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2/15/11
1
Jon Haveman Owner, Compass Economics SPUR – January 25, 2010
Recovery: Uneven, But Gaining Steam!
The Great Recession 1-2 Punch of Credit Crisis and Consumer Retrenchment
-‐8
-‐6
-‐4
-‐2
0
2
4
6
8
Q1-‐06
Q2-‐06
Q3-‐06
Q4-‐06
Q1-‐07
Q2-‐07
Q3-‐07
Q4-‐07
Q1-‐08
Q2-‐08
Q3-‐08
Q4-‐08
Q1-‐09
Q2-‐09
Q3-‐09
Q4-‐09
Q1-‐10
Q2-‐10
Q3-‐10
(%)
Source: Bureau of Economic Analysis
GDP Growth (SAAR) to Q3-‐10
2/15/11
2
US Unemployment
Source: Bureau of Labor StaEsEcs Source: Bureau of Labor StaEsEcs
64.0
64.5
65.0
65.5
66.0
66.5
67.0
67.5
Jan-‐00
Mar-‐01
May-‐02
Jul-‐0
3
Sep-‐04
Nov-‐05
Jan-‐07
Mar-‐08
May-‐09
Jul-‐1
0
(%)
ParEcipaEon Rate to November
4
5
6
7
8
9
10
11
Jan-‐05
Aug-‐05
Mar-‐06
Oct-‐06
May-‐07
Dec-‐07
Jul-‐0
8
Feb-‐09
Sep-‐09
Apr-‐1
0
Nov-‐10
(%)
Unemployment Rate to November
Jobs, Jobs, Jobs Jan-‐03 to Dec-‐07
Dec-‐07 to Dec-‐09
2010 Change
Total Nonfarm 7,685 -‐8,363 951 Prof/Business 2,127 -‐1,563 373 EducaVon/Health 2,121 791 369 Admin Support 709 -‐1,114 355 Health Care 1,814 661 299 Leisure/Hospitality 1,362 -‐544 183 Manufacturing -‐1,141 -‐2,192 114 Other Services 115 -‐200 88 Retail Trade 612 -‐1,206 70 Transport/Warehouse 340 -‐377 45 Wholesale Trade 406 -‐474 45 Federal Government -‐34 69 13 State Government 106 38 5 UVliVes -‐30 0 -‐6 InformaVon -‐241 -‐275 -‐31 ConstrucVon 787 -‐1,795 -‐81 Financial AcVviVes 314 -‐570 -‐84 Local Government 679 -‐3 -‐238
-‐800
-‐600
-‐400
-‐200
0
200
400
Jan-‐07
Jun-‐07
Nov-‐07
Apr-‐0
8
Sep-‐08
Feb-‐09
Jul-‐0
9
Dec-‐09
May-‐10
Oct-‐10
Chan
ge in Payrolls (T
housan
ds)
Source: Bureau of Labor StaEsEcs
NaEonal Change in Payrolls to November
Source: Bureau of Labor StaEsEcs
Change in Payrolls by Sector
2/15/11
3
California: A widespread hit
4 5 6 7 8 9 10 11 12 13
13,000
13,500
14,000
14,500
15,000
15,500 Jan-‐98
Dec-‐99
Nov-‐01
Oct-‐03
Sep-‐05
Aug-‐07
Jul-‐0
9
(%)
Thou
sand
s
State Labor Markets to Nov.
Total Nonfarm Unemployment Rate
Nov-‐10 Peak to Current (%)
Inland Empire 1,096.6 -‐14.1 Santa Rosa 168.8 -‐11.9 Oakland (MD) 929.0 -‐11.7 Stockton 187.8 -‐11.4 Orange County (MD) 1,362.6 -‐10.7 Modesto 144.5 -‐10.4 Ventura 270.4 -‐9.4 San Francisco (MD) 910.4 -‐9.2 Los Angeles (MD) 3,756.7 -‐9.1 San Jose 845.2 -‐8.3 Salinas 119.2 -‐8.0 San Diego 1,209.5 -‐8.0 Bakersfield 222.1 -‐7.4 Santa Barbara 162.1 -‐7.1
Source: California Employment Development Department Source: California Employment
Development Department
Why did it happen?
