fashion forecast 2017

fashion forecast 2017

   18.11       Fashion 2017

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>> jane netherton: myname is jane netherton and i have chairedthe board of governors for california stateuniversity, long beach and we have sponsored thisevent for the 18 years that it has been presented. however, we could nothave gone for 18 years without the contributionsand support of our sponsors and for all of those in theroom today that have been to probably almost 18 of them.

i see a lot of faces whohave been every year. i know a few of you that i'vetalked to, have missed one, and unfortunately, i missed one. i was out of thecountry last year, but this is our 18th annual. they do an incredible job. i thank all of youfor being here. we're going to move on tothe program so forgive me for not making introductionsaround the room.

i know there are a lot... everybody is important and iknow we have some people who've, i think of one that'scome the farthest came from i think north carolina,one of our governors, but i would like to thank youfor being here and welcome to our 18th conference. and we are goingto have a guest on. what movies joe has picked thisyear to describe our economy? i've never gottenthem right yet,

but we'll see howclose we can get. for those who've been herebefore, you know he always tries to tie into some moviethat's been around, so if you have thought aboutit and have written it down, we'll see how close you get. at this time, i'd liketo introduce someone who needs no introduction,but president king alexander, president of californiastate university, long beach, and say hello and welcome.

[ applause ] >> president kingalexander: thank you jane. thank you all forcoming this morning. we'd been doing this for 18years and we keep doing our job at the university to buildthe economy, and at the end of the month, we'llgraduate over 9000 students, so we hope that you're,you're recruiting our students and hiring our students becausewe're building the economy of long beach together andsouthern california together.

so thank you verymuch for coming today. you're going to learn a lotabout what we anticipate. it's, it's, it's a bit like lasvegas as you know in predicting where the economy is going, but we certainly appreciate allthe support of our university and all the support you give toour students, so thank you very, very much for beinghere this morning. jane. >> jane netherton: thankyou, president alexander.

at this time, without furtherado, we have doctors magaddino and grobar, who have been doingthis since i've been involved with it and they have beenon target for so many years. i hope that they have a, alittle bit of news this year and we wanted to be on target, but we want the newsto be better. so, please welcomedr. joe magaddino. >> dr. joe magaddino:thank you very much jane. king that's the first time i'veheard my research described

as a crap shoot. [ laughter ] >> dr. joe magaddino:good morning and welcome to our 18th annual economicforecast conference. let me begin by thanking all ofour sponsors for their support. i especially wish to acknowledgethe platinum sponsors, the port of long beach,the gateway city's council of governance andsupervisor don knabe. i do have an introductionto make.

i would like to introduce thenewest member of the department of economics, heather stevens. heather is a doctoral candidateat ohio state university and has experience inlocal economic development. she'll be joining theeconomic forecasting and let me have heatherstand up. she's not the tallest economistin the department, but... >> dr. joe magaddino: thankyou very much and welcome, i know our students aregoing to appreciate you

and i think the work thatyou will be able to do with the community willbe very beneficial. before i begin withour presentation, i ask you to turn off orsilence your cellphones as a courtesy toall in attendance. the packets that you havecontain a copy of the slides that we're using in thismorning's presentation, except for my introductoryremarks. so i thought i would begin ona positive note and remind you

that this recovery isalmost three years old. it began in july of 2009. given the weakness of therecovery, one can only assume that this is a limited releaseand may not be available in a theater near you. now last year we beganour presentation talking about the long-term structuralproblem facing the us economy and that is the growth of thefederal death, virtually all are in agreement that thecurrent path is unsustainable

and of course, if it'sunsustainable then it won't last, but there is nothing ineconomic theory that tells us in terms of how high the debtcan grow before investors or lenders lose confidence. so it really is a thin linebetween solvency and default. when you borrow funds, surprise,lenders expect to be repaid. if lenders questionyour ability to repay, then interest rates rise, which exacerbatesthe fiscal imbalance,

we're clearly not there yet. as i said, this is alonger term problem. such was not the casefor greece this summer. as the sovereigndebt crisis emerged, greece could not refinancethe debt and the prospects for default wererelatively high. as you know, germany andfrance needed to craft a plan for the european union. the germans were reluctantto tax themselves to bail

out their neighborswho they view as lacking fiscal discipline. after all, in the early 1990s,germany addressed a series of deep structural changes to make its economy much morecompetitive and while merkel and sarkozy deliberated,concern spread to spain, to ireland, and to italy. there was a legitimate fearthat the euro would unravel, that there would be a meltdownof the european banking sector,

and that financialinstitutions would fail much like they did in 2008. merkel and sarkozy formulated aplan to provide bail out funds in exchange for austeritymeasures and these austerity measuresare now being questioned in some countriesgiven the results of the most recent elections. the european centralbank has pumped in around one trillion eurosinto the banking system

and while these actions provideliquidity and time needed to address these problems, liquidity alone doesn'tsolve the problem. had merkel and sarkozynot taken action, there was a strong chance thatthe us, the global economy, along with the europeannations would have fallen into a recession, adouble dip recession. oh, come on i need abetter laugh than that. i mean the movies arereally tough this year.

fortunately, this did nothappen, although the countries, several of the countries in the euro zone arealready in recession. meanwhile, the fedended its qe2 program and depending upon how historyplays out ben bernanke may yet emerge as theartist of this recovery. as we gear up for the nationalelections this november, it appears that aftera long, and at times, a very divisive primary season,the republicans have coalesced

around governor romneyas their standard-bearer. now is it just meor do you think that michele bachmannlooks better as a blonde? now regardless of who winsthe election, the reality is that we face a fiscal cliffin january 01 of 2013. we're at the expirationof the bush tax cuts, the payroll tax reductionis phased out, we phase out the emergencyunemployment benefits that were extended,and most importantly,

we have the sequestered fundsthat generate automatic cuts that would primarily be dealtwith by the defense department. in addition to that, there'sthe atm that is subject to expire along withthe, the doctors' fix. to put this in perspective interms of the dollars involved, this amounts to a reductionin the federal government between $400 and $550 billionor 2.5% to 3.4% of gdp. so there's a significantchallenge that faces any newadministration and the failure

