Inland Empire’s Economy

2012 … Finally Recovery Underway!

Economics & Politics, Inc.

After Losing 8.74 Million Jobs …U.S. Job Creation Is Crawling Back

30% of Jobs Regained

VV Pattern of Likely Recovery

UUxx

Inland Empire Job Growth/Destruction

2007 2008 2009 2010 2011 2012

(110,000)

(100,000)

(90,000)

(80,000)

(70,000)

(60,000)

(50,000)

(40,000)

(30,000)

(20,000)

(10,000)

0

10,000

20,000

30,000

Source: CA Employment Development Department

Wage & Salary Job Creation/DestructionInland Empire, 2007-2011

Job Growth Comparison: November

26,600

19,50013,100 12,600

1,800 1,400

75,000

San Diego Co.Inland EmpireOrange Co.Los Angeles Co.Ventura Co. Imperial Co.So. California

Source: CA Employment Development Department

Average Job Change, California MarketsCalifornia Markets, November, 2010-2011

Finally!

In Nov-2011, Inland Empire’s Unemployment was 12.5%12.5%, CA was 10.9%, U.S. 8.2%

Still Tough Unemployment Rate

There is Some Good News Locally

Quarterly Industrial Absorption, 1991-2011

20 million Sq.Ft.

Industrial Vacancy Rate

12.8%

6.8%

2.7%

Change In Container Flows

-25.4%

15.3%

1.6 1.6 1.6 1.7 1.82.1 2.3

2.73.1

2.83.1 3.3

4.8 5.0

5.76.0

6.87.2

8.2 8.0

7.2

6.0

6.9 6.9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011e

Import Export

Source: Port Import Export Reporting Service (PIERS), collected from Vessel

Imported & Exported Container Volume, 2000-2011ePorts of Los Angeles & Long Beach (mil. teus)

Fourth Highest Total Container Volume

2. Ports On West Coast Nearest Asia

Los Angeles Long Beach

8,000-Container Post-Panamax Ships

3. Deep Water Ports As Ships Draw Over 50 feet of Water

Issue: Panama Canal Diversion

Suez

International Trade

112.2

84.0

72.8

-35.1%

Dollar Down: U.S. Goods Cheaper

2002 $1,5002012 $2,027

2002 $1802012 $117

Manufacturing

Manufacturing Orders:Aggressive to Neutral to Growing

Inland Empire Mfg. Goes To Neutral

Export Container Volume

2011 YTD2011 YTD6.8%6.8%

All-Time Record

Inland EmpireManufacturing Coming to Life

Industrial Situation

Goods Movement

Strength As No Where Else To Build Facilities

Strength Due To Long Term Growth of Trade

Manufacturing

Returning With U.S. Economy

Aided By Low Value of the Dollar

CA Regulation A Huge IssueCA Regulation A Huge Issue

Blue Collar Job Losses Have Ended or Are Close to Ending

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

ytd

(26,000)

(22,000)

(18,000)

(14,000)

(10,000)

(6,000)

(2,000)

2,000

6,000

10,000

14,000

Manufacutring JobsLogistics JobsConstruction Jobs

Source: CA Employment Development Department2011=Jan.-November Average

Blue Collar Job ChangesInland Empire, 1991-2011e

Job Change: Key Economic Drivers

Jan-

10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-

10

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-

11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

(6,000)

(4,000)

(2,000)

0

2,000

4,000

6,000

(6,000)

(4,000)

(2,000)

0

2,000

4,000

6,000

Logistics Health Care

Sourec: CA Employment Development Department

Inland Empire Logistics & Health Care Job ChangesJanuary 2010 to November 2011

Health Care

Logistics

Two Sectors Are Dominating Inland Empire Job Growth of Late

32.9%23.2%

43.9%

5,400

3,800

7,200

Logistics Health Care All Other

New Jobs Share

Sourec: CA Employment Development Department

Inland Empire Job CreationOctober 2010-2011

56.1%

Why Blue Collar Jobs Important

13.2%

18.6% 20.3%

29.2% 29.0% 30.8%

36.5%33.7%

58.4%

48.5%46.2% 44.6%

41.9%

36.7%34.6% 34.0%

Imperial San Bernardino Riverside Los Angeles So. California Ventura Orange San Diego

High School or Less Percent Bachelors or Higher

Source: 2010 Census

Educational Levels, Adults 25 & OverSouthern California Counties, 2010

Policy Conflict:

