“In the Heart of the Storm” Cerritos College 11 th Annual Advisory Committee Member Recognition Breakfast Jack Kyser Sr. VP & Founding Economist, The Kyser.

“In the Heart of the Storm”

Cerritos College11th Annual Advisory CommitteeMember Recognition Breakfast

Jack Kyser Sr. VP & Founding Economist,

The Kyser Center for Economic Research, LAEDC

Thursday April 30, 2009

The U.S., California & Southern The U.S., California & Southern California are in a RecessionCalifornia are in a Recession

How much longer will it last?

What type of recovery will we see?

Impact of Federal Stimulus & State Budget

Jobless Rates High & RisingJobless Rates High & Rising

3

4

5

6

7

8

9

10

11

Ja

n-9

0

Ja

n-9

1

Ja

n-9

2

Ja

n-9

3

Ja

n-9

4

Ja

n-9

5

Ja

n-9

6

Ja

n-9

7

Ja

n-9

8

Ja

n-9

9

Ja

n-0

0

Ja

n-0

1

Ja

n-0

2

Ja

n-0

3

Ja

n-0

4

Ja

n-0

5

Ja

n-0

6

Ja

n-0

7

Ja

n-0

8

Ja

n-0

9

U.S. 8.5%

California 11.2%

March 2009

Sources: BLS, CA EDD

Percent Unemployed (SA)

Job Counts Dropping FastJob Counts Dropping Fast

-4-3-2-1012345

90:1 92:1 94:1 96:1 98:1 00:1 02:1 04:1 06:1 08:1Year: Quarter

Rest of U.S.

California

Year/Year % Change

Sources: Bureau of Labor Statistics, CA EDD

U.S. EQUITY PRICES

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

96:12 98:6 99:12 01:6 02:12 04:6 05:12 07:6 08:12Year: Month

S& P Index

1,250

1,600

1,950

2,300

2,650

3,000

3,350

3,700

4,050

4,400

4,750NASDAQ Index

S&P 500

NASDAQ Composite

Source: BEA

U.S. Light Vehicle Sales

3

4

5

6

7

8

9

10

11

12

Jan

-90

Jan

-91

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Latest Month Plotted: Feb 2009

Mil

lio

ns o

f V

eh

icle

s S

AA

R

3

4

5

6

7

8

9

10

11

12

Cars

Light Trucks

U.S Housing Starts Are DownU.S Housing Starts Are Down

0200400600800

1,0001,2001,4001,6001,8002,0002,200

Multiple FamilySingle Family

Forecast

000s of Dwelling Units

Source: U.S. Census Bureau, forecast by LAEDC

1.15

1.20

1.25

1.30

1.35

1.40

Jan. 2006 Jul. 2006 Jan. 2007 Jul. 2007 Jan. 2008 Jul. 2008 Jan. 2009

Rat

io

Inventory-to-Sales Ratio

Tracking Retail SalesTracking Retail Sales

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09

Total Retail Sales

Core Retail Sales

Source: US Census Bureau

Year-Over-Year % Change

Spot Energy PricesSpot Energy Prices

0

2

4

6

8

10

12

14

Jan

-99

Jul-

99

Jan

-00

Jul-

00

Jan

-01

Jul-

01

Jan

-02

Jul-

02

Jan

-03

Jul-

03

Jan

-04

Jul-

04

Jan

-05

Jul-

05

Jan

-06

Jul-

06

Jan

-07

Jul-

07

Jan

-08

Jul-

08

Jan

-09

0

20

40

60

80

100

120

140

160West TX Intermediate -->

<-- Natural Gas (Henry Hub)