to deal with the problemwhether we increase taxes or whether reduce expenditures,creates lots of uncertainty and the uncertainty over theshort term is harming the economy because individualsand firms sit on the sideline, waiting to take action until they're really surewhat the economic landscape looks like. so given that degreeof uncertainty, we'll now turn ourattention to the forecast

and we have our ownausterity measures going on in at the office ofeconomic research. in the past, we're able toprovide you with a booklet that contained comments aswell as all of the tables. we've now moved thatto a website. we used all of our ingenuityand imagination to come up with the user name forecastand the password econ2012. so you can access that and thatshould be live this morning. the other thing that's changedis we're not going to be able

to post on our websitethe slides that we're presentingtoday and the reason for that is they're not adacompliant and to be honest with you, the amount of effortgiven the number of hits we get in terms of peopledownloading doesn't makes sense, so what the researchershave agreed to do is we will supply youwith copies of the slides if you so choose just bysimply emailing us. okay, with that, let me actuallybegin reviewing the forecast.

the great recession wasthe steepest decline in the post world war ii eraand we're in the midst of one of the weakest recoveries thatour nation has ever experienced. in 2010, it appeared thatthe economy had gained some traction, it wasgrowing at a rate of 3%. however, last year wesaw the economy falter. the fourth quarter of last yearlooked to be relatively good at 3% growth, butthe first quarter, at least the preliminaryestimates of the first quarter,

suggests the economy has againslow growing at only 2.2%. our forecast really calls for only modest growth giventhe amount of uncertainty that we have bothhere and, and abroad. so we're looking forgrowth right around 2% for both this yearand next year. the consumer price index,which is a popular measure of inflation rose by a littleover 3% last year and most of that increase was associatedwith food and, and energy prices

and while food andenergy prices remain high, the rates of increase that we'reseeing this year are much more moderate, so we do believe that the inflation index willshow some moderation both this year and next year. the unemployment numbers remainpersistently high and we'll talk about that shortly and we dobelieve given the positioning of the economy atthe present time, the fed will take no actions andwill indeed sit by the sideline.

so let's first of alltalk about the past because it's a lot easierto forecast the past. i, the, the recessionbegan in december of 2007, it ended in june of 2009. the strong recovery that we sawin 2010 was really attributed to an inventory cycle,fairly typical in this kind of business cycle. during the really deep losses that we saw during therecession, what happened is

that output fell much morerapidly than final demand and what that means is thatwe depleted inventories. people at upsurt [phonetic]are nodding their head because that wasn'ta good year for them, they weren't moving a lot ofproduct because it was not a lot of product to be moved becausepeople were not restocking their shelves. you can do that forsome period of time, but you can't do it indefinitelyand then eventually what has

to happen is you haveto restock those shelves and that's what we saw in2010 where we saw growth in output largerthan final demand, we're building up inventory. the problem with that iswe can't do that forever, you need much more sustainableeconomic growth its balance and we didn't see that last year because we saw a significantsoftening in the economy. as we move forward, we'relooking for final demand

to track a little bitmore closely to output which in fact is themore typical situation. let's talk a little bit aboutlast year and why we were wrong. last year, we thoughtthat the economy at the national levelwould grow close to 3%. we knew that the economy wasgoing to be sluggish in part of the first part ofthe year, but we thought that there'd be sufficientmomentum to really carry usforward in the second part

and that clearlydid not materialize. and part of the reasonfor that was simply that there were significantheadwinds that the economy had to deal with last year. you recall that the socalled super committee failed to present a plan to dealwith the long term problem of the growth inthe federal debt. the republican led house andthe president were unable to broker a deal to addressthis problem and it appeared

that the failure to raise thedebt ceiling would shutdown the government and technically bringus to the brink of default. the political maneuvering of both parties seriouslyundermined the consumer confidence as well asbusiness confidence and indeed the solutionthat they finally agreed on was simply to kickthe can down the road until after the nationalelections. in march of last year,

japan suffered a devastatingearthquake and tsunami, and beyond the tragicloss of life and property, there were major disruptionsin the global supply chain that particularly impactedthe oil, excuse me, the automobile industryin the united states. we also had the arab spring. we had turmoil inthe middle east. we lost the oil from libyaand we saw prices jump from $78 a barrelto $110, excuse me,

$101 during the firsthalf of last year. the $23 increase in crude priceseroded real purchasing power and that also slowedthe economy. unless we forget the sovereigndebt crisis that began in december and while theecb has done much along with our own federalreserve to increase liquidity in the eurozone, thisaction treats the symptoms, but not the verybasis of the problems and clearly the debt crisis

and the austeritymeasures have forced some of the european nationsinto a recession and that's certainly dampenedthe growth of exports. i'd like you to pay particularattention to the next slide because the slide you havein your packets is wrong and i apologize for that, that'smy fault, but i'd like you to look only at the last threeyears 2010, 2011, and 2012. now what this sliderepresents is the contributions of the various expendituregroups to overall gdp.

so first let's look at the redbar, which is the contribution of consumers and consumers youcan see pretty much have held the course that eachyear they're contributing about the same amountto overall gdp growth. in 2010, that thatblue bar investment, you see is really high,but that's no more than simply the buildup of the inventories and we didn't think the build up in inventories wecarried forward and so

in 2011 you see that,that has dropped. the real surprise forus is net exports, okay. net exports were reallyvery, very strong in 2010 and we had thought that that wasgoing to carry forward to 2011 and of course thatdidn't materialize because we had a slowdownin the global economy. the emerging nationsare growing much slower, you have a recessiongoing on in europe and all of those things limit ourability to export goods along

with an increase in thevalue of the dollar. so moving forward,we think that your, your strength is really goingto be again in consumption and investment expenditures,on balance, the net export should eithercome in as a slight drag or neutral, and of course, the government sector is nowbecoming a drag on the economy, which is simply atypical usuallygiven the business cycles of the past.