• Housing • Consumers • Financial Markets
2/15/11
4
Roots of the Great Recession
Source: Federal Reserve Board, Bureau of Economic Analysis
Source: Bureau of Economic Analysis
0
1
2
3
4
5
6
7
8
Q1-‐90
Q4-‐91
Q3-‐93
Q2-‐95
Q1-‐97
Q4-‐98
Q3-‐00
Q2-‐02
Q1-‐04
Q4-‐05
Q3-‐07
Q2-‐09
% of D
ispo
sable Income
BEA U.S. Personal Savings Rate to Q3-‐10
2.5
3.0
3.5
4.0
4.5
5.0
Q1-‐52
Q2-‐56
Q3-‐60
Q4-‐64
Q1-‐69
Q2-‐73
Q3-‐77
Q4-‐81
Q1-‐86
Q2-‐90
Q3-‐94
Q4-‐98
Q1-‐03
Q2-‐07
% of G
DP
Net Wealth of the U.S. to Q3-‐10
60
80
100
120
140
160
180
200
Q1-‐87
Q1-‐88
Q1-‐89
Q1-‐90
Q1-‐91
Q1-‐92
Q1-‐93
Q1-‐94
Q1-‐95
Q1-‐96
Q1-‐97
Q1-‐98
Q1-‐99
Q1-‐00
Q1-‐01
Q1-‐02
Q1-‐03
Q1-‐04
Q1-‐05
Q1-‐06
Q1-‐07
Q1-‐08
Q1-‐09
Q1-‐10
Inde
x = 100 in Q1-‐00
Source: Standard and Poor’s
National Housing Markets Case-Shiller US National Values to Q3-10
2/15/11
5
National Credit Bubble
10 12 14 16 18 20 22 24 26 28 30
Q1-‐65
Q1-‐69
Q1-‐73
Q1-‐77
Q1-‐81
Q1-‐85
Q1-‐89
Q1-‐93
Q1-‐97
Q1-‐01
Q1-‐05
Q1-‐09
(%)
Source: Federal Reserve Board
Household Debt as % of Net Worth to Q3-‐10
0
10
20
30
40
50
60
70
80
Q1-‐52
Q4-‐56
Q3-‐61
Q2-‐66
Q1-‐71
Q4-‐75
Q3-‐80
Q2-‐85
Q1-‐90
Q4-‐94
Q3-‐99
Q2-‐04
Q1-‐09
(%)
Consumer Debt as % of GDP to Q3-‐10
Mortgage Other Consumer Credit Source: Federal Reserve Board
Financial Sector Imbalance
Source: Federal Reserve Board
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Q1-‐52 Q2-‐57 Q3-‐62 Q4-‐67 Q1-‐73 Q2-‐78 Q3-‐83 Q4-‐88 Q1-‐94 Q2-‐99 Q3-‐04 Q4-‐09
RaEo
Total Debt/GDP to Q3-‐10
Public Private Financial
2/15/11
6
Where do we stand now?
• Signs of improvement – Industrial producVon growing!
• Signs that the improvement is tenuous
– Private sector employment growth slowing
• Consumers are going gangbusters!
US Industrial Production to November
85
87
89
91
93
95
97
99
101
103
Inde
x = 100 in 2007
Source: Federal Reserve Board
2/15/11
7
More: Jobs, Jobs, Jobs
Source: Bureau of Labor StaEsEcs Source: Bureau of Labor StaEsEcs
0
50
100
150
200
250
300 Jan-‐10
Mar-‐10
May-‐10
Jul-‐1
0
Sep-‐10
Nov-‐10
Thou
sand
s
Change in Private Nonfarm Payrolls to November
-‐300
-‐200
-‐100
0
100
200
300
400
500
Jan-‐10
Feb-‐10
Mar-‐10
Apr-‐1
0 May-‐10
Jun-‐10
Jul-‐1
0 Au
g-‐10
Sep-‐10
Oct-‐10
Nov-‐10
Thou
sand
s
Change in Government Employment to November
Federal State and Local
US Consumer Markets
310
320
330
340
350
360
370
380
390
Jan-‐07
Jun-‐07
Nov-‐07
Apr-‐0
8
Sep-‐08
Feb-‐09
Jul-‐0
9
Dec-‐09
May-‐10
Oct-‐10
Billion
s ($), SA
Source: Census Bureau
Nominal Retail Sales to November
8 9
10 11 12 13 14 15 16 17 18
Jan-‐07
Jun-‐07
Nov-‐07
Apr-‐0
8
Sep-‐08
Feb-‐09
Jul-‐0
9
Dec-‐09
May-‐10
Oct-‐10
Millions
Source: Bureau of Economic Analysis
Auto and Light Truck Sales to November, SAAR
2/15/11
8
National Credit Markets Cleared?
