2017 Economic Outlook Its not 2016 anymore.. Ra Ray Ma Major Chief - PowerPoint PPT Presentation

2017 Economic Outlook It’s not 2016 anymore…….. Ra Ray Ma Major Chief Economist Jan 5, 2017 1

Y EAH , BUT WHAT ABOUT ………. Trumponomics 2

Economists Warn of Global Recession Following Trump Victory •Martha C. White Money Magazine Updated: Nov. 9, 2016 10:19 AM Trump Administration to Rev Up Global Growth, Says OECD The OECD has revised its U.S. and global economic outlooks to reflect the projected effects of a Trump administration. By Andrew Soergel | Economy Reporter Nov. 28, 2016, at 10:35 a.m. 3

Trumponomics What is:  Personal Tax Cuts  Corporate Tax Cuts  Infrastructure Programs  Defense Spending  Build up the Military  Repeal/Modify Obama Care  Relax Regulations – Energy, Environment, Financial Policy  Trade  Immigration  Foreign Policy  Drain the Swamp  Build the wall (now with doors) “It takes time, It takes consensus” 4

Trumponomics = Fiscal Stimulus Fiscal Stimulus = Tax Cuts + Spending Inflation GDP Growth Interest Rates Employment Unemployment National Debt

National Forecast for 2017/ 2018 A massive fiscal stimulus on any economy that is at or near full employment will lead to more growth, higher levels of inflation and higher interest rates and then ……. Inflation +2% GDP Growth +3% Interest Rates +2% +3% Employment +2% Unemployment 4.5% National Debt $1 Trillion

San Diego Outlook: Job Jobs 7

70% of job creation was from low ‐ paying jobs average recovery, now 7 years into an expansion. Recovery from the Great Recession took six times longer than the 1,150,000 1,200,000 1,250,000 1,300,000 1,350,000 1,400,000 1,450,000 San Di San Jan ‐ 00 Apr ‐ 00 Diego Jul ‐ 00 Oct ‐ 00 Jan ‐ 01 Apr ‐ 01 ego Total Employment 2000 ‐ 2016 Jul ‐ 01 Oct ‐ 01 Jan ‐ 02 Apr ‐ 02 Jul ‐ 02 Oct ‐ 02 Jan ‐ 03 Apr ‐ 03 Jul ‐ 03 Oct ‐ 03 Jan ‐ 04 Apr ‐ 04 Jul ‐ 04 Oct ‐ 04 Jan ‐ 05 Apr ‐ 05 Jul ‐ 05 Total, All Industries Oct ‐ 05 Jan ‐ 06 Apr ‐ 06 Jul ‐ 06 Oct ‐ 06 Peak (Dec-07) Jan ‐ 07 Apr ‐ 07 Jul ‐ 07 Oct ‐ 07 Jan ‐ 08 Apr ‐ 08 Jul ‐ 08 Oct ‐ 08 Trough (Jan-10) Jan ‐ 09 Apr ‐ 09 78 months Jul ‐ 09 Oct ‐ 09 Jan ‐ 10 Apr ‐ 10 Jul ‐ 10 Oct ‐ 10 Jan ‐ 11 Apr ‐ 11 Recovery (Jun-14) Jul ‐ 11 Oct ‐ 11 Jan ‐ 12 Apr ‐ 12 Jul ‐ 12 Oct ‐ 12 Jan ‐ 13 Apr ‐ 13 Jul ‐ 13 Oct ‐ 13 Jan ‐ 14 Apr ‐ 14 Jul ‐ 14 Oct ‐ 14 Jan ‐ 15 Apr ‐ 15 Jul ‐ 15 Oct ‐ 15 Jan ‐ 16 Apr ‐ 16 Jul ‐ 16 Oct ‐ 16

S AN D IEGO 2017: Diverse and Expanding Economic Base Innovation 10% Driving Sectors Tourism 30% 12% 30% Military 8% Health & Soc. Assist Supporting Sectors 11% 9% Education 27% 7% Government Retail/Wholesale Trade Traditional Sectors 16% & Other Services 43% 16% FIRE, Prof, Info 5% Construction 4% Manufacturing 2% Transport. and Util.

