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BEACON ECONOMICS
The Economic Outlook
Focus on Newport Beach
January 2019
Christopher Thornberg, PhD
Founding Partner, Beacon Economics
Director, UCR SoBA Center for Economic Forecasting ar
Development
Beacon Economics I beaconecon.com
Will the Real Economy Please Stand Up? PT
It isn't the `when', it's the `why' that matters
Why so glum? WSJ Next Recession Poll
— 2018 Growth: 3.2% with .75% fiscal
stimulus after -burner zoos
- Labor markets, consumer spending,
business investment, wages, exports, 2019
energy, debt levels still all on steady
sustainable paths 2020
-Interest rates, inflation still constrained
- 2019: back to a solid pace of 2.5% 2021
g rowth
2022 _
-Still a low chance of recession in next 24
months` 2023 ■
-Southern California: Still out in front
0.0% 20.0% 40.0% 60.0%
Will the Real Economy Please Stand Up?
Brakes and Imbalances
Labor shortages impacting employers
Local Housing Shortages
Recent market volatility / rising long term rates
Aggressive Fed, flattening yield curves
Sharp growth in government deficits
The Federal government shutdown
Global trade / security worries
Political Dysfunction in DC
-Little effort to deal with underinvestment in infrastructure, rising
wealth inequality, healthcare cost inflation, pension and
entitlement issues, etc etc etc
-The great disconnect between economic realities and political
discourse
Federal Budget
$3.8 trillion
Discretionary Spending
$1.1 trillion
Cost of 1 aircraft
carrier
$14 billion
Cost of full border wall
$60 billion+
Cause of shut down
$5.7 billion
GDP: Q3 3.5%, Q4 tracking 2.8°/o
Real GDP Growth (yoy)
00 0000 0000 0000
U-) CO 1` W M C N M �U-) CO 1` W
C C C C o
0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N
GDP
Final Demand
Consumption
Goods
Services
Fixed investment
Structures
Equipment
Intellectual prop
Residential
Change inventories
Net exports
Exports
Imports
Government
Federal
State and local
2016
2017
Q2
Q3
1.88
2.48
4.20
3.50
1.87
1.83
2.57
2.69
0.75
0.96
1.16
1.20
1.11
0.87
1.42
1.49
0.39
0.95
1.10
-0.04
0.07
0.08
0.43
-0.26
-0.08
0.54
0.27
0.03
0.24
0.18
0.45
0.35
0.16
0.15
-0.05
-0.16
-0.20
-0.11
-1.17
2.07
-0.34
-0.23
1.22
-1.78
0.09
0.56
1.12
-0.45
-0.43
-0.79
0.10
-1.34
0.16
0.03
0.43
0.56
0.02
0.09
0.24
0.21
0.15
-0.06
0.20
0.35
Consumer Spending
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
Real Consumer Spending
Growth (Y -o -Y)
10.0
9.0
5.0
4.0
3.0
2.0
1.0
0.0
Personal Savings Rate
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Autos?
US Auto Light Truck Sales 160
20.0
18.0 140
16.0 120
14.0 100
12.0
10.0
'1
M;I- Ln (D I` M O O N M S LO CD f` M
O O O O O O O
C C
:1
r'
Domestic Auto Production
M � M CD I` W O O N M Ln Cfl f` 00
O O O O O O O
(� C6 C6 (� C6 C6 C6 (6 C6 C6 C6 Ca C6 (B (6 C�
Labor Markets
350
300
250 }
200
150
100
50
0
-50
Change Non Farm Payrolls
(Smoothed)
O
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7
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Unemployment and Job
Openings
� N M":I' CO I` M M= N M S CO I- M
0 0 0 0 0 0 0 0=
co In co co r*-- co 00 � j � j 0- � j c :3(6 (6 (o 0
o c6
—Job Opening Rate Unemployment Rate
5.0
.e
3.0
2.0
1.0
11
-1.0
Consequences
Real Wage Gains for Continuously
Employed FT Workers
N M It M CO I� CO M O N M M CO I`
0 0 0 0 0 0 0 0
Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q
—Median Average
3.0
2.5
2.0
1.;.,
1.0
0.5
0.0
-0.5
-1.0
Ot
US Labor Force Growth
(Smoothed)
O N� ti M N� (0 M � (D M S M Cfl
> i Q U >, U i C C > LL
cn LL D Q
Looking Ahead
US Population Forecast
Current 104.5 169.4
49.2
2016-26
0.9
4.7
17.8
2026-36
2.0
6.2
11.9
2036-46
2.3
9.4
4.8
Total
5.3
20.3
34.5
00*
2016 Population by Age (Millions)
25.0
20.0 =
imt,
10.0
5.0
L L L L L L L L L L L L L L L L L
>
O N O O O N N N N N N N N N N N N O
L O N N CO CO Ln Ln CO (O I` I` CO M
a) }'0 0 0 0Z. 0 0 0Z. 0Z. 0 0 0Z. 0 0 0Z. 0 w
Z.