Source: Federal Reserve Board
0
200
400
600
800
1,000
1,200
Jan-‐08
May-‐08
Sep-‐08
Jan-‐09
May-‐09
Sep-‐09
Jan-‐10
May-‐10
Sep-‐10
Billion
s ($)
Source: Federal Reserve Board
US Bank Excess Reserves to November
0 1 2 3 4 5 6 7 8 9
10
Q1-‐87
Q1-‐89
Q1-‐91
Q1-‐93
Q1-‐95
Q1-‐97
Q1-‐99
Q1-‐01
Q1-‐03
Q1-‐05
Q1-‐07
Q1-‐09
Rate
Bank Por]olio Problems to Q3-‐10
Losses Delinquencies
US Housing Market
Source: NaEonal AssociaEon of Realtors Source: Census Bureau
5
6
7
8
9
10
11
12
13
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
Jan-‐07
Jul-‐0
7
Jan-‐08
Jul-‐0
8
Jan-‐09
Jul-‐0
9
Jan-‐10
Jul-‐1
0
Inventory to Sales RaE
o
Sales (Millions)
NAR Sales Stats to October
Sales Months Supply
0 200 400 600 800
1,000 1,200 1,400 1,600 1,800
Jan-‐06
Aug-‐06
Mar-‐07
Oct-‐07
May-‐08
Dec-‐08
Jul-‐0
9
Feb-‐10
Sep-‐10
Thou
sand
s
New Single-‐Family Homes to October, SAAR
Permits Sales
2/15/11
9
How Many Underwater? as of Q2-10
Source: First American CoreLogic
CBSA Name # Mortgages NegaVve Equity Share
Las Vegas-‐Paradise NV 449,205 72.83 Stockton CA 129,100 62.36 Vallejo-‐Fairfield CA 92,418 57.93 Phoenix-‐Mesa-‐Glendale AZ 966,635 56.03 Bakersfield-‐Delano CA 153,522 52.04 Riverside-‐San Bernardino-‐Ontario CA 861,023 51.33 Fresno CA 153,362 46.85 Visalia-‐Porterville CA 69,237 44.81 Sacramento-‐-‐Arden-‐Arcade-‐-‐Roseville CA 494,024 43.41 Salinas CA 61,704 41.57 Oakland-‐Fremont-‐Hayward CA 547,903 32.44 San Jose-‐Sunnyvale-‐Santa Clara CA 347,365 19.79 San Francisco-‐San Mateo-‐Redwood City CA 324,164 9.48
CA Housing Sales to Q3-10
Source: DataQuick
150
200
250
300
350
400
450
500
550
200
250
300
350
400
450
500
550
Q1-‐05
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
Q4-‐08
Q1-‐09
Q2-‐09
Q3-‐09
Q4-‐09
Q1-‐10
Q2-‐10
Q3-‐10
Sales (Th
ousand
s)
Prices (T
housan
ds)
Median Prices Sales (SAAR)
2/15/11
10
CA Real Estate Markets
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000 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
Q3-‐08
Q1-‐09
Q3-‐09
Q1-‐10
Q3-‐10
Num
ber o
f Defau
lts and
Foreclosures
California Foreclosure AcEvity to Q3-‐10
Defaults Foreclosures Source: DataQuick
What comes next?
• ConVnued Slow Growth?
• Double-‐Dip?
• AcceleraVng Recovery?
2/15/11
11
US GDP and Unemployment Forecasts
Source: Bureau of Economic Analysis Forecast by Beacon Economics
Source: Bureau of Labor StaEsEcs Forecast by Beacon Economics
0
2
4
6
8
10
12
Q1-‐98
Q3-‐99
Q1-‐01
Q3-‐02
Q1-‐04
Q3-‐05
Q1-‐07
Q3-‐08
Q1-‐10
Q3-‐11
Q1-‐13
Q3-‐14
Percen
t
Unemployment Rate to Q4-‐15
-‐8
-‐6
-‐4
-‐2
0
2
4
6
Q1-‐08
Q4-‐08
Q3-‐09
Q2-‐10
Q1-‐11
Q4-‐11
Q3-‐12
Q2-‐13
Q1-‐14
Q4-‐14
Q3-‐15
Percen
t
Real GDP Growth to Q4-‐15
What about a Double-Dip?
