The Great Recession - SPUR · 2/15/11 5 National Credit Bubble 10 12 14 16 18 20 22 24 26 28 30...

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


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


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

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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


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


Auto and Light Truck Sales to November, SAAR

2/15/11

8

National Credit Markets Cleared?


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 ($)


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

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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

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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


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


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


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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

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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


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


-‐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




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




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




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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

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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!

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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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