O m O LC) O LO O LO O LO O LC) O m O
N N CO CO Ln Ln CO CO I- I` CO
Ln
CO
Housing Markets: Slight Slowing
Home Sales
7500.0
7000.0 A
6500.0
6000.0
5500.0
5000.0
4500.0
4000.0
3500.0
3000.0
M O — N ,;I- Ln CO I` M O N qt Ln CO I`
M 0 0 0 0 0 0 0 0 =====
Q
IL
0 Q 0 Q O) Q 0
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
Median Prices Y -o -Y Growth
M S M C4 I` M M O N M t M C4 I` M
Home Prices / Inventories
3.5
I,'
2.5
2
1.5
1
0.5
I
Housing Starts per New Household
M N LO M � d' f` O M Cfl M N LO d
Cfl I` ti� M M M M M M M O O C
d7 d7 O d7 d7 O d7 d7 d7 d7 O O O C
N N C
I
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N N
12.0
10.0
:1
2.0
Months Supply of Homes
M
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Consumer Debt Loads
1.2
1.15
1.1
1.05
1
0.95
0.9
0.85
0.8
0.75 }
0.7
Household Debt / DPI Ratio
`
.M .4 L.n C6 00 di O .M 4 d C6 1.. 00
Mortgage Origination by Credit
Score
14"IfIff
750
700
650 _ / V
600
550
afff
N
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'r.-
'r.-
Median 25th percentile 10th percentile
Industrial Production
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%
U') CO 00 M - N "t LO P.- M O M zt CO f`
L Q L Q L Q L Q L Q L Q L Q L Q
Industrial Production YoY Growth
Exports of goods, Real
2000
1800
1600
1400
1200 ............... ..........
1000 .................. ..........
800 .................. ..........
600 .................. ..........
X11
N M t LO CO ti 00 M O N M;I- LO CO ti M
0 0 0 0 0 0 0 0= =======
O O O O O O O O O O O O O O O O O
N N N N N N N N N N N N N N N N N
12000
11000
10000
9000
8000
7000
6000
5000
4000
3000
2000
Oil Production / Prices
US Crude Oil Production (TB/D)
M Ln f` M M LO I` O M LO I` O M Ln I`
ti ti ti ti ti ti ti ti ti� ti ti ti ti ti ti ti ti
160.00
140.00
120.00
100.00
80.00
60.00
40.00
20.00
0.00
A
ON
WTI Oil Prices ($/B)
N N N N N N N N N N N N N N N
O O O O O O O O O O O O O O O
O O O O O O O O O O O O O O O
46 6 I` o0 c� O � NA 4 Ln 6 I` 00
O O O O O O -r---r--
O O O O O O O O O O O O O O O
N N N N N N N N N N N N N N N
Twin Deficits
0
-10000
-20000
-30000
Trade Deficit
-50000
-70000
C`7
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-200
-400
-600
-800
-1000
-1200
-1400
-1600
-1800
Net Surplus Federal Go
LO CO CO M � N� LO I` CO O MCO I'-
M
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� � N N N N N N N N N N N N
-T
The China Syndrome
United States goods trade with China, $bre
4
y
Value US Exports
to China as%of
GDP:
0.75%
Country
Total,
200 China
100 Canada
Unyirn
0
Wil"
200
300
400
500
1985 90 95 2000 05 10 1
Japan
Germany
United Kingdom
Korea. South
PrnnrA
India
Italy
Taiwan
Netherlands
Value China
Exports to US as
% of GDP:
10%
Exports
829.8
64.0
7.7%
151.9
18.3%
131.3
15.8%
35.7
4.3%
29.4
3.5%
33.9
4.1%
27.1
3.3%
18.1
2.2%
15.5
1.9%
11.9
1.4%
13.6
1.6%
24.2
2.9%
Imports
1233.9
249.7
160.0
169.3
70.3
62.3
29.3
35.4
25.7
26.8
26.8
21.6
10.7
20.2%
13.0%
13.7%
5.7%
5.0%
2.4%
2.9%
2.1%
2.2%
2.2%
1.8%
0.9%
The Yuan response
m
58
56
54
52
50
48 4-
10
China Purchasing Managers' Indices
Index, Seasonally Adjusted
—Chinese Manufacturing PMI: Dec @ 49.4
—Chinese Non -Manufacturing PMI: Dec @ 53.8