• Need some sustained shock to the system • There is potenVal (worry scale: 1-‐10):
– Housing (3) – Consumers (3) – Deficit/Bond Markets (5)
• Only through gross negligence on the part of policymakers is this possible – Policy signals deficits over the long term
2/15/11
12
National Housing Bounce
Price Trough to Aug-10 (Case-Shiller)
Price Trough to Aug-10 (Case-Shiller)
CA-San Francisco 16.3 NY-New York 2.3 CA-San Diego 11.0 TX-Dallas 2.1 MN-Minneapolis 10.1 IL-Chicago 2.0 DC-Washington 9.8 CO-Denver 1.8 CA-Los Angeles 8.0 WA-Seattle 1.7 OR-Portland 6.3 GA-Atlanta 0.9 MA-Boston 5.0 FL-Miami 0.6 OH-Cleveland 4.8 FL-Tampa 0.0 AZ-Phoenix 2.5 NC-Charlotte 0.0 MI-Detroit 2.4 NV-Las Vegas 0.0
National Housing unBounce
1-yr Change to Nov-10 (Case-Shiller)
1-yr Change to Nov-10 (Case-Shiller)
CA-San Francisco 0.4 TX-Dallas -4.2 DC-Washington 3.5 IL-Chicago -7.6 CA-San Diego 2.6 MI-Detroit -7.1 CA-Los Angeles 2.1 FL-Miami -3.5 MN-Minneapolis -4.4 FL-Tampa -4.0 MA-Boston -0.8 GA-Atlanta -7.9 OH-Cleveland -4.4 NC-Charlotte -4.3 CO-Denver -2.5 NV-Las Vegas -3.5 NY-New York -1.7 OR-Portland -7.0 AZ-Phoenix -6.4 WA-Seattle -4.7
Source: Standard and Poor’s
New Lows
2/15/11
13
National Spending Fumes?
1,450 1,470 1,490 1,510 1,530 1,550 1,570 1,590 1,610 1,630 1,650
790 810 830 850 870 890 910 930 950 970 990
Jan-‐06
Sep-‐06
May-‐07
Jan-‐08
Sep-‐08
May-‐09
Jan-‐10
Sep-‐10
Billion
s ($)
Billion
s ($)
Consumer Credit to October
Revolving Non-‐Revolving Source: Federal Reserve Board Source: Bureau of Economic Analysis
10,000
10,500
11,000
11,500
12,000
12,500
13,000
Jan-‐06
Aug-‐06
Mar-‐07
Oct-‐07
May-‐08
Dec-‐08
Jul-‐0
9
Feb-‐10
Sep-‐10
Billion
s ($) SAA
R
Personal Income to October
Attack the Deficit Now?
2/15/11
14
Summary • The Recession is Over… Prognosis Improving
• Consumer weakness is fading • Housing bounce is ending • Forecast: Robust 2011-‐12, weakness 2013-‐14
• Tax Policy, both short and long run, is crucial • Short run sVmulus, long run danger • Must convince bond markets of long run fiscal sanity
• Employment growth accelerates in 2011 • Real estate markets to remain weak
CA Summary • California has been part of the recession’s epicenter • Housing, exports, business investment
• Early employment gains have ceased • Should resume in 2011, but unemployment will lag
• Decisions now will affect economy long term • Budget • EducaVon, infrastructure, regulatory environment
• Years before recovery is complete • Catching up to potenVal could be 5+ years
2/15/11
15
Bay Area Forecast
• Employment • Taxable Sales • Forecast
Employment
0 2 4 6 8
10 12 14
Jan-‐00
Feb-‐01
Mar-‐02
Apr-‐0
3 May-‐04
Jun-‐05
Jul-‐0
6 Au
g-‐07
Sep-‐08
Oct-‐09
(%)
Unemployment Rates to August
