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HomeMy WebLinkAboutSS3 - Beacon Annual Economic Forecast - PowerPointJnauary 9, 2018 Item No. SS3 The Economic Outlook City of Newport Beach January 2018 Robert A. Kleinhenz, Ph.D. Economist & Executive Director of Research Beacon Economics, LLC US/CA Overview Local Economy Conclusion/Looking Ahead BEACONECONOMICs Analysis. Answers. • US Labor Market Slowing ... Sign of Recession? • California in a Housing Crisis? • Tax Cuts — Stimulus to Economy? — California Impact? BEACONECONOMICs Analysis. Answers. U.S./CA Overview BEACONECONOMICs Analysis. Answers. • GDP Growth Rate Labor Market Conditions • Inflation Rate UEACONECONOmics Analysis. Answers. 4 3 2 1 0 -1 -2 -3 Gross Domestic Product YTY % Change �O� �o� roti roti roti roti roti �Oti� Qti �(S1 BEACONECONOMICs Analysis. Answers. Contributions to Change in GDP *2017 YTD: Q1-17 through Q3-17 Sector CONSUMERS BUS. INVESTMENT GOVERNMENT NET TRADE SUMMARY BEACONECONOMICs Analysis. Answers. Outlook Steady solid growth Acceleration, energy drag over Flat/Up Slightly Imports & Exports up, Imports larger... NET Negative Domestic Spending Up 4.5 3.5 - 2.5 - 1.5 �0.5 -0.5 F'3 �� oil oi0 O`�' O''', Oh O'� 00 'y'y ,y0 ,y0 ,y0 ,y0 ,10 ,ti0 ,LO ,ti0 ,ti0 ,ti0 ,ti0 ,ti0 ,LO BEACONECONOMICs Analysis. Answers. Unemployment Rate -U-3 -U-6 BEACONECONOMICs Analysis. Answers. 2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 0.6 0.4 Yr -To -Yr % Change in Jobs 2.1 1.9 1.7 1.5 2014 2015 2016 2017 Local Economy BEACONECONOMICs Analysis. Answers. State and National Job Growth 4.0% 3.5 3.0% 2.5 2.0% 0.5% 0.0% ti� ti'` ti� ti< ti� ti� til a�, ate, ��, a�, ate, ��, -California United States BEACONECONOMICs Analysis. Answers. N ov-17 14-15 15-16 16-17 Inland Empire 1,470,000 5.2% 3.3% 3.0% Fresno 346,000 3.6% 3.1% 2.3% S. Francisco 1,125,700 5.1% 4.1% 2.3% East Bay 1,162,400 3.6% 3.2% 2.0% Sacramento 978,700 3.6% 3.5% 1.8% San Diego 1,457,400 3.3% 2.6% 1.7% San Jose 1,102,100 4.3% 3.3% 1.8% Los Angeles 4,465,200 2.6% 2.7% 1.4% Kern 269,400 1.4% -1.9% 0.9% Orange 1,600,700 3.6% 2.3% 0.8% 0% Jan -01 Jan -03 Jan -05 Jan -07 Jan -09 Jan -11 Jan -13 Jan -15 Jan -17 —California —Inland Empire Los Angeles (MD) Orange County BEACONECONOMICs Analysis. Answers. US Labor Force Growth 2.5% 67% 2.0% 66% 1.5% 65 1.0% 64% 0.5% 63 o II IlIIIII�lil�l. 0.0/o ,I111IhI1 IF -0.5% 62% -1.0% 61% -1.5% 60% BEACONECONOMICs Analysis. Answers. US LF Participation Rate 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% US JOLT Job Openings Rate O� ) O°� 'y0 �` 'yam 'y1' `y� `y 'Sa 'a 'a IS 11 IS 1a IS �a IS IS BEACONECONoMICs Analysis. Answer,. Sector Level (OOOs) Oct -16 Oct -17 Change (%) Oct -16 Oct -17 Total 5,587 5,996 3.7 3.9 Hospitality 731 852 4.5 5.1 Health Care 1,054 1,026 5.2 5 Professional 1,083 1,083 5.1 4.9 Financial activities 317 377 3.7 4.3 Retail trade 650 655 3.9 4 Logistics 186 226 3.2 3.8 Construction 196 227 2.8 3.2 Manufacturing 314 402 2.5 3.1 Information 74 81 2.6 2.9 Mining 12 21 1.7 2.8 Education 107 100 2.9 2.6 Government 484 535 2.1 2.3 Wholesale trade 185 129 3 2.1 NR/Construction Other Services Leisure and Hospitality Education Management Admin Support Retail Trade Health Care Total Nonfarm Information Wholesale Trade Financial Activities Prof Sci Tech Government Logistics Manufacturing YOY % Change Nov -17 -4% -3% -2% -1% 0% 1% 2% 3% 4% 5% 6% 7% BEACONECONoMICs Analysis. Answers. Industry Total 2016 EmpIt. 