11 12 13 14 15 16 17 18
56
54
52
50
+L 48
19
7.20
7.00
6.80
6.60
6.40
6.20
6.00
5.80
5.60
5.40
CO It 191- � 't LO LO LO LO Cfl (0 CO CO ti I` ti I` 00 00 00
00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00 00
N N N N N N N N N N N N N N N N N N N N
O -- "t I` O -- � I` O = It ti O —m It I` O -m It I`
V_ T -1V_ IT—
ON
Yuan / Dollar Exchange Rate
The Markets
3000
2950
2900
2850
2800
2750
2700
2650
2600
2550
2500
00' 00' 00' 00' 00' 00' 00' 00' 00' 00'
00XXI& �Oo 0Iz 0Iz 00 0Q) �Iz 0Iz 0,�0
Col Col �o'� N'
N'
�oN �oN �o'� N'
S&P 500
3000
2700
2400
Aft 2100
1800
1500
WII11
ON
S&P 500
900
�(�K �(�K N(�K �Q�K �(�K N(�K N(�K N(�K NOI`
IlzX00 ANO O O Nix �v Xv �Al X00
�O �o �O �O �o ro (V ro �O
FIs
"mm* NBER says U.S. recession began
So what's going on?
• Afall to remember
— Heard on the street "There are only two positions out there: cash,
and fetal"
• Its not 'what Wall Street troubles mean Nevada', its 'what Nevada
troubles mean for Wall Street'
— Recession was already fully underway even if many economists and
politicians remained in deep denial
• What went wrong
— The big three imbalances: housing, finance, and the consumer
• Where from here?
— Things are bad.. But not THAT bad! So far the numbers are in line (if
a bit worse) than past recessions, and proportionate to the
imbalances in the economy...
— Recovery is a given, the big question is when
BiA00NEOONOMgC=
December 2007
Mon Dec 1, 12:20 pm ET
WASHINGTON (Reuters) — The U.S. economy
slipped into recession in December 2007, the
National Bureau of Economic Research's
business cycle dating committee announced on
Monday.
Public Opinion Meter
Denia
teria
Beacon Economics I
A
ftmw ac..o.o
The Markets
0.00%
-2.00%
-4.00%
-6.00%
-8.00%
-10.00%
-12.00%
-14.00%
-16.00%
-18.00%
-20.00%
ON
Market Selloffs Current Expansion
��O ANO ��O ��O NV NV
�h0 ��O �,`O ��O
�O �O �O �O �O rO
Rising Rates?
5.00
4.80
4.60
4.40
4.20
4.00
3.80
3.60
3.40
3.20
3.00
Mortgage Rates (30 Year Fixed)
Mortgage Rates (30 Year Fixed)
20.00
18.00
16.00
14.00
12.00
10.00
8.00
6.00
4.00
2.00
0.00
w
w
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co
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co
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cfl
cfl
co
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cfl
co
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N
N
N
N
N
N
N
N
N
N
N
0
0
0
0
0
0
0
0
0
0
0
0
0
0
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4
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Ir
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6
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m
m
m
m
m
m
m
O
O
O
O
O
O
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Inflation?
Core Inflation
000 O O O O O O O O O O O O
4O 00 M O 6 N I` N6 4 6
O 0 0 00 = 0 = 0 0 0 0 0
6 I` 6 N 4 6 ti o0 O N M 6 6 o0
d7 d7 O O O O O O O O O O O O O
14.0
12.0
10.0
8.0
6.0
4.0
2.0
ME
00*
M2 Growth (Y -o -Y)
O
O O
O
O
O
O
4ti
O
A
6
6N
6
00
O
mm
O
O
m
O
T
m
T-
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O
O O
O
O
O
O
O
6N
6
00
I`
M
O
O
O
m
O
O
O
O
O
O
N
N
N
N
N
N
Federal Reserve Policy: Normalization?