$/Mcf $/Barrel

Sources: EIA, Natural Gas Weekly

Latest Month Plotted: Feb 2009

CONSUMER INFLATION

-2.5%

-1.5%

-0.5%

0.5%

1.5%

2.5%

3.5%

4.5%

5.5%

2004 2005 2006 2007 2008 2009 2010

Source: Bureau of Labor Statistics

ForecastHistory

Year-Year % Change in CPI-U

Interest RatesInterest Rates

0.0

1.0

2.0

3.0

4.0

5.0

6.0

2003 2004 2005 2006 2007 2008 2009f 2010f

0.0

2.0

4.0

6.0

8.0

10.0

Fed Funds Rate

10Yr Treasury Note

Bank Prime Rate

30Yr Fixed Mortgage

4th Quarter Averages %

U.S. Economic GrowthU.S. Economic Growth

1.6

2.5

3.62.9

21.3 1.4

2.8

-3.2-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

'02 '03 '04 '05 '06 '07 '08 '09f '10f

% Change in Real GDP, Year-Over-Year

Sources: BEA, forecasts by LAEDC

Risks to the ForecastRisks to the Forecast Upside:

• Lower energy prices/costs

Downside:

• Bank lending constraints

• The length and depth of the housing and automotive downturns

• “Fear”

Global Growth RetreatsGlobal Growth Retreats

-3.0-1.50.01.53.04.56.07.59.0

10.512.0

World Euro Area DevelopingAsia

Latin/SouthAmerica

Japan

2007 2008e2009f 2010f

Annual % Change

Source: IMF (Jan., 2009)

California Fundamentals

0%

2%

4%

6%

8%

10%

12%

90-0

191

-01

92-0

193

-01

94-0

195

-01

96-0

197

-01

98-0

199

-01

00-0

101

-01

02-0

103

-01

04-0

105

-01

06-0

107

-01

08-0

109

-01

-800

-600

-400

-200

0

200

400

600

800

Nonfarm Jobs: -62,100

Unemployment Rate: 11.2%

Un

emp

loym

ent

Rat

e

Ch

ang

e in

No

nfa

rm J

ob

s Y

ear/

Yea

r (0

00s)

Source: California Employment Development Dept.

March 2009

NSA

-110.5

-94.1

-91.6

-36.5

-32.5

-23.3

-22.8

-9.4

11.8

32.3

-0.1

-150 -125 -100 -75 -50 -25 0 25 50

Construction

Manufacturing

Retail Trade

Leisure & Hospitality

Finance & Insurance

Prof'l, Scientific & Tech.

Wholesale Trade

Real Estate

Government

Private Education

Health Care

Source: California Employment Development Dept; forecasts by LAEDC.

2009 Industry Winners and Losers--California2009 Industry Winners and Losers--California

Total Change: -447.5

Year-Year Change in Average Employment (000s)

Job Growth by Metro AreasJob Growth by Metro Areas

-82.8

-71.9

-45.4

-44.6

-43.0

-36.7

-36.6

-13.9

-8.9

-4.9

-4.5

-149.4

-2.5

-170 -145 -120 -95 -70 -45 -20 5

Los AngelesInland Empire

OrangeSacramento

San DiegoOakland

San JoseSan Francisco

VenturaFresno

ModestoStockton

BakersfieldNonfarm Numerical Employment Change in Thousands March ’08 -’09

Sources: CA EDD, Labor Market Information Division

CALIFORNIA HOUSING MARKETCALIFORNIA HOUSING MARKET

0

100

200

300

400

500

600

700

90:1 92:1 94:1 96:1 98:1 00:1 02:1 04:1 06:1 08:1Year: Quarter

0

40

80

120

160

200

240

280New Home Permits [--->]

Existing Home Resales [<---]

000s of Units, Annual Rate

Sources: U.S. Census Bureau, California Association of Realtors

000s of Units, Last 12 Mos

Source: California Association of REALTORS®

Median Home Price--CaliforniaMedian Home Price--California

$0

$100

$200

$300

$400

$500

$600

Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09

Thousands of $

$247,590

February ‘09

Down -58.2% from May ’07

(peak)