San Di San Diego ego, Employment: Driving Sectors 2014 2007 2010 Recovery Peak Trough 140 130 Military +15 120 Innovation +14 Index 2007=100 110 +12 Tourism 100 90 80 2012 70 60 0 1 2 3 4 5 6 7 8  Years since last peak (2007) 

San San Di Diego ego, Employment: Supporting Sectors 2014 2007 2010 Recovery Peak Trough Health Care & 140 +34 Soc. Assis. 130 120 +11 Education Index 2007=100 110 +4 Government 100 90 80 2011 70 60 0 1 2 3 4 5 6 7 8  Years since last peak (2007) 

San San Di Diego ego, Employment: Traditional Sectors 2010 2014 2007 Trough Recovery Peak 140 130 2015 120 Retail/Wholesale Trade & Other Index 2007=100 Serv. 110 +1 ‐ 2 Tran. & Util. 100 FIRE, Prof, Info ‐ 5 90 ‐ 16 Manufacturing 80 ‐ 20 Construction 70 60 0 1 2 3 4 5 6 7 8  Years since last peak (2007) 

San Diego Region, 2017 Select Sector Forecasts Employment: 40,000 new jobs (2.7% growth) Unemployment: drops below 4.5% Economic Drivers: Innovation 10% Innovation sector continues to thrive. Travel and Hospitality will outpace GDP growth in 2017. 12% Tourism Military expands its strong presence. 8% Military Population ‐ Driven Sectors : Health & 11% Soc. Assis. Health Care grows as population ages. 9% Education remains stable. Education Government grows proportional to population . 7% Government Retail Trade, Other Economic Sectors: 16% Wholesale Tr & Other Serv. Retail trade Brick & mortar weak / Increases spending. Financial and Professional very slow growth. 16% FIRE, Prof, Info Construction and Real Estate strong growth through 2018. Manufacturing continues steady recovery. 5% Construction Manufacturing 4% Transport. and Util. 2%

San Diego Outlook: Wa Wages 14

San San Di Diego ego Coun County ty Wages Nominal Hourly Wages +23% 145 140 +18% 135 130 +16% 125 120 115 110 105 100 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 25th Median 75th Index: 2004 = 100

San San Di Diego ego Coun County ty Wages Real Hourly Wages 114 +5.7% 112 110 108 +1.3% 106 104 102 +0% 100 98 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 25th Median 75th Index: 2004 = 100

S AN AN D IE IEGO 2017 2017 O UT ON W AGES UTLOOK OOK ON AGES  Skilled (Visa program) vs nonskilled workers  Wages increase to induce workers to move to California domestically  Growth in real wages up 2% in 2017, 2.5% in 2018  Deportations/ The Wall o Impact on Central/Imperial Valley (farming) o Increase in wages for documented labor  $15 hr minimum wage , might be prevailing wage 17

San Diego Outlook: Housi Housing 18

10,000 12,000 14,000 16,000 18,000 20,000 2,000 4,000 6,000 8,000 S AN AN D IE 0 Single Family Permits 2000 Permits Issued 2001 2002 55% SF IEGO 2016 2003 2004 2005 2006 2007 2008 Multi ‐ Family Permits 2009 2010 2011 66% MF 2012 2013 2014 “Housing permits and prices” 2015 Q3 2016 100 150 200 250 300 50 0 01/01/2000 11/01/2000 09/01/2001 Housing Prices 07/01/2002 June 2006 05/01/2003 03/01/2004 01/01/2005 11/01/2005 May 2009 09/01/2006 07/01/2007 05/01/2008 03/01/2009 01/01/2010 11/01/2010 Sept. 2016 09/01/2011 07/01/2012 05/01/2013 03/01/2014 01/01/2015 11/01/2015 09/01/2016

San Diego Region, Housing Affordability Median Priced Home Affordability Index $557,000 Dual income $79,200 60% $433,000 46% 50% Dual Income $55,300 (all jobs 2015) 40% 30% $232,000 Avg. Income $55,300 20% 24% 10% 9% 0% Apr-91 Jan-92 Oct-92 Jul-93 Apr-94 Jan-95 Oct-95 Jul-96 Apr-97 Jan-98 Oct-98 Jul-99 Apr-00 Jan-01 Oct-01 Jul-02 Apr-03 Jan-04 Oct-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16 Source: California Association of Realtors 20

S AN AN D IE IEGO 2017/2018 2017/2018 O UT ON H OUSI UTLOOK OOK ON OUSING NG  Increased demand for housing  Prices increase in the short ‐ term  Interest rates increase (mortgages hit 6%)  Housing affordability falls below 20%  Housing starts soften, possibly decrease  Construction employment starts to slows and fails to get back to pre 2007 levels. 21

100% Chance Trump Drives Economy into Depression in 2017 •Brian Maher Daily Reckoning Updated: Nov. 18, 2016 10:19 AM Economists Concur, U.S. Economy Poised to Double Under 8 Years Trump By Andrew Soergel | Economy Reporter Nov. 28, 2016, at 10:35 a.m. 22