Ot
25.00
20.00
15.00
10.00
5.00
WN
Federal Funds Rate
N N N N N N N N N N N N N N N N
O O O O O O O O O O O O O O O O
O O O O O O O O O O O O O O O O
I` O C'7 CO O N 6 o0 � 4 ti O C" X 6 6
I` I� CO CO CO CO M M 0) O O O = = =
d7 M M O O O O O O O O O O O O O
Ir- === T- T- T- = N N N N N N N
• 11
s 11
3.00
2.00
1.00
1 11
10 Year 3 Month Spread
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Cr-- Cr-- 0
-1.00 � � � � � � � � �
N O o0 O N O 00 O N CO 00 O N CO 00
00 00 00 07 07 07 M 0 0 0 0 0 0
d7 O O M O) 07 07 07 M 0 0 0 0 0 0 0 0 0 0
� � � �- �- � � N N N N N N N N N N
State Economic Performance
Real Output Job Gains by MSA
Q1 2018
1 Year
5 Year
Chg,
11-17
Metro
2017
Washington
4.3%
3.7%
%
Absolute
California
3.5%
3.7%
Los Angeles -Long Beach
673163214
11.0
6257998
Utah
3.7%
3.4%
Dallas -Fort Worth -Arlington
3,5421411
16.7
508,100
Colorado
4.5%
3.4%
Houston -The Woodlands
3,115,118
14.3
390,199
Oregon
3.4%
2.9%
San Francisco -Oakland
274473183
17.1
3567613
Phoenix -Mesa -Scottsdale
27135,994
14.0
262,366
Florida
2.3%
2.8%
Riverside -San Bernardino
178703456
16.1
2597420
Texas
4.2%
2.8%
Seattle -Tacoma -Bellevue
1,9351115
13.4
229,383
Idaho
3.2%
2.8%
Austin -Round Rock
17074,307
24.1
208,713
Georgia
2.5%
2.8%
Denver -Aurora -Lakewood
17492,974
14.9
193,291
Nevada
4.0%
2.7%
San Jose -Sunnyvale
170153579
19.0
1617799
Myth Busting
California's economy recently grew to
become the world's fifth-largest
economy if it were its own country.
Sounds like great news, but that wealth
mostly benefits the very rich in the tech
sector.
"Almost all the income growth and high-
end job growth took place in Silicon
Valley,"
Joel Kotkin, professor of Urban Studies
at Chapman University
May 18, 2018
Share New FT Employees
25-50K 50-75K 75K -100K 100K+
State
3181146
1791115
1771425
4841322
Bay
4.4%
9.1%
24.1%
39.4%
So Cal
43.1%
27.7%
29.5%
39.4%
S Cen Val
19.6%
19.9%
8.8%
7.1%
N Cen Val
16.1%
11.8%
12.1%
10.1%
Cen Cst
5.3%
6.0%
5.1%
2.2%
Other
11.4%
25.5%
20.3%
1.8%
Myth Busting
California's economy recently grew to
become the world's fifth-largest
economy if it were its own country.
Sounds like great news, but that wealth
mostly benefits the very rich in the tech
sector.
"Almost all the income growth and high-
end job growth took place in Silicon
Valley,"
Joel Kotkin, professor of Urban Studies
at Chapman University
May 18, 2018
Share New FT Employees 2013-2016
25-50K
50-75K
75K -100K
100K+
State
3181146
1791115
1771425
4841322
Bay
4.4%
9.1%
24.1%
39.4%
So Cal
43.1%
27.7%
29.5%
39.4%
S Cen Val
19.6%
19.9%
8.8%
7.1%
N Cen Val
16.1%
11.8%
12.1%
10.1%
Cen Cst
5.3%
6.0%
5.1%
2.2%
Other
11.4%
25.5%
20.3%
1.8%
Taxable Receipts, Orange County
Total Taxable Receipts
Q3-2009 to Q3-2018
180
170
0 160
150 -
Cn
a�
140
U
130
a�
120
X
ca
~ 110
100
O- O- 4 CV C3 IN 4 O 4
Total 168,500,000 3.1
Fuel & Service Stations 12,766,596 7.8
Autos & Transportation 29,905,875 7.0
Building & Construction 13,156,909 4.1
Food and Drugs 7,247,511 3.5
Restaurants and Hotels 26,524,364 2.1
General Consumer Goods 36,349,653 0.1
Business and Industry 21,919,387 -1.3
Hotel Statistics, Orange County
215.0
195.0
175.0
155.0
135.0
115.0
95.0
Average Daily Rate and Revenue per
Available Room
AVERAGE DAILY RATE
2018 2017 VAR
JANUARY TO NOVEMBER 2018
ANAHEIM $198.93
COSTA MESA $146.15
