2016-17 Southern California Economic Forecast & Industry Outlook Robert A. Kleinhenz, Ph.D. Sr. VP/Chief Economist, Kyser Center for Economic Research LAEDC February 17, 2016
Outline U.S. Economy California Economy Southern California Economy & Industries Conclusion/2016-17 Forecast Summary Kyser Center for Economic Research
U.S. Economy Kyser Center for Economic Research
GDP – Low Steady Growth Annual % Change 3.3 2.7 2.5 2.5 2.5 2.4 2.4 2.3 2.2 1.8 1.6 -0.3 -2.8 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f Sources: Bureau of Economic Analysis, forecasts by LAEDC Kyser Center for Economic Research
U.S. Economy at a Glance Consumer Sector Business Sector Government International Trade Other Macro Indicators: Labor Market Inflation Kyser Center for Economic Research
Consumption Up With Income Growth Annual % Change 4 3 2 1 0 -1 -2 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Bureau of Economic Analysis Source: Bureau of Economic Analysis Kyser Center for Economic Research
Business Investment Spending Annual Percentage Change 8% 2015 2016 2017 7% 6.6% 6% 5.0% 5% 4.5% 4% 3% 2.6% 2% 1% 0% Total Equipment Intellectual Property Structures -1% Source: IHS, LAEDC Kyser Center for Economic Research
Budget Deficit Stable, Rising in 2020+ Receipts Outlays 26 24 22 20 18 16 14 12 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f Source: Office of Management and Budget Source: Office of Management & Budget Kyser Center for Economic Research
Dollar: Index vs Basket of Currencies 100 Higher Dollar: • Pricier Exports 95 • Less Expensive Imports/Foreign Travel 90 85 80 75 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Source: Federal Reserve Source: Federal Reserve via FRED Kyser Center for Economic Research
Global Economy Up Overall Annual % Growth 10.0 2014 2015 2016f 2017f 8.0 6.0 4.0 2.0 0.0 -2.0 World Euro Area Developing Asia Latin Japan America/Carb. Source: IMF World Economic Outlook, January 2016 Update Kyser Center for Economic Research
Source: US BLS, CA EDD 10% 12% 0% 2% 4% 6% 8% Jan-90 Unemployment Rate Jan-91 Jan-92 Jan-93 U.S. At Full Employment Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 U.S.: 4.9% Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Kyser Center for Economic Research Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
Wage & Salary Jobs…Slower Growth 3 % Change 2.1 1.9 2 1.7 1.7 1.7 1.4 1 0 -1 -2 -3 -4 -5 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f Sources: Bureau of Labor Statistics, forecasts by LAEDC Kyser Center for Economic Research
U.S. Consumer Inflation Rising Year-Year % Change in CPI-U 4.5 4.0 3.5 3.0 2.4 2.5 2.0 2.0 1.5 1.0 0.5 0.1 0.0 -0.5 -1.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f Source: Bureau of Labor Statistics; forecasts by LAEDC Kyser Center for Economic Research
U.S. Forecast: What to Watch Kyser Center for Economic Research Kyser Center for Economic Research
Key Interest Rates Fed Funds Fixed Rate Mort 10-Year T-Bond 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 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 Source: Federal Reserve Kyser Center for Economic Research
Plunging Oil … Good or Bad? Dollars/barrel 150 West TX Intermediate 125 100 75 50 25 0 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Source: US Energy Information Administration Source: US Energy Information Administration Kyser Center for Economic Research
First Significant Wage Gains in Years Annual % Change in Hourly Wage Annual Inflation Rate 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bureau of Labor Statistics Kyser Center for Economic Research