43,176 I -Yr. Chg. 556 1 -Yr. % Chg. 1.3 Location Quotient - Median Earnings $68,137 Prof/Sci/Mangement 8,328 339 4.2 1.5 $81,721 Financial Activities 7,588 124 1.7 2.8 $95,539 Education/Health 7,454 -127 -1.7 0.8 $63,228 Retail Trade 4,257 231 5.7 0.9 $41,361 Manufacturing 4,220 -218 -4.9 1.0 $102,885 Hospitality 3,369 48 1.4 0.8 $27,320 Wholesale Trade 2,090 147 7.6 1.6 $76,667 Construction 1,587 -89 -5.3 0.6 $74,972 Other Services 1,463 63 4.5 0.6 $29,147 Transport/Warehouse 1,021 -18 -1.7 0.5 $64,491 Information 948 -52 -5.2 0.8 $54,875 Government 750 102 15.7 0.4 $81,406 N 50.0 - 45.0 N p 40.0 - s ~ 35.0 - 30.0 25.0 20.0 BEACONECONOmics Analysis. Answers. 16 120 MM iplt n O N 90 we 70 Taxable Sales (Indexed) � 00 M O N M q* Ln l0 r- ,�rtr�r�1 0 0 M —Los Angeles —Orange Orange County Taxable Receipts Category Autos and Transportation Building and Construction Business and Industry Food and Drugs Fuel and Service Stations General Consumer Goods Restaurants and Hotels Total Source: HdL Companies 2017 Q3 YTY Chg. YTY % Chg. 27,934,529 456,760 1.7% 12,308,463 409,525 3.4% 22,052,703 120,141 0.5% 7,013,446 135,733 2.0% 11,406,326 636,687 5.9% 36,481,797 78,824 0.2% 25,664,786 1,002,704 4.1% 162,810,456 3,957,412 2.5% BEACONECONOMICs Analysis. Answers. 17 Taxable Sales MIIIIIIIIIIIIIIu wuuw BEACONECONOMICs Analysis. Answers. Price Change Sales Change Nov -16 Oct -17 Nov -17 MTM YTY YTY Los Angeles $487,060 $580,360 $530,920 -8.5% 9.0% -2.8% Orange $734,500 $786,000 $785,000 -0.1% 6.9% 0.6% Riverside $352,500 $382,500 $383,000 0.1% 8.7% -6.7% San Bernardino $250,000 $274,450 $280,000 2.0% 12.0% -5.4% San Diego $557,000 $603,000 $619,900 2.8% 11.3% -6.1% Ventura $625,000 $635,000 $640,000 0.8% 2.4% -3.5% BEACONECONOMICs Analysis. Answers. 3 0 = 2 2 it 1 Newport Beach SFR ��1 �,�� �,titi �,ti3 �,ti� �,ti1 a a a C; a C; Sales —Median Price Source: Data Quick BEACONECONomics Analysis. Answers. 250 700 200 600 500 150 400 100 D 300 50 200 100 0 0 Residential Permits tib& ti�S� ti�S� Multi -family Source: CIRB Single-family State/Region/County Los Angeles • 30 • 28 Orange County 22 21 Riverside County 41 39 San Bernardino County 56 51 San Diego County 28 26 Ventura 33 27 California 31 29 BEACONECONOMICs Analysis. Answers. Metro Rents $2,000 $1,800 $1,600 $1,400 $1,200 $1,000 $800 aaaaao-aao-o-a Inland Empire Los Angeles MD Orange County MD—San Diego BEACONECONOMICs Analysis. Answers. Lounty Ventura Wages 1 $57,789 41" Rents $1,700 Share 35% Los Angeles $63,236 $1,830 35% Santa Barbara $52,911 $1,526 35% Orange $63,849 $1,827 34% Riverside $45,219 $1,293 34% San Bernardino $45,762 $1,293 34% San Diego $60,887 $1,696 33% San Luis Obispo $44,816 $1,147 31% 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Permitted Units O'?O�(Z°Orb (Z�'y"Y Nl-`",ti')`''� o-aaaaao-o-ao-a —Single Family —Multi Family BEACONECONOMICs Analysis. Answers. I New California Pop 4.1 / Permits Tulare 0 4.0 Ventura 6.8 Los Angeles 4.0 Contra Costa 6.6 Fresno 4.0 Sonoma 6.1 San Mateo 3.4 Alameda 5.9 Kern 3.0 Santa Barbara 5.3 Santa Clara 3.0 San Bernardino 5.0 Orange 2.8 Solano 4.6 Placer 2.1 Riverside 4.5 San Francisco 2.1 San Diego 4.2 Sacramento 0.7 • Signs of stress: — Homeownership rate at lowest in decades — Escalating rents — Insufficient building despite growing demand • How to Address Chronic Housing Problems — Less about making housing affordable to households — Really about supply: • Construction • Aligning construction with actual needs BEACONECONOMICs Analysis. Answers. Vacancy Rate (%) by Metro Area in Southern California Office Industrial Location • • Q34 -=6,Q3-17 Los Angeles (MD) 13.9% 14.4% 0.9% 1.1% Orange County (MD) 9.7% 9.8% 1.4% 2.3% Inland Empire 13.0% 11.7% 4.3% 3.3% San Diego 12.4% 11.0% 4.2% 4.7% Source: CBRE BEACONECONOmiCs Analysis. Answers. .