Environment vs. Blue Collar Jobs

Public Health

Blue Collar Sectors Bring Rising Asthma Asthma & & CancerCancer Risk From Airborne Toxics

California Solution

Single Issue Regulatory Agencies

CA Air Resources Board

South Coast Air Quality Management District

CA Environmental Protection Agency

CA Water Resources Control Board

& More

Two Results

1. Air Quality Is Improving

BlueBlue Collar Collar Work Is Much of Our Workforce’s Best Chance To Reach The Middle ClassMiddle Class

2. Downward Pressure On Blue Collar Jobs

Few Training BarriersFew Training Barriers To Beginning Employment

Mining ($65,268) Blue Collar

Wholesale Trade ($51,156) Blue Collar

Manufacturing ($47,933) Blue Collar

Logistics ($45,851) Blue Collar

Construction ($41,076) Blue Collar

Gaming ($37,827)

Retail Trade ($28,824)

Agriculture ($24,552)

Hotel/Motel ($16,026)

Eating & Drinking ($16,026)

Alternative Jobs to Blue Collar

Results Of Job Suppression

• Unemployment Higher Than It Needs To Be

• Underemployment A Constant Difficulty

• Lack of Access to Jobs Leading to the Middle ClassLeading to the Middle Class

• Health Issues of Poverty

• Divorce

• Spousal Abuse

• Drug & Alcohol Abuse

• Suicide

• Lack of Timely Medical Care

Public Health Issues!

Clean Air, Asthma & Cancer

Are Health & SocialHealth & SocialJusticeJustice Issues

Lack of Blue Collar Jobs & Poverty Are

Health & SocialHealth & SocialJusticeJustice Issues

Public Policy Dilemma

After Years Of Focus on Concentrating Solely On The EnvironmentConcentrating Solely On The Environment

Blue Collar Job Creation Is Our Forgotten PriorityForgotten Priority!!

Housing Is Still An Issue

Inla

nd

econ

om

y

Foreclosures Issue1,012,594 HomesIn Inland Empire

36.6%All Homes

When Does Mortgage Difficulty End?

If Rate of Decline of

15,241 Underwater Homes per Quarter Persists

Seasonally Adjusted Home Volumes Lack of Foreclosure Sales Has Been An Issue

Is There Any Good Housing News?

Last Foreclosure Sold!

Demand > Supply & Price Above Lows

10.6%

Long Term Price Competitive Advantage Still Exists

Soaring Housing AffordabilityEasily Remains At Near Record Levels

69%

59%

15%

BUT . . .

Oil Prices Soaring Again19

85

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

$0

$15

$30

$45

$60

$75

$90

$105

$120

$135

Source: Federal Reserve Bank of Dallas

Exhibit 6.-West Texas Intermediate Crude Oil PricesMonthly Average. 1985-2012

Congressional Madness

European Debt Crisis

Fear Caused Consumers Confidence It Has Recently Begun Rising

Office Market

Housing Slowdown Hurts!

Office Absorption

Absorption Fell With Housing Slowdown

Office Vacancy Rate Has Jumped Dramatically

7.0%

23.8%

Major Office Occupations Job Changes

Jan-

10

Feb

-10

Mar

-10

Apr

-10

May

-10

Jun-

10

Jul-

10

Aug

-10

Sep

-10

Oct

-10

Nov

-10

Dec

-10

Jan-

11

Feb

-11

Mar

-11

Apr

-11

May

-11

Jun-

11

Jul-

11

Aug

-11

Sep

-11

Oct

-11

Nov

-11

(10,000)

(8,000)

(6,000)

(4,000)

(2,000)

0

2,000

(10,000)

(8,000)

(6,000)

(4,000)

(2,000)

0

2,000

Sourec: CA Employment Development Department

Finance, Insurance, Real Estate, Management, ProfessionsJanuary 2010 to November 2011

Office Forecast

Now A Permanent Part of the Inland Empire Story

Strength from Firms Needing to Serve IE Market

4.3 million people (More than 24 states)

1.3 million jobs

Near Term: Weakness From Housing Slowdown

Long Term: Housing Firms Will Add Great Strength

2012 Better than 2011

Foreclosures A Continuing Issue

Complete Recovery 2015-2016??

2011 Job Growth Did Not Occur Neutral

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