Affect State & Local Property Tax Collections

Gold Mine Theory Secondary Tier Primary Tier

Retail Sales Turn Positive Taxable Sales Growth Rates Quarterly, San Bernardino County & California, 1992 -2010 18% California San Bernardino 14% 10% 6% 2% -6% -10% -14% -18% -22% 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: CA Board of Equalization, Hinterliter De. Llamas 2006 2007 2008 2009 2010

OFFICE FORECAST Well-Educated Workers Were Migrating Inland BA Or Higher Education Adults 25 & Up, Inland Empire, 2000 -2009 476, 406 52. 6% 312, 257 164, 149 2000 2009 2000 -2009 Source: 2000 Census & 2009 American Community Survey Percent

Inland Empire’s in-migration from Coastal Counties Has Stopped Net Domestic Migration Inland Empire, 2000 -2009 87, 330 66, 390 86, 553 81, 899 61, 565 61, 093 40, 263 26, 624 (8, 811) 2000 2001 2002 2003 2004 2005 2006 2007 2008 (14, 933) 2009 Not Bringing Students, Skills, & Spending Source: California Department of Finance, Demographic. Wealth, Research Unit, E-2 Income Reports, 2000 -2009

Office Absorption: Collapsed In 2008 … Flat In 2009 -10

Office Vacancy Has Gone From 3 rd Lowest In U. S. To Very High as Housing Collapsed 23. 9% 7. 0%

Median Incomes

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