The 2020 Economic Outlook U.S. and California January 15, 2020 Mark Schniepp Director What are Californian’s Concerns? (1) Economy ? (2) Global Warming ? (3) Homelessness ? (4) This year’s Presidential Election (5) The Stock market ? (6) The next Recession ? a (7) None of these ?
What Californians Google index 50 facebook weather football 40 instagram star wars movies 30 20 10 impeachment 0 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Agenda: the outlook for California (1) What you should know (2) Searching for Recession (3) What you should know about California (4) Community College Update (5) The 2020 outlook
What you should know about the Economy q Unemployment rate just dipped to 3.5 % q All time record job creation continues in the U.S. q The economy has slowed however -- to 2.3% in 2019 (from 2.9% in 2018) q Uncertainty from the trade war has been a cloud over the economy -- which is now abating due to a Phase 1 agreement q Stock market is at all time record highs S&P 500 Index index February 2019 -- January 14, 2020 3,300 3,200 3,100 3,000 2,900 2,800 2,700 Feb-19 Mar-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Dec-19 Jan-20
More of what you should know q Long term interest rates remain very low q Household wealth is at all time record highs q record high stock market q very low debt q record high home prices q Real wages have eclipsed their previous peak q Inflation around 2 percent, or less Annual return on the Dow Jones Industrial Avg percent 2007 - 2019 change 26.5 30 25.1 22.8 18.8 20 13.4 11.0 7.5 5.5 7.3 6.4 10 0 -2.2 -5.6 -10 -20 -30 -33.8 -40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Unemployment Rate / US percent December 1964 -- December 2019 December 1964 -- August 2019 11 50 year low 10 9 8 7 6 5 4 3 Dec-64 Oct-71 Aug-78 Jun-85 Apr-92 Feb-99 Dec-05 Oct-12 Aug-19 Job Openings / U.S. thousands of jobs November 2004 -- November 2019 8,000 7,000 7 million job openings 6,000 5,000 4,000 3,000 2,000 Nov-04 Jul-06 Mar-08 Nov-09 Jul-11 Mar-13 Nov-14 Jul-16 Mar-18 Nov-19
Jobs Created / California thousands of jobs 2009 - 2019 600 327 389 425 476 428 356 338 290 400 151 200 0 -200 -156 -400 -600 -800 -861 -1,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Unemployment Rate / California percent 1986 -- 2019 13% 11% 9% 7% 5% 3% 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
Job Openings by California Region thousands November 2019 250 570,000 200 150 100 50 0 Bay Area Far North Central Sacramento Inland Central Coastal Coast Valley Empire Valley Southern California How do you handle job openings? q we don’t have any job openings q we recruit new college graduates q we raid other companies q we use all social media to recruit a q we’re hoping the next recession will eliminate our need to hire
Searching for recession Searching for the most widely anticipated recession in history Economic Expansions in Months / U.S. months 1945 to Now 126 120 125 105 100 91 73 75 58 45 50 39 37 36 24 25 0 Oct 45 - Oct 49 - May 54 - Apr 58 - Feb 61 - Nov 70 - Mar 75 - Dec 82 - Mar 91 - Nov 01 - Jun 09 - Nov 46 Jul 53 Aug 57 Apr 60 Dec 69 Nov 73 Jan 80 Jul 90 Mar 01 Dec 07 Dec 19
Consumer Sentiment / University of Michigan index 1985=100 August 2006 -- December 2019 Consumers have 104 98 not appeared 92 nervous 86 80 74 68 62 56 50 Aug-06 Apr-09 Dec-11 Aug-14 Apr-17 Dec-19 What would Consumers Worry About ? q . . . their jobs q today and in 6 months q . . . their wealth q the stock market q their home values q . . . about recession
Google Search for "Recession" index February 2019 -- January 2020 90 80 70 49ers 60 50 40 30 20 10 - Feb-19 Mar-19 Apr-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Dec-19 Jan-20 The recession is imminent Even Gavin Newsom talks recession (January 10, 2019 news conference)
Revenue Could Drop by Nearly $70 Billion in a Recession California State Budget 2019-2020 / June 27, 2019 General Fund Ending Fund Balance / California billions of dollars FY 2008 - FY 2021 9 6 3 0 -3 -6 -9 2009 2011 2013 2015 2017 2019 2021
Who Should Worry about Recession? q Anyone that has a job q Business owners q State, County, and City governments q Anyone with debt -- can’t be serviced with lower revenues q Lenders q Most everyone Index of Leading Indicators / U.S. index 2010 = 100 November 2014 -- November 2019 113 110 107 104 101 98 95 Nov-14 Nov-15 Nov-16 Nov-17 Nov-18 Nov-19