so let's talk a little bit aboutconsumption, consumption growth. we're looking atright around 2%. we think it is indeedunreasonable to suspect that we could get toa more robust level of consumption growth, whichwould really be a, a good driver for the economy, not the levelsthat we saw in the middle of the last decade where we sawconsumption growing somewhere between 2, 2.5% to 3.5%. it's not reasonable and thereason why it's not reasonable

has to do with the a, avariety of different factors and the first one i'm going totalk about is the job market. this recession generatedjob losses on the order of 8 million. the recovery to datehas generated job gains of around 4 million. so there remainsa sizable number of people underemployedand unemployed. given the slow rate of jobformation, unemployment is going

to remain persistentlyhigh, and more importantly, we haven't seen thejob growth necessary to get the income growth toreally move consumption forward. the last two months employmentnumbers were disappointing, they averaged about a 135,000jobs in those two months. in the prior three months,from december to february, the average was 250,000and it appeared to some that the economy was really wellready to take off, and in fact, it was a little bit perplexingeven ben bernanke said he was

confused by the numbersbecause it seemed to be the employmentnumbers were growing faster than the output numbersand so now what it seems to us is while the numbers in the last two monthsare disappointing, they're probably more realisticwith what we see in terms of the overall growth of theeconomy, okay, a modest level of economic activityis taking place. part of the increaseof umemploy, excuse me,

the employment numbers in theearlier months may simply be due to the unusually goodweather that happened back in the north east which simplymeans that jobs were moved up earlier in the calendaryear than they otherwise might. now we do think that theemployment is going to improve and sort of one of the reasonswhy it's going to improve has to do with the productivitynumbers, so this is both a goodnews and bad news scenario. the good news in thevery short run is

that firms have done everythingthey can to raise productivity and they can't get anymoreout of their workers and so the productivitynumbers are down. so if you see an increase indemand, the only way we're going to be able to meet thatincrease in demand is by adding on to your labor force and so that's the shortrun, that's the good news. the bad news over the longerterm is productivity is one of the key components

to determining long-termeconomic growth and long-term economic growthdeterminants are ability to increase our standardof living. so if these numbersremain low then that means the long-termprospects of growth are greatly reduced. we don't think that that's goingto happen, we think that in, in a couple of yearswe should see a return to reasonably goodproductivity numbers.

consumers have donea fair amount of consolidatingtheir balance sheets. they've reduced theirnon-mortgage consumer debt considerably. you saw, we show a little bitof an uptick this coming year and part of that is due to thefact that there's a lot of pent up demand with respect toautomobiles in particular and auto sales havedone really well. so consumers are at leastconfident enough to take

on the additional debt burden. the other thing that'sincreasing now is student debt. believe it or not, studentdebt is the largest single item of debt in household'sportfolio other than mortgages, so it really eclipses all otherdebt, so given the deposition of the consumers improvingsome, but not enough to see really robust growth. and lastly, it was a goodquarter for the stock market. we're heading in theright direction in terms

of the overall wealthof households in the us, but clearly we'reway below the peak that we had beforethe recession began. let's look at non-residentialinvestment and there's two components here. there's equipment andsoftware and there's structures and we display them separatelybecause they behave differently at different pointsin the business cycle. during the downturn, theyboth go down really rapidly,

but on equipment and software, firms can't postpone thosedecisions very long if they wish to remain competitive,and so as a consequence, they have to makethose investments. and this time outduring this recession, firms' balance sheetswere relatively good. they, they are flushedwith cash. they can well afford to makethe investments, and indeed, we saw them make investmentsin equipment and software both

in 2010 and carryingforward after that point. structures are alittle bit confusing because we don't normallyexpect structures to bounce back as quickly as they did, butwhat's going on here has nothing to do with sort of buildingnew office buildings or building retailbuildings or the likes of the typical commercialbuildings. what's in this categoryalso is power plants, oil, and other energy activities,petroleum extractions,

so what we're seeing with higherenergy prices is we're seeing an expansion of economic activityin this particular area. we're not really looking for thetraditional business structures to really improve until2013 and that will be only at a modest rate of, by2014 it should pick up some. let's look at housing starts,housing starts bottomed out in 2009 and continued to runpretty much around the bottom. we're looking for housingstarts somewhere in the order around 750,000 unitsacross the nation this year,

most of that is going to bein multi-family dwellings. to give you some perspectiveon what these numbers mean, the long-term trend inhousing starts should be about 1.5 million and that'sbased on family formation, the demand for secondhomes, and the demand for replacement homes. and one of the thing that'shappened during this deep recession, and lisa is goingto talk about a little bit, is that household formationis way below the trend line

and so what we expect orwhat i expect to happen is that once the economy startsposting some significant improvements in theemployment area and we start seeingsome economic growth, we're going to get a hugejump in family formation and of course because we haven'tadded on to our inventory, we're going to beginanother housing cycle. the existing home saleshave trended upward, but still way below thepre-recessionary numbers.

residential fixed investmentas i just got through saying, we do expect some uptake here, but most of it ismultifamily units. looking at the exportsand imports, this really was the area thatdisappointed us the most. the euro zone is in recession, emerging nations haveslowed their growth path, dollar has strengthened and onbalance all of these things mean that our exports aregoing to decline in terms

of the overall rate ofgrowth, so we expect them to be a slight drag interms of the economy. looking at the currentaccount deficit, the current account deficitis now expanding and much of that expansion is associatedwith increases in oil prices. the dollar has strengthened,and frankly, the reason why thedollar has strengthened is that the euro is now in questionand people have moved to safety. the, the, that's good newsin a way, but it's bad news

if you're an exporterbecause it means that our goods are alot less competitive on a global marketplace. we think that the dollar willcontinue to show some strength against the euro, but we dothink that the longer term trend against the emerging nations is that the dollar shouldstart to slide. government expenditures, ithink you understand the story pretty well.

we're looking atnegative rates of growth for the federal governmentboth last year and this year and that simply reflectsthe unwinding of the stimulus package. that stimulus package mostlywas one time expenditures, those expenditures have beenmet and so as a consequence, the rate of growth is negative. the situation continuesto deteriorate for state and local government units.

they don't have the sameflexibility oftentimes that the federal governmenthas in terms of running into deficit, althoughit's hard for people in sacramento to accept that. nonetheless, what we've seenhere is a, a clear deterioration because the balancesheets of local governments and state governments simplylag the economic cycle and we're looking forsignificant cuts again to take place this year.

