Shannon Sedgwick Director, LAEDC Institute for Applied Economics (IAE)
Shannon Sedgwick Top-line 2020 Forecast California, Southern CA & LA County
Economic Growth in California Slower, yet Continued Growth Real GDP Growth Forecast 4.3% 3.7% 3.1% 2.6% 2.0% 1.9% 1.8% 1.8% 1.8% 1.6% 1.6% 1.6% California Los Angeles County Southern CA 2018 2019 2020f 2021f Sources: IHS, Forecast by LAEDC
Eliminating the Last of its Slack The Labor Market will be Unemployment Rate Real Personal Income Growth 3.8% 4.7% 3.6% 3.5% 4.5% 4.3% 3.2% 4.2% 4.2% 4.1% 4.1% 4.1% 2.8% 2.8% 4.0% 4.0% 3.9% 3.9% 2.5% 2.4% 2.2% 2.2% 2.1% 1.8% California LA County Southern CA California LA County Southern CA 2018 2019 2020f 2021f 2018 2019 2020f 2021f Sources: BLS, BEA, Forecast by LAEDC
California Historical Employment Growth 10 Year Employment Change Educational & Health Svcs Professional & Business Svcs Leisure & Hospitality Transp., Trade, & Utilities Construction & Natural Resources Government Information Other Services Financial Activities Manufacturing -100 0 100 200 300 400 500 600 700 800 Thousands Los Angeles Other Southern CA Rest of California Sources: IHS
California Employment Forecast 2 Year Employment Forecast Educational & Health Svcs Professional & Business Svcs Leisure & Hospitality Government Construction & Natural Resources Transp., Trade, & Utilities Manufacturing Information Other Services Financial Activities -50 0 50 100 150 200 Thousands Los Angeles Other Southern CA Rest of CA Sources: IHS, Forecast by LAEDC
Barrier to Growth: Demographic Headwinds Population Trends Low Fertility Year-over-Year % Change In Population Total Fertility Rate 2.3 2.5% 2.20% 2.2 2.0% 2.1 1.5% 2.0 1.0% 1.9 0.5% 0.5% 1.8 1.72% 0.0% 1.7 -0.01% 1.63% -0.5% 1.6 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 Los Angeles California United States California
Barrier to Growth: Demographic Headwinds Outmigration Low Labor Force Productivity California Domestic Migration U.S. Labor Force Productivity % Growth (Year-Over-Year) 600 400 5% 200 Thousands 4% 0 2018 -200 3% -190.1 -400 2% 1.3% -600 1% -800 -1000 0% 2001 2003 2005 2007 2009 2011 2013 2015 2017 -1% 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 Coming Going Net
Barrier to Growth: The Housing Crisis Housing Undersupply Total Housing Permits Issued 250 SCAG Region RHNA Target: 200 1.3 million over 8 years Thousands 150 116.0 100 50 45.9 22.0 0 1990 1994 1998 2002 2006 2010 2014 2018 California Los Angeles SCAG Source: US Census Bureau
Barrier to Growth: The Housing Crisis Housing Affordability, Traditional (HAI) SoCal Apartment Rents 60% $3,000 Minimum Qualifying Income LA $2,614 County $2,612 Q3 2019 50% $2,500 $127,200 $2,548 40% $2,000 $1,915 31% 30% 25% $1,500 Estimated Annual Rent in 20% L.A. County (2018): ~ $31,000 Median HH Income in Los Angeles County (2018): $68,093 $1,000 10% $500 0% 2010-09 2011-09 2012-09 2013-09 2014-09 2015-09 2016-09 2017-09 2018-09 2019-09 2006.1 2007.3 2009.1 2010.3 2012.1 2013.3 2015.1 2016.3 2018.1 2019.3 CA LA LA/OC Inland Empire San Diego Ventura
Upside Economic Potential California Venture Capital Investment Venture Capital Investment 1000 30 900 Los Angeles California Number of deals 25 800 700 20 600 Number of Deals $US Billions 500 15 400 10 300 200 5 100 0 0 Q1 1995 Q1 1997 Q1 1999 Q1 2001 Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1 2017 Q1 2019 Source: PwC
Streaming Content Investment Upside Economic Potential Content Investment ($billions) 25 $23.8 20 15 $15.0 $14.3 10 $6.0 $6.0 5 $1.0 $2.5 $2.5 0 Amazon (2019) Apple (2019) AT&T (including HBO (2017) Disney (Non- Disney+ (2019) Hulu (2018) Netflix (2019) HBO) (2018) Sports) (2019)
Upside Economic Potential Regional Transit Expansion LA Metro Budget 7 $6.6 6 5 Billions 4 3 2 1 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Source: LA Metro
Conclusions from the 2020 LAEDC Forecast ▪ Still more slack in the labor market, particularly in Los Angeles County ▪ Low to moderate but sustained economic growth in the near term ▪ Employment expansion, particularly in health care ▪ Barriers To Growth: ▪ Demographic Headwinds ▪ Housing Crisis ▪ Potential for Greater Growth: ▪ Business investment, particularly in the digital and traditional media ecosystem ▪ Transit expansion, both direct fiscal stimulus and helping to connect labor market