Risks for the California EconomyRisks for the California Economy

• Local government finance

• Water supply

• Unfriendly business environment

Los Angeles County Fundamentals

0%

3%

5%

8%

10%

13%

90-0

1

91-0

192

-01

93-0

1

94-0

195

-01

96-0

1

97-0

198

-01

99-0

1

00-0

101

-01

02-0

103

-01

04-0

1

05-0

106

-01

07-0

1

08-0

109

-01

-200

-100

0

100

200

Change in Nonfarm Jobs: -149,400

Unemployment Rate: 11.4%

Un

emp

loym

ent

Rat

e

Ch

ang

e in

No

nfa

rm J

ob

s Y

ear/

Yea

r (0

00s)

Source: California Employment Development Dept.

March 2009

2009 Industry Winners & Losers in2009 Industry Winners & Losers in Los Angeles County Los Angeles County

Sources: CA EDD, Labor Market Information Division; forecasts by LAEDC

-28.5-25.0

-19.5-15.0

-10.5-10.0

-9.5-7.0

-6.0-5.0

-2.53

6.5

-35 -30 -25 -20 -15 -10 -5 0 5 10

ManufacturingRetail

ConstructionAdminstrative

Finance & InsuranceTran/Ware/Util

Wholesale TradeLeisure & Hos Svcs

InformationProfessional Bus

Government(Private) Education

Health SvcsTotal Nonfarm: -100.5Total Nonfarm: -100.5

Jobs 1000’s

Some Industry TrendsSome Industry Trends

Los Angeles County

LA County Aerospace IndustryLA County Aerospace Industry

0

10

20

30

40

50

60

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

f

2010

f

• Changing Defense spending priorities

• More orders for the C-17?

• Aging workforce

No Change in

Employment in 2009

Employment in Thousands

Source: CA EDD, LMID

LA County Financial Services IndustryLA County Financial Services Industry

0

10

20

30

40

50

60

70

80

90

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

f

2010

f

• New regulations

• Changed players in retail banking

Letter Grade

C-

Employment in Thousands

Source: CA EDD, LMID

LA County International TradeLA County International Trade

0

2

4

6

8

10

12

14

16

18

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

f

2010

f

• Recovery in 2010?

• New Port Facilities

• Environmental challenges

• Hungry competitors

Letter Grade

C-

TEUs in Millions

Sources: Ports of Los Angeles & Long Beach, forecasts by LAEDC

LA County Motion Picture/ TV LA County Motion Picture/ TV ProductionProduction

100

115

130

145

160

Jan-

06

May

-

Sep

-

Jan-

07

May

-

Sep

-

Jan-

08

May

-

Sep

-

2009

f

• Labor problems

• Run-away production

• A changing business model in broadcast TV

Letter Grade

B-

Employment in Thousands

Source: CA EDD, LMID

LA County Tourism IndustryLA County Tourism Industry

50

51

52

53

54

55

56

57

58

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

f

20

10

f

• Business & international travel down

• New facilities in early 2010

• Too many CVBs

Letter Grade

C+

Employment in Thousands

Source: CA EDD, LMID

Housing Permits in Los Angeles County Housing Permits in Los Angeles County

0

5,000

10,000

15,000

20,000

25,000

30,000

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

F

Sources: Construction Industry Research Board; forecast by LAEDC

Los Angeles County Housing MarketLos Angeles County Housing Market

0

2,000

4,000

6,000

8,000

10,000

12,000

Jan-06 May-06 Sep-06 Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08 Jan-09

$200

$250

$300

$350

$400

$450

$500

$550

$600

Home Sales Median Home Price (000s)

Sources: RERC (DataQuick)

New Home InventoryNew Home Inventory — LA County —

0

1,200

2,400

3,600

4,800

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2008

Attached

Detached

Number of Unsold New Homes

Source: RERC

Los Angeles County Apartment Vacancy Los Angeles County Apartment Vacancy Rates & Average Rental RatesRates & Average Rental Rates