in terms of the federaldebt both in absolute and relative terms thefederal debt has declined or will decline in, in 2012. inflation, this is the personalconsumption expenditure deflator that the fed looks at. the red line is the total whichincludes the food and energy which are more volatile, if you purge thoseout, you get the core. our estimates suggest thatit's well within the fed's zone

for comfort, so we don'tanticipate the fed doing very much. inflation is not anear term problem. interest rates fairly benign. so just to summarize,we're looking for really modest growth thisyear, right around the 2% level. we think that the monthlyemployment numbers are going to come in at around a180,000, but remember, we need about a millionjobs every year just

to satisfy the new entrantsinto the job market. and lastly, the inflationnumbers and the federal debt, we think are serious problems, but we think they arelonger term problems. and with that i'm goingto turn the podium over to the intellectual drivingforce behind our research, lisa grobar. thanks so much. >> dr. lisa grobar: thank you.

i'm going to be presentingour outlook for the southerncalifornia regional economy and i thought i'd start outthis morning by taking a look at the recent quarterlyhistory of employment growth in southern california and aboutthis time last year we started to become increasingly confidentof an imminent recovery in the region because we startedto see a couple of quarters of just barely positive growthemerging in the region right at the end of 2010, althoughthe annual number was declined

for 2010, we, we startedto see some quarterly gains and the good news is thatwe have sustained positive quarterly economic job growthin the region ever since. the bad news is that the growthhas not been particularly robust, and in all ofthese quarters you see that employment grewby 1% or less. so we would characterize thisat the regional level thus far as a, as a modestregional recovery. one thing that's alwaysinteresting is to kind

of compare how is a regiondoing compared to the nation in terms of job growth? you can see that at thebeginning of the recession, we trended very closeto the nation, and then our recession becamejust a little bit deeper and more prolonged thanthe national recession, so you can see theregion's recovery in orange began alittle bit later. but by the end of 2010,we had sort of caught

up to the region's recovery, although we are trending alittle bit lower in terms of employment growth in,in the latest few quarters than the nation, but overall, the cycle has been pretty muchfollowing the national path. this is the same employmentdata, but it's just looking at the average annualrate of employment growth and so you can see thelast bar there is 2011 and 2011 was the first year

that we had positiveemployment growth in some time in the region. again, it's been moderategrowth, but one of the things that you can see with thistime series here is that it's, it's not uncommon for theregion to see a period of moderate growth followinga recession, so you can see that following therecession of the early 1990s on the left there, the firstyear out was pretty moderate and the same thing withthe recession of 2002.

but the year afterthat year of recovery, generally we seeemployment accelerating and that is actually the storythat we will be telling today and i'll have the forecastfor you in a minute. but first taking a lookat the county trends, i think that the thingthat stands out the most for 2011 was just simply that orange county reallyled the economic recovery in the region.

it was the only county thatsaw employment growth above 1% and at just slightly so. the region grew atabout 0.6% last year and that was exactly the rate ofgrowth of la county and ventura and then the lagging area in the region has beenriverside-san bernardino, but nonetheless, even that areasaw positive economic growth, it was only a three-tenths ofa percent gain, but it was a above the line growth even forthat lagging region in 2011.

so here's our forecast, and as isaid, the second year out looks to be a lot stronger than thefirst year out of the recession. for 2012, we are predicting thatthe region will post a job gain of 1.5% so it's a lot stronger than the 0.6% gain we sawlast year, and in fact, our forecast has the regioncontinuing to strengthen over the forecast horizon,by 2014 we're going to be adding jobs at, atjust below the 2% line. so that, these three yearsreally represent a return

to a more healthyand average rate of, of job growth for the region. what's the main difference between the regionthis year and last? one, i think i would pointto is, is a strengthening in the cyclical sectors. so the sectors that suffered theworst downturn are now coming back and more of themare coming back this year and that's making oureconomy grow faster.

one area that was pretty weak in its recovery lastyear was retail, but as consumers are reallygetting back into the stores and buying as joe mentionedthe automobiles, we're starting to see some employmentgrowth there. the construction sectorwas obviously very hard hit by the housing downturn, it'snot returning to any sort of robust economic growth,but we, we actually think for the region atleast as a whole,

the construction sectorwill be above the line with slightly positive growthand that's a big difference from where we've been. but we're also getting a lotof our growth in 2012 in, in sectors like the professionaland business services sectors, which recovered last yearwith positive growth, but is, is accelerating this yearand we're also seeing strong, a strong recovery in theleisure and hospitality sector and in, in healthcare.

as i mentioned, constructionis now positive and that's kind of a big deal because you haveto go all the way back to 2006 to see a year where this, this sector even posted anykind of job growth at all. so it looks like the worstof the downturn is behind us, although this is, this, thisstory varies across the region because we are seeing certainareas with continued declines in construction activity,but for the region as a whole we think we're goingto get a little bit of growth.

it's not going to be until 2015and beyond that this is going to show a strongcyclical recovery. as i mentioned, retail is one ofthe things that's propelling us to faster growth in the regionthis year and we're expecting above 2% growth inretail, employment. over the longer term, there aresome issues in retail employment that are dampening the growth. there has been productivitygains that may mean that this sector doesn't growthis fast over the longer term,

but we're getting a nicecyclical boost to gain back some of those many jobs that we lost in this sector during therecession, especially in 2009. as i mentioned, the professionalbusiness services this is definitely a bright spot,definitely a bright spot for the regional economy. we did get some pretty goodjob growth even last year of almost 2%, but you cansee our, our forecast has, has this sector acceleratingto 3% growth this year

and almost 4% growth by2014 and this is important for a couple of reasons. this, i would say mostof all is important because this is a sectorthat has a high average wage. there is diversity within thesector and i wanted to pull out some of the detail to giveyou some sense of, of what kinds of jobs are in professionaland business services and we get the most detaileddata for los angeles county, so the growth rates hereare actually for la not,

not the region as a whole. but what we see is over thelast 12 months over 11% growth in jobs in accounting andtax preparation, bookkeeping. over 7% gain in jobs in the areaof management and scientific and consulting and these areareas with high average pay. the average pay for la countyas a whole is about 52,000. so as you can see these twoareas are growing rapidly, they're high, they'recreating high paying jobs and so this is one sectorthat really is going

to help boost oureconomy in 2012. i highlight also a thirdcategory called employment services and this oneis important even though as you noticed the, theaverage pay here is fairly low. employment services picks upa lot of your temporary help, your temporary secretarialclerical type jobs that may not be particularlyhigh paying, but this sector is importantfor a couple of reasons. number one, it is usually avery good leading indicator

of the economy because weoften see that firms hire up on a temporary basis beforethey commit to fulltime jobs and the 13% growth in thatdefinitely sustains our notion that yes this, thiseconomy is definitely on a firm recovery path. and furthermore, employmentservices is one area that's a stepping stone forunemployed people to get a temporaryfoothold in the labor market and then often that, thatleads to a permanent job.