Probability of Recession / U.S. the probability that the U.S. economy will be in recession in 6 months % likelihood May 2008 -- November 2019 60 50 40 30 20 10 0 May-08 Apr-10 Mar-12 Feb-14 Jan-16 Dec-17 Nov-19 Dow Jones Industrial Average index the last 125 days . . . . . to January 14, 2019 29,000 28,500 28,000 27,500 27,000 26,500 26,000 25,500 25,000 24,500 7/17/19 8/21/19 9/26/19 10/31/19 12/6/19 1/14/20
What you should know about the California economy right now q Surprising sustained strength in job creation q New development remains especially strong -- Building booms in Los Angeles, Bay Area, Orange County, Sacramento and Central Valleys -- High speed rain project continues . . . . -- Fire rebuilds in Northern California q Technology remains the principal engine of growth in California Employment in Technology Sectors / California thousands of jobs 2003 -- 2019 780 Film and video recording Software development 740 Data processing and web hosting 700 Computer systems design Scientific & technical consulting 660 These jobs cannot 620 be filled fast enough 580 540 500 460 420 2003 2005 2007 2009 2011 2013 2015 2017 2019
New Apartment Unit Production / California thousands of units permitted 1998 -- 2019 60 50 40 30 20 10 0 1998 2001 2004 2007 2010 2013 2016 2019 Investment in New Commercial & Industrial Structures / California billions of dollars 1979 -- 2019 20 Office Vacancy rate low in LA and SF 18 Industrial vacancy at record lows 16 Even retail store vacancy is still low 14 12 10 8 6 4 2 1979 1983 1987 1991 1995 1999 2003 2007 2011 2015 2019
Investment in New Hotels / California billions of dollars 1992 -- 2019 2.0 Proposition 51: $9 billion for schools 1.6 SB1: $5.2 billion per year for transportation infrastructure 1.2 0.8 0.4 0.0 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 Community College Update Current Enrollment & Future Demand
Population Age 65 & over / California millions of people 1990 - 2030 9.5 48 percent 8.5 7.5 6.5 5.5 4.5 3.5 2.5 1990 1995 2000 2005 2010 2015 2020 2025 2030 CA Demographics are changing q The fastest growing age cohort is 65+ q The largest age cohort is the Millennial generation, born 1980 to 1999 and are now aged 21 to 40 q And because Millennials don’t have kids . . . . . q . . . population growth has now slowed to the lowest rate since records have been kept q Net in-migration to California has turned negative q Hispanic population now the dominant ethnicity in California
Distribution of Ethnicity / California • 2019 13.1 Asian 38.3 5.7 White Black other 3.5 39.3 Hispanic Student Demographics / Ethnicity 2017 - 2018 (1) Black 6% (2) Asian 12% a (3) Hispanic 45% (4) White 26% (5) Multi-Ethnicity 4% (6) Other 8%
Net In-migration / California thousands of persons 1991 - 2019 300 250 200 150 100 50 0 -50 -100 -150 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Population Growth / California percent change 1969 -- 2019 3.0 lowest rate in 2.5 recorded 2.0 history 1.5 1.0 0.5 0.0 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019
Births / California thousands 1977 - 2019 of live births 600 560 520 480 440 35 year low 400 360 320 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 Organic 18 year olds CC Enrollment and Organic 18 year olds millions of California thousands students of births 1992 - 2018 650 1.9 600 1.8 550 1.7 500 450 1.6 400 1.5 350 1.4 300 250 1.3 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019
Community College Enrollment / California millions of students 1992 - 2018 1.9 1.8 1.7 1.6 1.5 1.4 1.3 1992 1995 1998 2001 2004 2007 2010 2013 2016 2019 Distance Education / FTES California Community Colleges thousands of students 1997 -- 2019 200 175 150 125 100 75 50 25 0 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
On-Campus Enrollment / FTES California Community Colleges millions of students 1997 -- 2019 1.20 1.15 1.10 1.05 1.00 0.95 0.90 0.85 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Factors Affecting CC Enrollment • Pool of graduating 12 th graders in the region • Number of Births lagged 18 years: Organic 18 YOs • Per unit fees - did not have much impact on FTE students • Economy had a negative correlation on part time student enrollment - Less enrollment of Part Time students when the economy created more jobs and the unemployment rate fell • 18-24 year old population growth - 25 to 34 pop growth a factor for some colleges
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