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John Husing, Ph.D.
Economics & Politics, Inc.
Chief Economist, IEEP
Inland Empire Economic Growth . . .
Building An Expansion
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After Losing 8.71 Million Jobs …U.S. Jobs Almost All The Way Back
-670,000 Government Jobs+9,239,000 Private Sector
(106.1%)
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U.S. & CA Unemployment History
Cold War Ends Great RecessionPrime Rate: 21%
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California Job Gains/Losses2008-2010-1,066,400
DefenseCutbacks
Dot.Com
GreatRecession
2011-2013+965,700
2013 Short-100,700
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Unemployment Rates, March 2014
Interior CA
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Unemployment Falling, But High
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Inland Empire
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Worst U.S. Metropolitan Area Unemployment Rates
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Primary Tier
Secondary Tier
Economic Development … Increase The Economic Base!
How Regional Economies Work
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Three Step Growth ProcessBased On Interaction Of:
• Population
• Preferences
• Dirt
Prices Force Decisions
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Southern California Population Growth, 2000-2012
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People Prefer To Live Near The Coast
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As a homeowner, would you prefer to move closer to work if it involved a townhouse or condo?
(I-15 & Sr-91 Commuters, 2008)
72.3% No
Same question to Renters:
87.5% No
Answer stable over 5 years
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Importance of Blue Collar Sectors
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• People forced to move inland for affordable homes
• Population Serving Jobs Only
• High Desert & I-215 South are current examples
Stage #1: Rapid Population Growth
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Commuting Bad, But Stable Over Time
1,650,384 Total Jobs
1,156,313 Inside IE
494,071 Commute Outside County
154,845 Between IE Counties
339,226 Outside IE
20.6% Commute Outside the IE
16.3% Orange County Commuters
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Construction & Real Estate:Finally Some Hope
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Share of Underwater Homes Plunging
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Direct Investor Purchases of Foreclosures
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Notices of Default At Low Levels
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Home Price Trends
61.5%
43.1%
50.3% less for Existing home -34.7%
2014
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Long Term Competitive Price Advantage Still Exists
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Affordability To Median Income Family19
88
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0%5%10%15%20%25%30%35%40%45%50%55%60%65%70%75%
0%5%10%15%20%25%30%35%40%45%50%55%60%65%70%75%
Inland Empire Orange County Los Angeles
Source: CA Association of Realtors
Exhibit 14.-Housing Affordability, Southern CaliforniaShare of Families Afford Median Priced Home, 1988-2014
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FICO Score Average Is Easy A Little
Feb-2014Approved
724
Feb-2014 Denied
689
Sub-Prime Loans 2007
621
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Volume Stagnant
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Inland Empire’s In-migration From Coastal Counties Has Not Yet Recovered
-27,324
Not Bringing Skills, Wealth, Income & Spending
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Why Low Volume
• Less Foreclosures
• Buyers Want or Need High Prices
• Continued Wall Street Acquisition of Large Share of Foreclosures
• Credit Hurt By Foreclosures
• Higher FICO Scores
• FHA Lowering Conforming Mortgage Ceiling From $500,000 to $350,000
• Fear
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Permits: Finally A Little Hope
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Construction & Mining Job Growth
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Assessed Valuation Finally Growing (6.1% for SB County)
6.3%Inflation
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Firms Prefers The Coastal Counties
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Stage 2: Strong Industrial Growth
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Industrial Construction
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Logistics Flow of Goods
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Port Container Volumes
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Fulfillment Centers
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E-Commerce Growth RatesYear Over Year by Quarter
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Source: Bureau of the Census
U.S. E-Commerce Growth RatesQuarter over Same Quarter Prior Year, 2000-2013
2013
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Job Growth: Logistics
19% of All Inland Jobs … During 2013
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Manufacturing: Could Be A Major Growth Source
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U.S. Manufacturing Job Creation
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CA Manufacturing Job Creation
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Job Growth: Manufacturing
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Health Care
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Health Care Demand Set To Explode
People Without Health Insurance (2012) 828,431 (19%)People Will Age, Already Those 55 & Over 926,696 (21%)
Population Growth Will Resume (2000-2013) 1,075,807 (33%)
Inland Health Care Workers Handle More People Than CA (28%)
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Job Growth: Health Care
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Stage 3.-Office Based Firms Follow Their Workers
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Skilled Workers Migrate InlandFor Better Homes
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High End Homes
$553,051
$421,581
$474,176
UPLAND
EASTVALE$469,814
$484,332
$449,797
CORONA
$437,038
TEMECULA$341,339
8$399,759
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Office Absorption Finally Starting to Recover
High-End Jobs Follow Workers
into the Area
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Office Vacancy Rates Improving But Still Very High
18.2%
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Growth:Office Based Jobs
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Primary Tier
Secondary Tier
How Regional Economies Work
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Retail Sales Almost Back
13.7%Inflation
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Job Growth: Population Serving & Lower Paying
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Job Growth: Government & Education
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Where Will IE Be In Its Job History?
2011-201381,733 of 143,108 lost or 57.1%
2011-2014121,833 of 143,108 lost or 85.1%
21,275 Jobs To Go
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Forecast: Review
2014 Better Than 2013• Construction Returning• Logistics Strong• Manufacturing Weak• Health Care Set To Take-Off• Office Sectors Modest• Pop. Related Group Gaining• Govt & Education Crawling• Unemployment Drops to 8.5%• Growth Looking Normal• A Little Below Pre-Recession