so this is a, this is verygood news to see rapid growth in employment services. leisure and hospitalityrecovered in 2011and is going to add jobs at apace of 3% this year. again, we're addingback a lot of the jobs that we lost duringthe recession and the reason why we lost jobsin this sector is that a lot of discretionary spending takesplace in these categories. so during the recession,households stopped going

or cut back on going outto, to eat in restaurants and businesses cutback on travel and what we saw starting lastyear was that we're starting to see those trends go backtoward a more normal path and that's creatinga lot of jobs here. the manufacturingsector was a source of job losses unfortunatelyduring the recession. it will not be a major sourceof, of employment growth in the region in the nearterm, but neither is it a drag

on the economy andactually the growth in manufacturing istaking place mainly in riverside-san bernardinoso it is having an impact on some areas of the region,although for the region as a whole it, it, it's notdoing much either plus or minus in terms of job creation. but the recovery in the nationaleconomy is creating a lot more job opportunities intransportation, warehousing, and this is another cyclicalsector that did recover in 2011,

but is strengthening alot in this year and next. so we're seeing this year amuch more broad based growth and accelerated growth in alot of the cyclical sectors that we had previouslyseen a downturn in. you know, the, one of the onlyremaining areas of contraction in the regional economyis government, both federal and state. federal government onlyplays a very small role in the region's economy, it's afairly small sector, but state

and local government is alarge one and this has been a, a difficult area forour regional economy for some time now with somesizable employment losses. unfortunately 2012 will bea continued year of job loss in state and local government. what, what we find is that staterevenues tend to lag the economy because the revenues coming intothe state this year are based on last year's income. so with the job growththat's happening now,

we do feel confident that thissector will turn around in 2013, but it will remain a drag on the economy'sgrowth in the near term. taxable sales is an area wherewe get, there's a big lay, lag in the data collection, so the state has just onlyrecently published the taxable sales for 2010 and we are... leaving us in a positionto having to, of having to forecast the past.

so our 2011 number is aforecast but the good thing is that while we feltpretty confident last year that sales had returnedto positive levels, now we have confirmationthat in 2010 in fact taxable sales did growafter the tremendous decline in 2009 and our forecast callsfor sales in the, in the range of 4.5% to 5% annuallythrough the forecast horizon and that puts taxable salesgrowing ahead of inflation, so we're getting some gainsin real taxable sales.

so to summarize where wesee the region's economy, 2011 was in fact the start ofthe region's economic recovery, it was the first year of annualjob growth and all county areas within southern californiadid see at least some employmentgains last year. the good news is thatwe expect the region to accelerate prettysignificantly to 1.5% job growth this year and to sustain ahealthy job formation

over the next twoyears accelerating up to 2, almost 2% by 2014. i want to take a quick lookat the individual county areas and first turning to thelos angeles county data and here we find that losangeles county has tracked the region pretty closely,especially last year when the growth rate wasidentical to the regional rate of 0.6% and like the region, wedo have la county accelerating in its growth toabout 1.5% this year.

so it is a positive picturefor la as for the region. in los angeles countyas for the region, i'm going to highlight the fourservice sectors that are going to create almost allof the net job growth in the region this year. so if we look at lacounty, for example, adding about 60,000 jobsto the region's economy, which is about 60% of thetotal because we're going to get a gain of about a 100,000jobs this year just under that.

the bulk of that job creation ishappening in just four sectors and they are all private sectors and they are allservice sectors. health and education,which traditionally grows, as you know, because healthservices is relatively immune to recessions willpost some gains. i have already mentionedprofessional business services, the retail trade sector isgoing to generate a good number of jobs and part of thereason for that is just

that that sector is so largethat any percentage pickup in growth rates translatesto a lot of jobs and then the that leisure and hospitalitysector that i mentioned. so for la county and for theregion it is these four service sectors that are really where,you know, this is the heart of the job growth that's, that's propelling theregion forward this year. taking a look at orange county,orange county is interesting because it has led the regionout of recession and part

of the reason why it'sleading at this point is it, it was a little earlier inthe business cycle overall, so orange county felt thehousing downturn very sharply and began to turn down in two,in 2007 on an annual basis. so orange county wentinto recession earlier, but the good news is it'scoming out a little bit earlier and a little bitstronger and i think one of the things that's notableabout orange county is that orange county is goingto post a gain in employment

of almost 2% thisyear and that's even without any real recovery in orange county'shousing related sectors. so one of the big causes ofdecline in orange county was of course the downturn inhousing, but the associated loss in employment in finance, realestate, and in construction and those sectors reallyhave not recovered yet. they will by 2014and that's part of the reason why the economywill get even yet stronger,

but even, but as of thisyear, even without growth in those areas, orange countyis generating a lot of new jobs and so that's i thinkvery good news and it is those big fourservice sectors that is, is really creating a lot ofthis activity and you can see in orange countythe professional and business services, the samekind of path as the region. so even without thehousing related sectors, we've got a nice recovery goingin orange county and we predict

that orange county will remainthe fastest growing county in the region through 2014. that's a little unusual becauseusually the leader in terms of job creation isriverside-san bernardino, but that area has hadits own set of problems and so we do anticipate thatit will be orange county that is going to be theleader in the region at least in the near term. let me talk a little bit aboutriverside-san bernardino.

