GROBAR SCAG CSULB Nov 16 1

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Southern California Association of Governments November 16, 2001 Regional Economic Forecast 2002-2003: 

Southern California Association of Governments November 16, 2001 Regional Economic Forecast 2002-2003 Presented by Lisa M. Grobar, Ph.D. Director, Economic Forecast Project California State University, Long Beach

Slide2: 

CALIFORNIA STATE UNIVERSITY LONG BEACH Regional Economic Forecast

An Overview of the National Economy: 

An Overview of the National Economy

Slide4: 

The Booming Economy Ends 1997 1998 1999 2000 2001 Real GDP 4.4 4.3 4.1 4.1 1.0 Inflation 2.3 1.6 2.2 3.4 3.1 Unemployment 4.9 4.5 4.2 4.0 4.7

Consumption Expenditures [annualized percent change]: 

Consumption Expenditures [annualized percent change]

Forecast for 2002-2006: 

Forecast for 2002-2006 U.S. economy falls into recession in third quarter 2001, growth improves in 2002, economy in an expansionary mode by 2003 Real GDP growth 1% this year, 1.3% in 2002 Inflationary pressure not a problem in near-term but a long-term concern Look for Fed to start to raise rates in 2002 and 2003

Regional Economic Forecast 2001-2006 : 

Regional Economic Forecast 2001-2006

The Regional Economy Begins to Slow: 

The Regional Economy Begins to Slow Regional Employment Growth Rate

Factors Contributing to Slowdown (pre-September 11): 

Factors Contributing to Slowdown (pre-September 11) Sharp slowing of U.S. economy Weakness in the region’s manufacturing sector Stock market decline curbing growth in personal income

California Growth in Personal Income: 

California Growth in Personal Income percent

Factors Contributing to Future Slowing (post-September 11): 

Factors Contributing to Future Slowing (post-September 11) Sharp decline in travel and tourism expenditures Low consumer confidence - general weakness in consumption Diversion of expenditures toward security from more productive uses

Initial Impact of Terrorist Attacks on Southern California Tourism: 

Initial Impact of Terrorist Attacks on Southern California Tourism Week of September 22: occupancy at 53% for Los Angeles, 42% for Anaheim these rates were down 35% in LA and 46% in Anaheim from year-ago levels Source: Ernst & Young, “Impact of Recent Event on the California Lodging Environment,” Oct. 1, 2001

Regional Forecast Assumptions: 

Regional Forecast Assumptions Government takes action to secure airlines The public gradually regains confidence in travel. No further major terrorist attacks

Regional Total Nonfarm Employment Growth: 

Regional Total Nonfarm Employment Growth percent

Regional Construction Employment Growth: 

Regional Construction Employment Growth percent

Regional Durable Manufacturing Employment Growth: 

Regional Durable Manufacturing Employment Growth percent

Over 11,000 jobs lost in durable goods manufacturing in L.A. County since October 2000: 

Over 11,000 jobs lost in durable goods manufacturing in L.A. County since October 2000 Primary Metals -900 Fabricated Metal -1,300 Industrial Machinery -1,500 Electronic Equipment - 500 Transportation Equip. -5,500 Main areas of job losses:

Regional TCU Employment Growth: 

Regional TCU Employment Growth percent

Regional Retail Trade Employment Growth: 

Regional Retail Trade Employment Growth percent

Regional Service Employment Growth: 

Regional Service Employment Growth percent

Growth in business services vs. total nonfarm employment (CA) : 

Growth in business services vs. total nonfarm employment (CA) percent

Temporary Help Employment (percent of total): 

Temporary Help Employment (percent of total) Source: “Contingent Workers and Alternative Work Arrangements: Evidence from the State of California,” Edwards and Grobar (2001)

Business Services (CA): Growth Since October 2000: 

Business Services (CA): Growth Since October 2000

Regional Government Employment Growth: 

Regional Government Employment Growth percent

Total Nonfarm Employment Growth Region and the Nation : 

Total Nonfarm Employment Growth Region and the Nation percent

Regional Economic Forecast Summary: 

Regional Economic Forecast Summary The slowing economy, along with the September 11 “shock” will cause the region to enter a period of below-average growth However, a recession will be avoided The region will not slow as much as the nation, especially during 2002

County Forecasts 2001-2006: 

County Forecasts 2001-2006

Los Angeles County Nonfarm Employment Forecast: 

Los Angeles County Nonfarm Employment Forecast percent

Los Angeles County Quarterly Employment Forecast: 

Los Angeles County Quarterly Employment Forecast percent A near recession for the county

Orange County Nonfarm Employment Forecast: 

Orange County Nonfarm Employment Forecast percent

Riverside/San Bernardino Nonfarm Employment Forecast: 

Riverside/San Bernardino Nonfarm Employment Forecast percent

Ventura County Nonfarm Employment Forecast: 

Ventura County Nonfarm Employment Forecast percent

Forecast Summary: County Forecasts: 

Forecast Summary: County Forecasts Los Angeles County will come very close to recession in 2002, with several quarters of near-zero growth. Outlying counties will do better than LA, but each will slow significantly Look for conditions to begin to improve in the second half of 2002