Bay Area SACOG
SCAG SANDAG
85
90
95
100
105
110
Jan-‐00
Jan-‐01
Jan-‐02
Jan-‐03
Jan-‐04
Jan-‐05
Jan-‐06
Jan-‐07
Jan-‐08
Jan-‐09
Jan-‐10
Inde
x = 100 in Dec-‐07
Total Nonfarm Employment to August
Bay Area SACOG
SCAG SANDAG
Source: California Employment Development Department
Source: California Employment Development Department
2/15/11
16
Nonfarm Employment Dec-‐10
Employment
Drop from Peak to
Trough (%)
Increase Since
Trough (%) Inland Empire 1,094.4 -‐15.0 -‐ Santa Rosa 170.1 -‐13.3 2.3 Sacramento 795.5 -‐12.2 -‐ Vallejo 115.1 -‐11.7 -‐ East Bay (MD) 930.3 -‐11.6 0.1 Fresno 279.9 -‐10.1 0.9 Los Angeles (MD) 3,759.9 -‐9.5 0.5 San Francisco (MD) 910.0 -‐9.2 -‐ San Jose (MSA) 848.7 -‐8.9 1.1 San Diego 1,213.5 -‐8.1 0.5
Source: California Employment Development Department
Unemployment Rate and Labor Force
Dec-‐10 Unemployment
Rate (%)
Unemployment Rate Low to Peak Change
Inland Empire 14.0 10.2 Fresno 16.8 10.7 Sacramento 12.8 8.5 San Jose 11.4 8.0 Vallejo 12.5 7.9 Los Angeles (MD) 13.0 8.5 Oakland (MD) 11.6 7.6 San Diego 10.5 7.2 Santa Rosa 10.4 7.1 San Francisco (MD) 9.4 6.1
Source: California Employment Development Department
2/15/11
17
Taxable Sales LocaVon Q2-‐10
(Millions) Drop from Peak to
Trough (%) Increase since Trough (%)
Bay Area 26,600 -‐20.5 7.3 SACOG Region 7,155 -‐23.2 2.6 SCAG Region 55,300 -‐23.2 4.5 SANDAG Region 10,300 -‐20.1 7.4
San Francisco (MD) 7,261 -‐19.0 7.3 San Jose (MSA) 7,572 -‐22.1 12.1 Oakland (MD) 8,323 -‐21.8 5.4 Vallejo 1,301 -‐26.2 2.4 Napa 562 -‐17.2 3.4 Santa Rosa 1,579 -‐24.4 2.9
Source: California Board of EqualizaEon
Bay Area Forecast (SF, EB, and SJ)
Current Level (2010 Q2)
Peak Level (Various) Return to Peak
NF Employment 2,710 2,962 2015 Q4
Taxable Sales 23,155 26,872 2015 Q1
Home Prices
-‐ San Francisco (MD) 695,093 891,542 90% in 2015 Q4
-‐ East Bay (MD) 350,475 646,658 69% in 2015 Q4
-‐ San Jose MSA 552,695 779,001 98% in 2015 Q4
2/15/11
18
Bay Area Summary
• Recovery is starVng to take hold • It will strengthen going into 2011 and 2012
– East bay and Napa/Sonoma slower than other regions
• Fundamentals remain intact, but in jeopardy – EducaVonal opportuniVes – Infrastructure
• Remains an aoracVve region for investment
SF Unemployment – It’s Grim
Source: California Employment Development Department
Unemployment (%) LocaVon Dec-‐08 Dec-‐09 Dec-‐10 California 9.2 12.3 12.5
Bay Regions San Francisco (MD) 6.6 9.7 9.5 San Jose 8.2 12.2 11.4 Oakland (MD) 8.1 11.7 11.6
Other Regions San Diego 7.8 10.8 10.5 Los Angeles (MD) 9.7 12.3 13.0 Inland Empire 9.0 14.0 14.6 0
2
4
6
8
10
12
Dec-‐85
Nov-‐87
Oct-‐89
Sep-‐91
Aug-‐93
Jul-‐9
5 Jun-‐97
May-‐99
Apr-‐0
1 Mar-‐03
Feb-‐05
%
San Francisco (MD) Unemployment Rate to Dec.