as you know, this was one area where the subprime mortgagecrisis hit particularly hard and the economic,the housing downturn, and there was tremendous joblosses in the inland empire and especially in 2009. the good news is that therecovery has been pretty quick in relative terms. so while riverside hasbeen lagging the region, this year it, you know, ithas still lagged, but it,

but it did generatejobs at a pace of 0.3%, the region was a lit, justa littler higher at 0.6. so the gap between the, theinland empire and the rest of the region is closingso much so that by 2014, we actually think that riverside-san bernardinowill be just a little bit behind orange county witha job growth of, of 2.7% versus orangecounty's 3%, but that's a big accelerationeven from where they are now

and then by mid to latedecade, we do anticipate that job growth will, willactually further accelerate in this area and get back into its more normalhistorical pace of 4 to 5%. so we do anticipate that thisarea is coming back strong. it will eventuallylead the region, but not in the forecast horizonthat we have on the slide here, so it will be laterin the decade. riverside-san bernardinois gaining jobs

in those four big servicesectors as is the rest of the region, but there arealso some additional sources of growth, manufacturing,we're starting to see some positivejob growth and one area that historically hasalways been very strong in this area has been wholesale and transportation relatedemployment, and as you can see, after the big downturnin the recession, this job growth iscoming back very strong.

we're looking at abouta 5% gain, for example, in wholesale employment in riverside-sanbernardino this year. so we have in riverside-sanbernardino, the general regionalrecovery, the service sectors, now we've got the trade and transportation relatedemployment coming back. the one area that isgoing to be the last to come back are the housingrelated sectors, and again the,

especially the construction is,is remaining a bit of a drag on this region's economy, butin relative terms it's, it's, it's doing a lot betterthan it has in recent years. ventura county, the smallestcounty area in the region, and this county really followedthe, the regional trends. i think the one differenceis 2012 is going to be a particularlyweak year for ventura. they've got, they'vehad some consolidation and layoffs affecting thehealthcare sector actually in,

in that area that havecaused some job losses and, and also the housingrelated sectors, especially construction,are still remaining, particularly weak in ventura. we do anticipatethat there'll be up to a 1% growth rate,but not until 2013. okay, i want to finishup my comments talking about the housing market, andas you know, this has been so central to understandingwhat's going on not only

in the regional level butalso at the national level and last year weswitched our focus. historically, we'vebeen presenting the data on the median home price andthis last year we switched to using what is known as the case-shillerhousing index, excuse me. this actually is an index thatcombines la and orange county, so we don't, we're notable to break those out. but what we like aboutthis index is it's based

on a repeat sales methodologylooking at identical homes that have sold more thanonce through time and because of that methodology that isa little bit more advanced than the median home price, itgives a much more accurate read on what's really happening tothe value of homes in the area. so what is this tellingus about 2011? well, what it's telling us ispretty much what we expected but we, we hopedwouldn't happen, which is we've beenbumping along the bottom

and 2011 was pretty similar to the two yearsthat came previously. so the housing marketappeared to have bottomed out around 2009, but there'sno recovery either and, and we had hopedthat by this point in the cycle we mightstart to see that recovery, but it did not materializein 2011. i guess the only good news isthat we didn't see any sort of steep decline either,but we're really hoping

to get the kind of recoverystarted up in housing that we're seeing in employment and it just isn'tthere quite yet. and if you look atsome key features of the current housingmarket, you, you definitely get apicture of a market that is not anywherenear normal. sick, might be another way ofdescribing it because so many of the usual indicatorsare so far out of whack.

so, for example, we've gotinvestor sales at almost a third of all sales and goingalong with that a, a very high numberof cash purchases. well what does that imply? it implies that the, thatthe typical home buyer that we always rely onwhich is the household that is buying ahousing unit to live in is still largely notparticipating in this market and that means that themarket just is not anywhere

near normal. and another abnormalindicator is the percent of distress sales. this would be your foreclosuresplus your short sales, the combination of the twoaccounting for about half of all sales and again that'sa very, very high number. it's coming down actuallyfrom recent years, but it's, it's much higher than itwould be in a typical year in the housing market.

so the housing market'sstill got a ways to go to, to normalize. i think the biggest worry wehave about the housing market at this point is the question,is there a second wave of foreclosures on the horizonand we know, for example, that a large number of thehomes that were possessed in recent years are, are homesthat the banks are holding onto for various reasons becauseof investigations that have gone on and also just the, theslow process of pushing these

through the process to get theseforeclosures on the marketplace. so the worry is that we've gotthis backlog of foreclosures if they were to come ontothe market very rapidly and there was no demandto meet the supply, could we see anotherdecline in prices? that's probably thebiggest worry. in february of this year, wehad a major agreement reached between the governmentand the major banks which the so-called robosigning agreement, settlement

and that many and less believehas paved the way for more of these, of this backlogof foreclosed properties to now come into themarket in the near term. as a matter of fact, we'reexpecting that we might start to see signs of that asrecently as april, but, but that has notyet materialized. but on the positiveside, the indicators of the coming foreclosuresso to differentiate between those properties thathave already, that are already

in the pipeline to those whomight be entering the pipeline, this notices of default whichis the first notice given to home owners that arelate on their mortgages, this is down sharply allacross the region and so on the foreclosure side the, the bad news is we still havea backlog of foreclosures. the good news is the backlogisn't going to be piling up at the rate itwas in historically because we are starting tosee these notices declining

and that would indicate that, that the new homes enteringforeclosure are going to be entering at a slower pace. well in trying to understand thehousing market, i tried to think of all of the differentvariables both on the supply and demand side that couldbe influencing housing in the near termand then i tried to assess well arethese variables moving in the right direction, are theymoving in the right direction

in a positive way that's goingto help the housing market or are they moving inthe wrong direction? and the good news is thatfor, for the vast majority of these indicators, the answeris that they're at least moving in the right direction,which gives us some reason to be somewhat optimisticabout this, this market. some of these are thingsi've talked about in the, in the past so i won'telaborate on them, some of them aresome new developments

that are interesting. of course at the top of thelist always has to be job growth and this is, you know, the highend employment rate is a key reason why even though,you know, we've got all theseother pieces in place such as low interest ratesand high affordability, we haven't had recovery in the,in the, in the housing market. well we can definitelysay finally this year that the job pictureis on the right path,

it's moving in theright direction. it's in the initial phases, the job growth last year wasrelatively weak, but we're, we're moving in the rightdirection on, on job growth. interest rates for many yearsnow that's not been an obstacle for housing, interest rates arelow and almost constant, that's, that's positive forthe housing market. as i mentioned, the newforeclosure activity is lessening, so that'sthe good news.