The Other Los Angeles
The Labor Market Isn’t as Tight as You Think Unemployment Rates: Including Underemployed and Detached Workers 25 U6 Unemployment, 4-Quarter Moving Average 20 15 10.2 10 8.5 7.0 U3 Unemployment 5 4.8 4.1 3.6 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Los Angeles California United States Los Angeles California United States Source: BLS
Household Income Has Seen Little Growth Indexed Growth from 2000 to 2018 Los Angeles County (2000=100) 110 104.3 105 100 95 90 Real Median Household Income only increased by: 4 percent 85 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Median Household Income ($2000)
Home Prices Far Exceed Household Incomes Median Home Price to Median Household Income Ratio The median home value in Los Angeles was 9.2 14.0 times the median household income in 2018 12.0 10.0 9.2 8.0 7.3 6.0 5.7 4.9 4.0 3.7 3.0 2.0 0.0 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Los Angeles California United States Source: US Census ACS
Extremely Low Income Households Increasing In 2013: 18.3% In 2016: 20.6% Percent of households whose incomes do not exceed 30% of the median family income Source: USC
The Number of Homeless are Increasing In Los Angeles County Homeless Count 58,936 55,048 52,765 46,874 44,359 2015 2016 2017 2018 2019
Households with Children Have Higher Poverty Rates Raising Children in LA County is Harder • 25% of HH with children Poverty Rate: Households receiving public assistance • 456,430 children living below poverty level 19.6% • 5,214 children in homeless 16.7% 16.7% families 6.6% 5.4% 5.0% United States California LA County Households - no Children Households - w/ Children
Inequity Persists in Education 2018-2019 Graduation Rates 98.1% 95.3% 86.1% 82.5% 78.0% Los Angeles Unified Antelope Valley Union High LA County Total San Marino Unified Palos Verdes Penn Unified
Job Growth Strongest for Those with More Education Educational Attainment of SoCal Residents Projected Job Growth by Entry-Level Education in SoCal Percentage change from 2018 to 2023 Population 25 years and over in 2017 High School or Master's degree 9.6% equiv Associate degree 7.7% 21.3% Postsecondary non-degree award 7.1% Less than HS PhD/ professional degree 7.1% 19.1% Some College/ Bachelor's degree 7.0% Nondegree Award High school diploma or equivalent 6.5% 18.1% PhD/Prof'l Less than high school 6.2% 3.5% Some college, no degree 5.3% Master's 7.3% Associate 7.5% Total, all levels of education 6.6% Bachelor's 20.4% Source: LAEDC
Wage Growth Rebounding for Those with The Lowest Wages The lowest quartile US Wage Growth by Wage Quartile is growing: 7 Lowest 25% of wages • took longer to Top 25% of wages 6 rebound post- recession 5 • Min Wage 4.4 increases are 4 causing growth 3 • Inequity remains 2.9 and they are still far behind 2 1 1998 2001 2004 2007 2010 2013 2016 2019 Source: Atlanta Fed
Growing Jobs Reflect the Bifurcation of Our Workforce Laborers and Freight, Stock, and Material Movers, Hand Cooks, Restaurant 5. Software Developers, Applications 4. 3. Administrative Assistants, Except Legal, Medical, and Executive 2. Combined Food Preparation and Serving Workers, Including Fast Food 1. Occupations with the most jobs added 2009 to 2018 – 54,530 jobs added – 51,220 jobs added – 42,980 jobs added – 29,890 jobs added – 25,200 jobs added
Growing Jobs Reflect the Bifurcation of Our Workforce 9. Working Part-Time, Year-Round: 32,100 Working Full-time, Year-Round: Level: Individuals Below the Poverty LA County’s Working Poor Waiters and Waitresses 10. Computer Systems Analysts Cashiers 8. Software Developers, Systems Software 7. Computer User Support Specialists 6. 150,130 Occupations with the most jobs added 2009 to 2018 – 23,640 jobs added – 23,300 jobs added – 20,240 jobs added – 19,080 jobs added – 17,580 jobs added
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