South Bay Estate Planning Council Kimberly Ritter-Martinez, - PowerPoint PPT Presentation

South Bay Estate Planning Council Kimberly Ritter-Martinez, Economist LAEDC Institute for Applied Economics May 11, 2017

Outline ▪ U.S. Economy ▪ California and Southern California ▪ Southern California Housing Market ▪ Conclusion Los Angeles County Economic Development Corp.

The U.S. Economy

U.S. Real GDP Growth 2016 Real GDP Growth 1.6%; Forecast for 2017 2.1% 6 4 2 0 -2 % Annual Growth Rate, Quarter-Quarter -4 -6 -8 -10 2008q1 2008q3 2009q1 2009q3 2010q1 2010q3 2011q1 2011q3 2012q1 2012q3 2013q1 2013q3 2014q1 2014q3 2015q1 2015q3 2016q1 2016q3 2017q1 (f) 2017q3 (f) Sources: Bureau of Labor Statistics, Forecasts by Wells Fargo

U.S. Personal Consumption: First Quarter Stumble 6 4 2 0 Annual Growth Rate, Quarter-Quarter -2 -4 -6 2013q3 2008q1 2008q3 2009q1 2009q3 2010q1 2010q3 2011q1 2011q3 2012q1 2012q3 2013q1 2014q1 2014q3 2015q1 2015q3 2016q1 2017q1 2016q3 Sources: Bureau of Economic Analysis, forecasts by Wells Fargo

Business Fixed Investment 2015q4 2016q1 2016q2 2016q3 2016q4 2017q1 25 20 15 Annual % Change 10 5 0 -5 -10 -15 -20 Total Structures Equipment Intellectual Residential Property Source: US Bureau of Economic Analysis

Consumers vs. Businesses Contribution to % Change in Real GDP Consumer Spending Gross Fixed Investment 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 2014q1 2014q2 2014q3 2014q4 2015q1 2015q2 2015q3 2015q4 2016q1 2016q2 2016q3 2016q4 2017q1 Sources: Bureau of Economic Analysis

Consumer Inflation on the Rise Percent change from a year ago, 100 = 1982-1984 March 2016: All Items 2.4%; Core +2.0% All Items Core 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 2017 Source: US Bureau of Labor Statistics Kyser Center for Economic Research

Interest Rates Moving Higher Fed Funds Rate 10-Year Treasury 30-Year Fixed Mortgage Interest rate % Forecast 9 8 7 6 5 4 3 2 1 0 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 2017-01 Source: Federal Reserve; Forecasts by Wells Fargo Kyser Center for Economic Research

U.S. Non-farm Job Growth MONTH TO MONTH CHANGES IN THOUSANDS, SEASONALLY ADJUSTED March 2017: 98,000 Jobs, up by 1.5% Y/Y 600 400 200 0 -200 -400 -600 -800 -1,000 Feb-08 Jun-08 Oct-08 Feb-09 Jun-09 Oct-09 Feb-10 Jun-10 Oct-10 Feb-11 Jun-11 Oct-11 Feb-12 Jun-12 Oct-12 Feb-13 Jun-13 Oct-13 Feb-14 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Source: Bureau of Labor Statistics

U.S. Unemployment Rate March, Percent Unemployed (SA) 18 16 U-6 Unemployment Rate 8.9% 14 12 10 8 6 4 “Headline” Unemployment Rate 4.5% 2 0 Sources: Bureau of Labor Statistics

Source: Atlanta Federal Reserve Wage Tracker 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 3-Month Moving Average of Median Wage Growth U.S. Wage Growth 1/1/2007 5/1/2007 9/1/2007 1/1/2008 Recession 5/1/2008 9/1/2008 1/1/2009 5/1/2009 9/1/2009 1/1/2010 5/1/2010 9/1/2010 1/1/2011 5/1/2011 9/1/2011 1/1/2012 5/1/2012 Overall 9/1/2012 1/1/2013 5/1/2013 9/1/2013 1/1/2014 Services 5/1/2014 9/1/2014 1/1/2015 5/1/2015 9/1/2015 Full-Time 1/1/2016 5/1/2016 9/1/2016 1/1/2017

The State and Local Economies

California Non-farm Job Growth Month to month changes in thousands, seasonally adjusted March 2017: 19,300 Jobs m/m and 346,400 | 2.1% y/y 150 100 50 0 -50 -100 -150 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 Jan-16 May-16 Sep-16 Jan-17 Source: CA EDD, Labor Market Information Division

Job Trends by California Industry 10 year 1 year Jobs, Thousands Manufacturing Construction Financial Activities Mining & Logging Other Services Information Educational Srvs. Trade, Trans, Utilities Professional Business Srvs. Leisure & Hospitality Health Care -400 -200 0 200 400 600 Source: CA EDD, Labor Market Information Division

Job Trends by California Metro Area Metro Area (YTY Job Gain March) Annual percentage change in nonfarm jobs (SA) Inland Empire (48,800) 3.5% Modesto (5,800) 3.4% Ventura (8,300) 2.8% Oakland (31,400) 2.8% Fresno (8,800) 2.7% San Diego (28,200) 2.0% Sacramento (18,900) 2.0% San Jose (21,200) 2.0% Stockton (2,500) 1.9% Los Angeles (72,800) 1.7% Orange County (20,500) 1.3% Bakersfield (1,600) 0.6% Source: CA EDD, Labor Market Information Division