the bad news is and this is theonly real negative that i put on the chart, we do havethis backlog of foreclosures and there's a lot ofuncertainty as to how that could affectthe housing market so i do put some questionmarks there, but certainly that is the one factorthat's clearly negative in the near term forthe housing market. we've talked in, in recentforecasts about affordability, it's at record levelsthat has not changed,

but there are some newdevelopments that are going to play a role i think inthe near term for housing. one of these is risingrents because we're starting to really see some of the rentalmarkets tightening up and as that happens, it'sgoing to push some of would be home buyersoff the fence into buying. a number of newspaper articleshave highlighted using, you know, slightly differentmethodologies sort of a rent to buy analysis for many regionsand cities across the nation

and the analysis is startingto increasingly weigh in many areas toward buyingbeing possibly even more cost effective than renting. so rising rents whileit's bad for the renters, it's good for thehousing market. i'm going to talk aboutcredit conditions which i, i give a positive,a weak positive for because they are notrecovered, but they're moving in the right directionand i'm going

to show you someevidence of that. and then i'm going to finallytalk about household formation and joe touched on thisin his presentation. the trends are again starting tomove in the right direction here and that does indicate somepent up demand for housing, which again will bepositive in the near term. alright, so to look atsome of these later factors that i've talked about, here'ssome data on rental rates and this data is for losangeles county and the,

the different areaswithin los angeles county and what we're seeing isthat rentals generally over the past 12months have risen faster than the rate of inflation. so renting housing isbecoming increasingly expensive in real terms. now what about creditconditions, i mean, if you, if you, if you don't wantto pay that high rent, can you get a loanif you want a house?

and this has been a big concernof course because so much of this recession has hadto do with financial markets and so what i'm going toshow you next is some data that is collected bythe federal reserve and what they do each quarteris they send out a survey to senior loan officersand commercial banks and they ask them abouttheir lending practices, and in particular, thisslide shows their responses when they're asked are youtightening up on credit

or are you loosening up andwhat this graph is going to show is the netpercent that are, are reporting a tighteningof credit standards. so not surprisingly of coursein 2008 you can see that this, this index rose very,very sharply, almost all the banks weretightening up sharply on their lending standards. since then, the, theindex has come down, but what we reallyneed to see is for this

to cross the zero line. at that point, we've got morelending officers reporting that they are looseningstandards than tightening and we are starting to seejust below the zero mark, especially in thelatest quarter. so, i, i, i talk about this asmoving in the right direction, but it is weak evidenceof, of easing and in the non-traditionalmortgages, which were so problematicearlier

in the decade these arenot easing quite as much, but the trend issomewhat similar. well, so credit gettingmaybe a little easier, what about demand for loans? are people coming intothe banks and asking to get loans in the first place? and again, this isthat same survey, senior loan officer survey and what this is showingus is not unexpectedly

in 2007-2008 demandfor loans down sharply. we saw a brief resurgence inthe demand for loans in 2009 when we had the federalhome buyer tax credit that pulled some buyersinto the market place, then it sank belowthe zero line again, but the good news again is in the last few quarterswe're starting to see this above the line. so yes some weak evidenceof some strengthening demand

for loans and some slighteasing, but the trends here look to be moving in theright direction and then this final slideshows the actual loans made, and again, this data comesfrom the federal reserve and it tells us wellwhat was the growth in the real estate loans thatwere actually made in each year, and again, 2011 was a continueddecline in mortgage lending. so the bad news is that as late as 2011 this number wasnegative, but if we look

at the last three months andthe 12-month percent change over those three months, weactually crossed the line into just, just positiveterritory in february and march. so again, this, this is amoving in the right direction, but we're at the very initialstages i think of a recovery in terms of the financialside of the housing market. and then i want to touch onthis issue of, of households and household formationand one of the things that we've observed inthe great recession is

that households have beenbundling up in housing units and we're getting,it's much more common to see multi-generationfamilies, living, sharing, living quarters, andone question is sort of is this the new normal? because if it is of coursethat has implications for the housing market. but my feeling is that thisis driven mainly by financial and economic considerations thatare going to be changing i think

over the near term and ithink we can actually point to some evidence thatthis is already starting. this graph shows the,the rate of household, new household formation and so what this tellsus going back all the way into the mid 1980s is that in anaverage year we get the number of households growingby 1.2% a year. so 1.2% is that redlinethere, which tells us the kind of growth we wouldnormally expect.

and household formation hasalways been somewhat cyclical. so again, you can see back in1990 the drop in the recession, you can see in the early 2000s,there was a, a period of decline in the rate of householdformation. but what's been reallynoticeable about this economy is that ever since really thehousing downturn began, there's been a sharp, sharpdecline in housing formation and it's been persistentfor a number of years now. and so, in a sense, thosehouseholds are missing and to,

and more, more importantly thesehouseholds really represent pent up demand for housing becauseunless you buy the notion that this is the new normalthen what is going to happen as the recovery lengthens and weget more and more job growth is that more of these householdsare going to un-bundle and so, you know, the, the young adultswho, who graduated college and came home andhave been living with their parents aregoing to go off and get that first apartmentand that's going

to create more demandfor housing. so we do think thatthere is significant pent up demand much more so thanhas occurred in past recessions that could play a major role in the housing marketin the near term. so as i say, growing evidenceof significant pent up demand and i think the first placeyou would look for the impact of that would be inthe rental market. i'm going to go backjust a second to point

out that the last bar thereis 2011 and you can see that with even with themodest recovery in job growth, job formation did rise alittle faster, so we're, i think we're already startingthis process, but again, it's in the very initial phases because we're stillwell below average. but compared to 2010,2011 had more growth in household formation and2011 saw the beginnings of a tightening inthe rental market.