2/15/11
19
Payroll Employment
Source: California Employment Development Department
-‐25 -‐20 -‐15 -‐10 -‐5 0 5
ConstrucVon Financial AcVviiVes
InformaVon Other Services
Retail Trade Total NF
Government Trade/UVl
EducaVon/Health Wholesale Trade
Leisure and Hospitality Prof/Bus
Manufacturing
% Change Year over Year
San Francisco (MD) Employment Growth by Sector
2010 2009
SF(MD) Employment Forecast
-‐8 -‐6 -‐4 -‐2 0 2 4 6
Manufacturing Government InformaVon
EducaVon/Health Total NF
Retail Trade Wholesale Trade
Leisure and Hospitality Trade/UVl
Other Services Financial AcVviiVes
Prof/Bus ConstrucVon
% Change Year over Year
San Francisco (MD) Employment Growth by Sector
2011 Forecast 2010
2/15/11
20
Manufacturing
80
90
100
110
120
130
140
150
160
Q1-‐95
Q2-‐96
Q3-‐97
Q4-‐98
Q1-‐00
Q2-‐01
Q3-‐02
Q4-‐03
Q1-‐05
Q2-‐06
Q3-‐07
Q4-‐08
Q1-‐10
Q2-‐11
Q3-‐12
Q4-‐13
Q1-‐15
Inde
x = 100 in Q4-‐07
Beacon Forecast: Manufacturing Employment to Q4-‐15 as of Q3-‐10
San Francisco (MD) San Francisco (MD) Forecast
California California Forecast
- 9,632 Jobs (-20.7%) jobs lost from peak to current. - No further job losses are expected.
Source: California Employment Development Department/Beacon Economics
Housing Market
San Francisco MD: • Currently
Down $196,449 (-22.0%) from peak in Q2-2007
• Peak to trough decline:
$287,599 (-32.3%) by Q1-2009
• Prices flat to up rising over the next couple of years
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000
200 300 400 500 600 700 800 900
1,000
Q1-‐95
Q4-‐96
Q3-‐98
Q2-‐00
Q1-‐02
Q4-‐03
Q3-‐05
Q2-‐07
Q1-‐09
Q4-‐10
Q3-‐12
Q2-‐14
Sales (Th
ousand
s)
Thou
sand
s ($)
Beacon Forecast: Housing SituaEon to Q4-‐15 as of Q2-‐10
Sales Sales Forecast
Prices Prices Forecast
Source: DataQuick/Beacon Economics
2/15/11
21
Residential Real Estate
Source: DataQuick, Department of Finance Source: DataQuick, Department of Finance
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Q1-‐00
Q4-‐00
Q3-‐01
Q2-‐02
Q1-‐03
Q4-‐03
Q3-‐04
Q2-‐05
Q1-‐06
Q4-‐06
Q3-‐07
Q2-‐08
Q1-‐09
Q4-‐09
(%)
Percentages of Single-‐Family Housing Units in Foreclosure
San Francisco (MD) San Jose (MSA)
Oakland (MD) Los Angeles (MD)
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
Q1-‐02
Q4-‐02
Q3-‐03
Q2-‐04
Q1-‐05
Q4-‐05
Q3-‐06
Q2-‐07
Q1-‐08
Q4-‐08
Q3-‐09
Q2-‐10
(%)
Percentage of Single-‐Family Housing Units in Default
San Francisco (MD) San Jose (MSA)
Oakland (MD) Los Angeles (MD)
Finance & Insurance
• Late start in SF • 10,688 jobs (-15.6%) lost to date
• No additional job losses are expected
80 85 90 95
100 105 110 115 120 125
Q1-‐95
Q2-‐96
Q3-‐97
Q4-‐98
Q1-‐00
Q2-‐01
Q3-‐02
Q4-‐03
Q1-‐05
Q2-‐06
Q3-‐07
Q4-‐08
Q1-‐10
Q2-‐11
Q3-‐12
Q4-‐13
Q1-‐15
Inde
x = 100 in Q4-‐07
Beacon Forecast: Finance and Insurance Employment to Q4-‐15 as of Q3-‐10
San Francisco (MD) San Francisco (MD) Forecast
California California Forecast
Source: California Employment Development Department/Beacon Economics
2/15/11
22
Business & Professional
• 20,125 jobs lost (-9.5%) to date • 9.9% total decline • Currently at bottom
• Late start, late recovery 70
75 80 85 90 95
100 105 110 115
Q1-‐95
Q1-‐96
Q1-‐97
Q1-‐98
Q1-‐99
Q1-‐00
Q1-‐01
Q1-‐02
Q1-‐03
Q1-‐04
Q1-‐05
Q1-‐06
Q1-‐07
Q1-‐08
Q1-‐09
Q1-‐10
Q1-‐11
Q1-‐12
Q1-‐13
Q1-‐14
Q1-‐15
Inde
x = 100 in Q4-‐07
Beacon Forecast: Professional and Business Employment to Q4-‐15 as of Q3-‐10
San Francisco (MD) San Francisco (MD) Forecast
California California Forecast
Source: California Employment Development Department/Beacon Economics
Leisure & Hospitality
• 7,168 jobs (-5.6%) lost to date
• No additional job losses are expected.