ORANGE COUNTY AIRPORT $144.59
NORTH ORANGE COUNTY $128.81
SOUTH ORANGE COUNTY $262.09
NEWPORT BEACH $308.01
HUNTINGTON BEACH $282.75
OVERALL AVERAGE
$188.77
$145.83
$143.72
$126.87
$251.71
$301.50
$270.44
$198.38 $191.09
Occupancy Rate
Nov. 2012 to Nov. 2018
OCCUPANCY PERCENT
2018 2017 VAR
-0.2% (��v
5.4% 83.70% 83.86%
0.2%
80.09%
80.85%
-0.9%
0.6%
79.71%
78.82%
1.1%
1.5%
80.75%
82.47%
-2.1%
4.1%
75.88%
78.74%
-3.6%
2.2%
83.09%
82.73%
0.4%
4.6%
76.37%
70.09%
9.0%
3.8%
81.32%
81.42%
-0.1 % ,�� ►��
Commercial Trends
30
25
0
.-
20
co
�
15
10
5
Office Vacancy Rate
Q3-2003 to Q3-2018
0
O5 Off` OHO O� O`b O'�� '�r' '�r5 NtK NO NA N1b
O c CrO- G C 4 4 4 0 4 4 4
Industrial Vacancy Rate
Q1-2010 to Q3-2018
18
16
,14
8
6
On
2
0
ON
030.440 C3O (:v Cr (:v CrO 440 C3O 4
Inland Empire Los Angeles —Inland Empire Los Angeles
Orange County San Diego Orange County San Diego
Nonresidential Real Estate Permits
1800
-1600
c
0 1400
1200
1000
800
600
400
a�
a 200
0
Orange County Permit Values
2003 to 2018
9� (f
Commercia
*up to the third quarter
Nonres Alterations
Orange County
Inland Empire
Los Angeles
San Diego
1,619,475 804,307
562,050 561,596
1,205,626 1,636,011
*up to the third quarter
369,776 826,541
276.8 13.5
9.7 19.4
0.3 -31.0
-32.1 1.5
Non -Residential Permits
Value of Permits Issued 2018 YTD Chg 2017 Chg 2019
*YTD through Q3 of each year • ' ' '
160
a�
140 Total NR 59,029.5 115303.1 -45078.6
0
0 120
E
Co Office 2,350.0 -45924.0 21350.0
Q 100
U)
80
Hotel - -355691.0 -
:�i 60
40 Alts 49, 822.9 11, 620.3 21, 805.8
20
o Other 3 200
,506.6 -.4 3,476.6
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
State Job Growth
4.0%
3.0%
2.0%
1.0%
0.0%
-1.0%
-2.0%
California Non Farm Payroll
YoY Growth
LO (0 I� W M O N M:I, LO CO I` M
0 0 0 0 0 r- � � � �
Nov -18
San Jose
1,147,800
2.6%
3.4%
Stockton
246,000
3.8%
3.1%
Santa Rosa
211,500
2.0%
2.3%
Riverside
1,509,100
4.2%
2.3%
Fresno
357,600
3.1%
2.1%
Oakland
1,194,800
2.0%
1.9%
San Francisco
1,146,000
1.9%
1.9%
Bakersfield
264,800
1.5%
1.8%
San Diego
1,490,500
1.8%
1.8%
Oxnard
309,400
1.1%
1.6%
Sacramento
993,500
2.6%
1.3%
Los Angeles
4,523,400
1.4%
1.3%
Orange
1,635,300
1.7%
0.4%
Employment Comparisons
1700
1650
C 1600
1550
U)
I
0 1500
1450
E 1400
—°Q 1350
E
w 1300
1250
Orange County Total Nonfarm
Nov. 2003 to Nov. 2018
rml!l 1w,11-
1200
03 Off` Oh Opo O'` Z Z N Cb N <� N N N N N N
�o `o o �o 'o 10 10 10 10 10 �o `o �o `o 10 �o
Total Nonfarm
15635
0.4
Prof, Sci & Tech
130.5
4.1
Education/Health
225.6
3.0
Leisure/Hospitality
228.0
2.9
Wholesale Trade
83.3
1.7
Admin Support
146.8
1.2
Construction
104.2
0.6
Logistics
263.7
0.2
Information
27.4
0.0
Retail Trade
151.7
-1.2
Financial Activities
116.7
-1.4
Manufacturing
152.8
-3.0
Government
156.0
-3.4
Other Services
48.6
-3.7
California Labor Markets
1.50%
1.30%
1.10%
0.90%
0.70%
0.50%
0.30%
0.10%
-0.10%
-0.30%
-0.50%
Net Migration as a % of Pop
all
V -
LO 1` 0) � CO LO ti O) � M LO ti 0) � M LO ti G) M LO
1` ti 1` 00 00 00 00 00 0) 0) d) 07 07 O O O O O
M M M M M M M M M M M M M o 0 0 0 0 0 0 0
� � � � � � � � � N N N N N N N N
13
12
11
10
9
8
7
6
5
4
3
ON
Unemployment Rate
O=
M::I-
Co
I`
M=
N,t
Ln
ti
M
O
N
M
L(')
QO
rn
M
M
M
M
M
M
o
0
0
0
0
0
cz
Z
M
0
co
(L)
��
0
o
=3
co
3
cu
c�
Q
2i
O
2i
0
LL(J)
Q
z��
Q
2
O
o
—California
Labor Force and Unemployment
110
W.