0.0

2.0

4.0

6.0

8.0

Q2:

05

Q3:

05

Q4:

05

Q1:

06

Q2:

06

Q3:

06

Q4:

06

Q1:

07

Q2:

07

Q3:

07

Q4:

07

Q1:

08

Q2:

08

Q3:

08

1,400

1,500

1,600

1,700

1,800<-- Vacancy Rate Avg. Rental Rate-->

Source: RERC

% $

Office Vacancy RatesOffice Vacancy RatesLos Angeles County By AreaLos Angeles County By Area

5

7

9

11

13

15

17

19

21

23

25

99:1 00:1 01:1 02:1 03:1 04:1 05:1 06:1 07:1 08:1 09:1Year: Quarter

Central L.A. 12.8%

West L.A. 12.5%

San Fernando Valley 16.7%

South Bay 15.1%

San Gabriel Valley 11.5%

Percent vacant, quarterly averages

Source: Grubb & Ellis Research Services

2009: Q1

Industrial Vacancy RatesIndustrial Vacancy RatesLos Angeles County By AreaLos Angeles County By Area

0

2

4

6

8

10

99:1 00:1 01:1 02:1 03:1 04:1 05:1 06:1 07:1 08:1 09:1

Central/ Dntwn L.A. 2.3%

Mid Cities 1.8%

San Fernando Valley 3.1%

South Bay 2.4%

San Gabriel Valley 3.8%

Percent vacant, quarterly averages

Year: QuarterSource: Grubb & Ellis Research Services

2009: Q1

Taxable Retail Sales in Los Angeles County Taxable Retail Sales in Los Angeles County

-5.0

-3.0

-1.0

1.0

3.0

5.0

7.0

9.0

11.0

13.0

15.0

Q1

:00

Q1

:01

Q1

:02

Q1

:03

Q1

:04

Q1

:05

Q1

:06

Q1

:07

Q1

:08

<-- % Change, Year to Year

Source: State Board of Equalization (BOE)

%

Los Angeles County Employment ForecastLos Angeles County Employment Forecast

-150,000

-100,000

-50,000

0

50,000

100,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 F

0

2

4

6

8

10

12

14

Chg. In Nonfarm Employment

Unemployment Rate

Source: California EDD; forecast by LAEDC

%

Risks for the LA County EconomyRisks for the LA County Economy

• No economic development strategy

• Government agencies frequently unfriendly to business

• A target for business raiders from other states

• Which industries changed due to the great recession?

Employment Trends in North Gateway Employment Trends in North Gateway

400

425

450

475

500

Q1

:01

Q3

:01

Q1

:02

Q3

:02

Q1

:03

Q3

:03

Q1

:04

Q3

:04

Q1

:05

Q3

:05

Q1

:06

Q3

:06

Q1

:07

Q3

:07

Q1

:08

Source: California Employment Development Dept (EDD)

Total Employment in Thousands

-4,236

-1,976

-1,451

-775

1

20

334

352

451

1,519

10,557

-9,737

335

-15,000 -10,000 -5,000 0 5,000 10,000 15,000

Professional & Business SvcsManufacturing

ConstructionFinancial Activities

WholesaleNatural Resources

InformationGovernment

Transportation & UtilitiesLeisure & Hospitality

Retail TradeEducation & Health Svcs

Other Svcs

Source: California Employment Development Dept (EDD)

Industry Performance for the North Gateway RegionIndustry Performance for the North Gateway Region

Change in Employment by Industry from Q2 2007 to Q2 2008

Changed Industries: A Short ListChanged Industries: A Short List

• Autos: DealersLocal aftermarket industry

• Business Services:Advertising – shift in reaching

consumers

• Entertainment:Change in broadcast TV

• International Trade/Logistics:“Near-shoring” – how real

• Retail: Squeezing out excess capacityFuture of luxury/near-luxury

segments

THANK YOU and STAY INFORMED

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