% 150 0 140 .. 130 Cn N 120 110 100 90 Total Passenger Traffic (Indexed) 2017 Hotel Statistics for Orange County Location"= Avg. Daily Occupancy Rev •A• Rate Rate Anaheim $185.8 82.6% $153.3 Costa Mesa $150.5 79.5% $119.7 Huntington Beach $263.7 67.7% $178.6 Newport Beach $289.5 75.9% $219.8 North Orange County $122.1 82.5% $100.7 Orange County Airport $143.1 76.9% $110.0 South Orange County $247.6 77.1% $191.0 Orange County Average $186.7 80.1% $149.5 —LA -LAX —OC -SNA SD -SAN Source: PKF Source: Visit California BEACONECONOMICS Analysis. Answers. 26 City of Newport Beach Revenue Forecast BEACONECONoMICs Analysis. Answers. Revenue Source Growth Rates, FY 2016-17 to FY 2021-22 Fiscal Year 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 Assessed Valuation Taxable Sales Transient Occupancy Tax Building Permit Valuations Source: Beacon Economics, LLC. 6.5% 6.6% 6.7% 5.6% 5.3% 5.2% 0.9% 2.4% 5.4% 4.1% 3.7% 3.4% 5.9% 2.9% 6.6% 6.0% 5.7% 5.6% 65.6% 14.4% -11.3% 1.1% 3.3% 3.5% BEACONECONOMICs Analysis. Answers. 28 Conclusion BEACONECONOMICs Analysis. Answers. • US & CA growth steady, full -employment, job growth harder to achieve • Leading industries: health care, construction, leisure and hospitality, trans/whsg • Real Estate: — Housing shortage ... not just affordable housing — MORE SUPPLY needed • NO Recession BEACONECONOMICs Analysis. Answers. Our Services ➢ Economic Forecasting ➢ Regional Intelligence Reports ➢ Business & Market Analysis ➢ Real Estate Market Analysis ➢ Ports & Infrastructure Analysis i Economic Impact Analysis ➢ Public Policy Analysis BEACONECONOMICs Analysis. Answers. w BEACON ECONOMICS To view or download this presentation please visit: www.BeaconEcon.com Chris 0BeaconEcon.com 310-571-3399 For additional information visit www.beaconecon.com 31 Appendix Fiscal & Monetary Policy BEACONECONOMICs Analysis. Answers. 32 • Households: — Doubling of Standard Deduction — Cuts for all but middle income households — Limit on mortgage interest deduction ($750K of debt) — Limit on and state/local tax (SALT) deduction ($10,000) — Lower rate on certain pass-through income • Businesses/Corporations: — Lower corporate tax rate (35% down to 21%) — Full expensing of short-lived capital — Other: International taxation, Deemed repatriation • Economic & Fiscal Impact — Marginally higher GDP; Budget Deficit/National Debt higher BEACONECONoMICs Analysis. Answers. • Rock -bottom federal funds rate 2008-2016 • Adjusting to labor market, inflation, GDP • Market rates less tied to FFR than before • Yield curve dynamics — FFR increases push up short end — Balance sheet activities push up long end — Markets keep long end low BEACONECONOMICs Analysis. Answers. 24,000 20,000 161000 12,000 8,000 4,000 0 DJ I A, SA titi�"15 0K 0X <I) <I) (o (01 1 NNNNNNNNNNNN BEACONECONOMICs Analysis. Answers. 5.0 4.0% 3.0% 2.0 1.0% 0.0% Fed Funds Rate 10 Year Yield 30 Year Mort �titititi�,ti�ti0K,tiOKN�,ti�N�,N�N N