Hot Button Issue: Household Income Median HH Income in Thousands of 2014 Dollars 60 57.8 57.4 55 53.7 50 45 40 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: Census Bureau Kyser Center for Economic Research Kyser Center for Economic Research
Stock Market Volatility Up 19,000 Daily DJIA 18,500 18,000 17,500 17,000 16,500 16,000 Oct.’14 15,500 15,000 14,500 14,000 13,500 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Source: Federal Reserve Kyser Center for Economic Research
China & U.S. Economy • Exports to China as % of GDP: – US: 0.96% – CA: 1.10% • Linkages & Ripple Effects – Financial system: global integration – Economic system: • U.S. linkages limited – Ripple effects Kyser Center for Economic Research
Exports as % of GDP Selected Countries (2014) 55 51 48 50 42 45 40 32 32 35 30 23 25 21 18 20 16 14 15 12 10 5 0 S. Korea Saudi Arabia European Union Mexico Canada China Australia Nigeria Japan (2013) USA Brazil Source: World Bank Kyser Center for Economic Research
U.S. Forecast Kyser Center for Economic Research
U.S. FORECAST: Steady, Modest Growth 2014 2015 2016f 2017f Real GDP - Annual % 2.4% 2.4% 2.5% 2.5% Chg. Nonfarm Jobs - Annual 1.9% 2.1% 1.7% 1.4% % Chg. Unemployment Rate 6.2% 5.3% 4.9% 4.7% Consumer Prices - 1.6% 0.1% 2.0% 2.4% Annual % Chg. Forecast Source: LAEDC Kyser Center for Economic Research
California Economy Kyser Center for Economic Research
California Growth Outpacing U.S. US GDP CA GSP Annual % Change 4% 3% 2% 1% 0% -1% -2% -3% -4% 2012 2013 2014 2015 2016f 2017f Source: US Bureau of Economic Analysis, IHS, forecasts by LAEDC Kyser Center for Economic Research
CA Unemployment Rate Falling Quickly Unemployment Rate, Seasonally Adjusted 14% U.S.: 5.0% CA : 5.8% 12% 10% 8% 6% 4% 2% 0% 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 Source: US BLS, CA EDD Kyser Center for Economic Research
CA Job Gains Outpace U.S. 4 % Change 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016f 2017f Sources: Bureau of Labor Statistics, forecasts by LAEDC Kyser Center for Economic Research
Job Trends by California Metro Area Annual percent change in nonfarm jobs, seasonally adjusted CALIFORNIA – 2015: +470,000 +3.0% YTY San Jose 5.4% San Francisco 4.4% Riverside-San Bernardino 3.8% Fresno 3.2% Orange 3.2% San Diego 3.1% Stockton 2.9% Sacramento 2.6% Modesto 2.3% Los Angeles 2.2% Oakland 2.1% Ventura 1.7% Bakersfield 1.1% 0% 1% 2% 3% 4% 5% 6% Source: CA EDD, Labor Market Information Division Kyser Center for Economic Research
Long Term Job Trajectories Vary CA SF OR LA RVSB 200 180 185 160 140 120 121 100 103 80 60 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: EDD, Compiled by LAEDC Kyser Center for Economic Research
California Economic Forecast 2014 2015 2016f 2017f Nonfarm Jobs - 3.0% 3.0% 2.5% 1.6% annual % chg. Unemployment Rate 7.0% 6.2% 5.5% 5.3% Personal Income - annual 4.7% 5.7% 4.7% 5.7% % chg. Total Taxable Sales - % 4.9% 3.4% 5.5% 7.0% chg. Housing Permits - 85.8 96.5 110.0 128.8 thousands of units Forecast Source: LAEDC Kyser Center for Economic Research
Southern California Economy Kyser Center for Economic Research
Local Unemployment Rates Dec. 2015 20% 20% LA - 5.8% OC - 4.1% IE - 5.9% 18% 18% 16% 16% 14% 14% 12% 12% 10% 10% 8% 8% 6% 6% 4% 4% 2% 2% 0% 0% Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Source: CA EDD, Labor Market Information Division Kyser Center for Economic Research
Major Industries in Southern California INCOME GENERATING INCOME CIRCULATING International Trade Retail Sales Entertainment Leisure & Hospitality Tourism Health Care/Social Assistance Business Services Personal Services Aerospace Nonprofit Sector Fashion & Apparel Knowledge Creation Kyser Center for Economic Research
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