70
75
80
85
90
95
100
105
110
Q1-‐95
Q2-‐96
Q3-‐97
Q4-‐98
Q1-‐00
Q2-‐01
Q3-‐02
Q4-‐03
Q1-‐05
Q2-‐06
Q3-‐07
Q4-‐08
Q1-‐10
Q2-‐11
Q3-‐12
Q4-‐13
Q1-‐15
Inde
x = 100 in Q4-‐07
Beacon Forecast: Leisure and Hospitality Employment to Q4-‐15 as of Q3-‐10
San Francisco (MD) San Francisco (MD) Forecast
California California Forecast
Source: California Employment Development Department/Beacon Economics
2/15/11
23
The Consumer
• Strong driver of the recession.
• 19.0% decline from peak to trough
• 13.2% decline from peak to current level • Continued pressure on state and local government budgets. 6.5
7.0
7.5
8.0
8.5
9.0
Q1-‐05
Q4-‐05
Q3-‐06
Q2-‐07
Q1-‐08
Q4-‐08
Q3-‐09
Q2-‐10
Q1-‐11
Q4-‐11
Q3-‐12
Q2-‐13
Q1-‐14
Q4-‐14
Q3-‐15
Billion
s ($)
San Francisco (MD) Taxable Sales Forecast to Q4-‐15 as of Q2-‐10
Taxable Sales Forecast Source: California Board of Equalization/Beacon Economics
Net Affect on the Labor Market
• Unemployment peak: 9.6% in Q4-2009.
Trough to Peak: +5.9 % pts
• Employment trough: 914,170 in Q4-2010
Peak to Trough: 86,317 jobs lost.
2
3
4
5
6
7
8
9
10
850
900
950
1,000
1,050
1,100
Q1-‐95
Q3-‐96
Q1-‐98
Q3-‐99
Q1-‐01
Q3-‐02
Q1-‐04
Q3-‐05
Q1-‐07
Q3-‐08
Q1-‐10
Q3-‐11
Q1-‐13
Q3-‐14
(%)
Employees (Th
ousand
s)
Beacon Forecast: San Francisco (MD) Employment SituaEon to Q4-‐15 as of Q3-‐10
Total Nonfarm Nonfarm Forecast
Unemployment Rate Unemployment Forecast Source: California Employment Development Department/Beacon Economics
2/15/11
24
Forecast Peak to
Current (%) Booom
Reached In Recovery Of
Peak Home Prices Marin -‐23.1 Q1-‐09 Aper Q4-‐15 San Francisco -‐15.9 Q1-‐09 Aper Q4-‐15 San Mateo -‐22.8 Q1-‐09 Aper Q4-‐15 Taxable Sales Marin -‐15.8 Q2-‐09 Q2-‐15 San Francisco -‐12.8 Q2-‐09 Q2-‐14 San Mateo -‐13.7 Q2-‐09 Aper Q4-‐15 Personal Income -‐4.5 Q4-‐09 Q3-‐11 Nonfarm Employment -‐8.9 Q2-‐10 Aper Q4-‐15 Unemployment Rate +5.7 Q4-‐09 Aper Q4-‐15
Source: Forecasts by Beacon Economics
Forecast Summary • Housing has booomed, but growth will be slow • Unemployment Rate peaked at 9.7% in Q4-‐2009 • Employment booomed out in Q4-‐2010 • Exports and business investment will be key drivers of
recovery • For most aspects of the economy, recovery is 5+ years off • Local budgets will be strained for some Vme
• Region is adaptable and recovery will be robust!
2/15/11
25
Venture Capital
Q2-‐10 Value of All Deals
(Millions) % of Total US VC
Bay Area 2,826 41
California 3,902 56
United States 6,943
Q3-‐10 Value of All Deals
(Millions) % of Total US VC
Bay Area 1,750 36
California 2,220 46
United States 4,820
Source: PriceWaterhouseCoopers MoneyTree
20
25
30
35
40
45
50
55
60
Q1-‐95
Q3-‐96
Q1-‐98
Q3-‐99
Q1-‐01
Q3-‐02
Q1-‐04
Q3-‐05
Q1-‐07
Q3-‐08
Q1-‐10
(%)
California’s Share of U.S. Venture Capital to Q3-‐10
Amount Deals
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