ThornbergPresentatio n4 14 06

Slide1: 

Christopher Thornberg Senior Economist The East Bay The short and the long… E.D.A.B.

Short Run Overview: 

Short Run Overview The state and local economy is doing well State income and employment growing well, and spending reflects it Manufacturing doing well on the output side, if not employment Rising benefit costs putting the squeeze on take home pay Despite the prosperity, the state budget situation remains perilous Real Estate starting to cool Sales activity falling, price appreciation slowing Residential permits starting to fall 2006-07 Outlook: A push-pull economy Cooling markets will hurt construction industry, and cool consumer spending Growing strength of external economy will offset this, but overall growth to be weak State budget problems will become bad again

Payroll Revisions and Growth: 

Payroll Revisions and Growth

Employment by Region: 

Employment by Region Total 05-06 04-05 05-06 04-05 Q1 06 Q1 04 California 15,360.7 2.2% 1.5% 8.1% 4.8% 5.0% 6.5% Los Angeles 4,054.2 1.2% 0.2% 8.0% 1.9% 5.4% 6.7% Orange County 1,509.4 1.8% 2.4% 8.4% 5.1% 3.5% 4.6% San Diego 1,309.1 2.0% 1.8% 7.8% 2.6% 4.0% 5.0% Riverside 1,253.4 3.1% 5.6% 8.6% 8.3% 4.7% 6.0% Ventura 318.8 2.4% 2.3% 8.8% 2.9% 4.3% 5.6% Bakersfield 269.2 4.6% 2.7% 18.5% 13.8% 7.5% 10.2% Santa Barbara 188.5 2.0% 0.1% 4.0% 2.6% 3.8% 4.7% East Bay 1,053.3 2.3% 1.0% 12.2% 5.9% 4.4% 6.2% San Francisco 953.3 1.3% -0.1% 4.3% -6.9% 4.2% 5.7% Sacramento 905.5 3.1% 2.2% 4.6% 3.9% 4.4% 5.7% San Jose 879.0 0.6% 0.7% 4.5% 2.5% 4.8% 7.5% Fresno 342.0 1.3% 1.6% 12.0% 4.9% 7.5% 10.7% Santa Rosa 195.0 2.3% 0.4% 8.9% 6.0% 4.0% 5.5% Stockton 169.8 0.9% -0.7% 6.2% -3.7% 6.0% 8.6% Total Payroll Construction Unemployment

Income and Spending Rising: 

Income and Spending Rising

Lots of new housing wealth: 

Lots of new housing wealth

Sales lead the market: 

Sales lead the market

True in the East Bay, too: 

True in the East Bay, too

Which ‘pop’ will it be?: 

Which ‘pop’ will it be?

California in Context: 

California in Context Size: 424,630 Sq Km (#67) Larger than Japan, smaller than Sweden About the same size as Iraq Population: 36.8 Million (#33) More than Canada, less than Argentina About the same size as Tanzania GDP: $1.56 Trillion (PPP) (#9) Greater than Russia, smaller than France About the same size as Italy

Where are they?: 

Where are they? 1 2 3 4 Los Angeles County: 10.2 Million Balance of Southern California: 10.9 Million Bay Area: 6.7 Million Central Valley: 6.6 million Central Coast: 1.4 Million Northern Cal: 1.0 Million 5 6

Population Growth: 

Population Growth California 4,483,000 14.2% Los Angeles-Long Beach MSA 822,400 8.9% Riverside-San Bernardino MSA 772,100 26.7% Orange County MSA 448,300 17.5% San Diego MSA 378,700 14.4% Sacramento MSA 349,500 24.2% East Bay MSA 307,500 14.0% Fresno MSA 158,900 18.9% San Jose MSA 149,700 9.5% Bakersfield MSA 120,700 20.0% Stockton-Lodi MSA 117,500 22.9% Ventura County MSA 100,200 14.3% San Francisco MSA 86,800 5.2% Modesto MSA 84,800 20.8% Vallejo-Fairfield-Napa MSA 62,200 12.8% Santa Rosa MSA 59,700 14.5% Salinas MSA 55,100 15.0% Santa Barbara MSA 29,900 7.8% Sutter-Yuba MSA 16,800 12.6% 10 Year Growth

The big demographic shift: age: 

The big demographic shift: age 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1970 1980 1990 2000 2010 2020 2030 0-19 20-39 40-59 60+ Population by Age: California Workforce

The State in the Long Run? Housing prices aren’t the issue. : 

The State in the Long Run? Housing prices aren’t the issue.

Bay Area Shortages?: 

Bay Area Shortages? Bay Area Home P/E Ratios New Homes / New People Bay Area Vacancy Rates

Overcrowded Housing: 

Overcrowded Housing

Nor are roads: 

Nor are roads

Who pays for a bad business climate?: 

Who pays for a bad business climate?

Still: things aren’t that bad: 

Still: things aren’t that bad

Quality vs. Quantity of Life: 

Quality vs. Quantity of Life Change in Real Median Household Income 90-03

California’s Growing Educational Gap: 

California’s Growing Educational Gap California California Balance of US Balance US

The importance of education: 

The importance of education 20000 30000 40000 50000 60000 70000 80000 90000 11 12 13 14 15 Average Education Family Income Education and Income

Wither California Manufacturing?: 

Wither California Manufacturing? Real Manufacturing Output 40 50 60 70 80 90 100 110 120 130 140 1988 1990 1992 1994 1996 1998 2000 2002 2004 Index: 1999 = 100 California United States Manufacturing Employment Share by State y = 0.6559x + 0.0047 0% 5% 10% 15% 20% 0% 5% 10% 15% 20% 25% 30% Share 1990 Share 2005

The education premium still rising: 

The education premium still rising Wage Gap in Average Income Bachelor Degree / Less than High School

State Disparities: 

State Disparities Based on 233 largest US Counties 2003 Demographic Stats

The budget rose from 1995 to 2000…: 

The budget rose from 1995 to 2000…

Sales and Revenues Growth Strong: 

Sales and Revenues Growth Strong

California: A high tax state?: 

California: A high tax state? We aren’t a high tax state, we are a dumb tax state.