0 108
co 107
106
c
2--105
m
0 104
103
0
102
J
WIS
100
Labor Force
Nov. 2003 to Nov. 2018
16
14
0
12
10
a� 8
i�
E
0 6
4
2
—Los Angeles Orange County
Unemployment Rate
Nov. 2003 to Nov. 2018
0
(Z`) (�` o�' o° 01 0`� o°' ►.° ,�'` ►.�. ►.3 ►.� ►.`' �o ►.'� �o
Inland Empire —Los Angeles Orange County
New Housing Supply
How Much Housing Needed?
Housing Needed to maintain 2% State
Job Growth
Method 1
Total
7221022
Per Year
2061674
Current
1111185
Shortfall
1001489
Method 2
Tota 1
9111001
Per Year
2631667
Current
1111185
Shortfall
1571482
Residential Permits (SAAR)
250000
200000
150000
100000
50000
0 Yi
LOCOI`MO NMU-)COI`Wor-NMU-)C9I`
a�rnrnrn00000000�r-- T-- r-- r-- r--
N A 4 N M 4 N M 4 N M 4 N M
SF MF
Home Prices
2,500,000
2,000,000
0 1,500,000
E
U)
Q 1,000,000
U)
500,000
Median Home Prices
0
Cr
Cr
a�o� a�o� a�o� orNo
Huntington Beach Irvine
Santa Ana Orange County
Cr Cr Cr Cr
Newport Beach
Irvine
Santa Ana
Newport Beach
Orange County
Huntington Beach
1,119, 500
638,200
2,217,600
779, 300
10.6
5.5
4.2
3.5
Residential Permits
# of Permits Issued
*YTD through Q3 of each year
700
we
500
400
300 -
200 I
1
100 in
0
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
■ Multi -Family Single -Family
Total
Single -Family
Multi -Family
139
105
34
K••
-36
ff•1
E9N
54
w•
The Upside of Labor Shortages
Pop w
Earn
Median
Earn
< HS
HS
SC
Bach
Grad
County Gr 15-17
51364
32,169
21,901
285882
365535
54,442
77,200
2.7%
5.1%
7.2%
6.7%
3.4%
4.8%
7.6%
City Gr 15-17
2,218
31,191
21,372
26,656
351392
51,896
75,290
4.3%
12.8%
15.6%
5.7%
9.6%
1.9%
12.7%
37
36
E
° 35
0 34
0
33
� 32
231
0
a)
MR,
29
ON
Median Rent as % of Income
2005 to 2017
r6 (f, (f, (f, 90 (f, �o
Inland Empire Los Angeles
Orange County —San Diego
The Big Picture
■ Positives: It will be a good year
GDP Growth Outlook for 2019: 2%+
State revenues will look positive
Labor markets to remain tight
Rising wages to put pressure on profits
Exports, business investment continue
to grow
-Inflation to remain constrained
-Interest Rates Still Low
-Debt Levels still safe
California: Still a top performer
■ Negatives: Problems Growing
—Labor shortages will be an issue
Local housing supply tightening
Fed will continue to tighten, yield curve
flattening
Markets behaving oddly
Federal deficit widening sharply
Current shutdown how long?
-Political uncertainty to dominate
headlines
Critical Policy Issues Remain
Undiscussed
Miserabilism warping our sense or reality
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