Southern California Association of GovernmentsNovember 16, 2001Regional Economic Forecast2002-2003: 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


RegionalTotal NonfarmEmployment 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 Forecasts2001-2006: County Forecasts 2001-2006


Los Angeles CountyNonfarm Employment Forecast: Los Angeles County Nonfarm Employment Forecast percent


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


Orange CountyNonfarm Employment Forecast: Orange County Nonfarm Employment Forecast percent


Riverside/San BernardinoNonfarm Employment Forecast: Riverside/San Bernardino Nonfarm Employment Forecast percent


Ventura CountyNonfarm 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