SoCal Unemployment Rates Los Angeles County (4.3%) Orange County (3.7%) Inland Empire (5.3%) Ventura County (4.6%) March 2017 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 May-15 Oct-15 Mar-16 Aug-16 Jan-17 Source: CA EDD, Labor Market Information Division

Los Angeles County Employment Trends March 2017: Gain +1.9%, +84,300 jobs (y/y), NSA Industry, Annual % Change Number of Jobs, Thousands Health Care (4.1%) 26.2 Leisure & Hospitality (2.8%) 13.7 Prof, Sci, Tech Services (3.5%) 9.5 Government (1.5%) 8.7 Prvt. Education (6.7%) 8.6 Other Services (5.4%) 8.2 Admin & Support (2.5%) 6.6 Construction (3.7%) 4.9 Wholesale Trade (1.9%) 4.3 Real Estate (2.9%) 2.3 Trans, Warehousing, Utilities (0.8%) 1.5 Mgmt of Companies (1.6%) 0.9 Retail Trade (0.2%) 0.7 Finance & Insurance (-0.1%) -0.1 Minining & Logging (-8.1%) -0.3 Mfg. Nondurables (-1.9%) -3.0 Mfg. Durables (-1.5%) -3.0 Information (-2.2%) -5.1 Source: CA EDD, Labor Market Information Division

Los Angeles County Economic Growth Indexed 1990 = 100 Annual % Change U.S. California L.A. County 220 200 180 160 140 120 100 80 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 2016e 2017f 2018f 2019f 2020f Source: US Bureau of Economic Analysis, IHS Kyser Center for Economic Research

Since 2007...L.A. County 89,000 92,000 Fewer More jobs in manufacturing jobs food services Ave Wage: $52 K Ave Wage: $20K

Since 2007...Santa Clara 1,200 34,000 Fewer More manufacturing jobs Internet Jobs Ave Wage: $135K Ave Wage: $295K

Since 2007... Santa Clara Los Angeles 16% 37% Ave wage in 2015 Ave wage in 2015 for all workers: for all workers $57,000 $117,000

Since 2007... Santa Clara Los Angeles 0% 12% Real wage Real wage growth over 9 growth over 9 years years

Educational Attainment by County Population 25 years and older % Bachelors or County % High School Higher San Bernardino 78.6% 19.0% Riverside 80.1% 20.9% Los Angeles 77.3% 30.3% Ventura 83.1% 31.7% San Diego 86.0% 35.7% Orange 84.3% 37.7% Santa Clara 87.0% 47.9% Source: Census, ACS Estimates 5-Yr Averages 2011-2015

Educational Attainment by Age in L.A. County High School Graduate or Higher BA Degree or Higher 84.6% 77.3% 75.6% 71.2% 34.1% 31.7% 28.9% 26.5% 25-34 Years 35-44 Years 45-64 Years 65 Years & up Source: U.S. Census Bureau, ACE 2010-2014 5-Year Estimates

The Housing Market

Median Prices in Southern California Existing Single-Family Homes YTY % County Mar-17 Mar-16 Change Los Angeles County $465,810 $441,700 5.5% Orange County $760,000 $720,200 5.5% Riverside County $375,000 $350,000 7.1% San Bernardino County $263,100 $237,350 10.8% Ventura County $672,220 $620,020 8.4% California $517,020 $484,120 6.8% Source: California Association of Realtors Kyser Center for Economic Research

Home Affordability in California Santa Clara California Los Angeles (Silicon Valley) Median Home Price (4q16) $511,360 $1,005,000 $503,400 Single-Family Homes Median HH Income $61,818 $96,310 $56,196 (2011-2015) Minimum Qualifying $100,800 $198,100 $99,230 Income (4q16) Housing Affordability 31 22 28 Index (4q16) Source: US Census ACS 5-year estimates, C.A.R. Kyser Center for Economic Research

SoCal Apartment Rents Los Angeles Orange Riverside San Bernardino Ventura 2,400 2,200 $2,180 2,000 $1,965 $1,890 1,800 1,600 $1,418 1,400 $1,367 1,200 1,000 800 600 05Q1 06Q1 07Q1 08Q1 09Q1 10Q1 11Q1 12Q1 13Q1 14Q1 15Q1 16Q1 Source: Real Estate Research Council, Harvard Joint Center for Housing Studies Kyser Center for Economic Research

Residential Building Permits Issued in SoCal 5-County Region Units permitted, thousands Single-Family Multi-Family 30.2 24.3 27.6 23.3 63.9 26.3 61.3 28.2 25.2 21.9 48.7 15.8 13.5 12.9 8.1 26.4 6.3 17.6 16.5 15.4 13.8 11.0 10.5 9.4 8.6 8.2 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: CIRB, California Home Building Foundation, forecast by LAEDC Kyser Center for Economic Research