i think these trendsare going to continue. so i think in 2012we're goingto look to see more of this, more unbundling, meaningpretty rapid growth in demand for housing and the firstplace we see it evident is in rental markets. we anticipate rental marketsare going to tighten further. once they do that againpushes households into, makes them more likelyto turn toward buying as an option ratherthan renting.

while we don't think that thatis going to have a major impact on the housing market thisyear because our forecast for 2012 is, is prettymuch flat. we think in 2013 and 2014that that increased demand for housing will start to pushup housing values and i think that we will be able toabsorb even that backlog of foreclosed properties prettyrapidly once we start to see that pickup in demand. part of the reason forclosures have been so damaging

to prices is that there justhasn't been the demand side strength there to pick upthose, those properties, but i think thatis going to change. and so our forecast for thehousing market is 2012 another slow year, but i thinkrecovery is in sight now and we are predicting thatthat will begin in 2013 and will accelerate in 2014. it's going to be veryclosely tied to the job market because as, as, as jobsrecover, this unbundling

of households couldhappen at a faster and faster pace possiblyleading to a sharp increase in the demand for housingand i think our major problem with housing in the second partof this decade is not going to be a lag in housing market, it's going to be again we'regoing to ultimately going to be more concerned withhousing affordability because as joe mentionedthe pace of construction hasnot kept up with this.

so i think for 2013-14,what we're going to see is the last piece of thepuzzle put into place in terms of the region's economicrecovery, the housing marketrecovery, which will mean that we will have a morecomplete economic recovery beginning with 2013. thank you. >> dr. joe magaddino:thank you very much lisa. i'm going to turn my attentionto the long beach economy.

this is work that is doneby myself, but the bulk of the work really isdone by dr. monaco. and moving to the city forecast,we focus on the same kind of data that we look at inthe region, in other words, we measure economicperformance by job growth, but cities are muchsmaller geographical units and the residents don'tnecessarily live, work, and shop in the same area. so sometimes the job growth doesnot necessarily capture the full

well being of a cityand for this reason in this morning's presentationwe're going to take advantage of some recentlyreleased census data to provide not onlya profile of jobs in long beach, butof the residents. and we're going to begin bylooking out on employment, we've already told you that theemployment picture is improving in the national economy. lisa indicated inher presentation

that california is lagging thenation, and frankly, los angeles and long beach arelagging in the state. long beach historicallyhas had higher unemployment than the state andcounty averages and what's most alarming in the recent period is the gapis growing and not much prospect for it contractingover the near term. now typically i don'tpay too much attention to unemployment rates atthe city because of the way

in which they are constructed,but given the proximity of the census data, i thinkit's worth taking away from this particularpresentation that the residents in long beach are not enjoyingthe same kind of improvement that we're seeing at the nationand in the state and i'm going to return to this themetowards the end when i talk about the census data. this gives you a quicksnapshot of what's going on in the long beach economy.

i'm going to remind youof a couple of things. this is establishment data so that means it doesn't includethe self-employed individuals and unlike lisa in the regionaldata where we have access to the first quarter this year, the most recent data i have isthe first quarter of last year and so when i talk about 2011, they're not reallyactuals, it's a forecast. the reality is the number ofestablishments and the number

of employees were relativelyflat from 2010 to 2011. what's interesting is thepayroll is larger and so what that suggests to us in additionto having some minor raises for some people thatsome of the jobs that were part time jobsmigrated over to full time jobs, and as a consequence, weget a higher average wage. the wage is about $52,000on average and that is about the same as whatwe see in la county. in terms of the overallemployment, we peaked in 2005,

as i said, the employmentlevels have been flat the last two years. we're about 13,000 jobsshorter than what we were at the pre-recessionary peak. so you might askwhere the jobs are and this is the same story we'vebeen telling year after year. the, the sectors that drive thiseconomy first off are logistics, okay, and that's mostlythe port of long beach. it also includes the,the long beach airport,

and just as an aside, we'llbe releasing a new report on the economic impactof the airport and its adjacent propertiesprobably in about a month. but surely what happensis the port of long beach is the maindriver not only for the city of long beach, butclearly, for the region, that's an important sector. the next sector that'sreally important is health and health servicesand education.

this is private education,not a very big component, so the real driver is healthcare and long beach has had a longdistinguished career having excellent healthcare. we have memorial hospital. we have some of the peoplefrom st. mary's here. this has always been a communitywhere healthcare matters and we have highlevel of healthcare. in an economics sense,it operates a little bit

like tourism in one way, is thatpeople outside of the area come into long beach for thehealthcare services. so in essence we're exportingthese goods and it adds to the overall economicvitality of the community. government has been astrong employer here, but most of this employment ispublic education, and obviously, that's going to be a net drag onthe economy this year for sure. leisure and hospitalitytourism really matters, it's about 10% of, ofthe employment base

and it generates theovernight visitors alone, generate about $330 milliondirectly spent in the city of long beach, so it clearlyis an important sector. the other thing thatprobably sticks out to you is manufacturing. we've seen a big declinein the percentage of jobs in manufacturing and sincethis is a political season and people are interestedin jobs and interested in manufacturing, i thoughti'd spend a little time trying

to temper some of the discussion to show you what'sactually going on. so this is a graph thattakes the total number of manufacturing jobs anddivides by the total number of jobs in the economyover time. so back in 1950, wheni was a little boy, everyone in three jobswas a manufacturing job. today, that's less than 1 in10, in fact, it's less than 9% of the jobs in the us economyare manufacturing jobs.

and let me submit to you thatduring the decades of the 1950s, 60s, 70s, 80s, andthrough much of the 1990s, we did not lose manufacturingjobs because we were outsourcingto asian nations. the story here is the tremendousgains in productivity. you give workers more capital,they're able to produce more, and as a consequence you needfewer manufacturing workers. last year, we added 207,000jobs in manufacturing. you have to go back to1998 to get another year

where we added manufacturingjobs. the story here isexactly the same as the story in us agriculture. in us agriculture, in 1880 wehad over 85% of the population on the farm, and in less than a100 years that went down to less than 2%, and today, we are thesecond largest nation in terms of the value of agriculturalgoods produced, that's the manufacturing story. there isn't anything innational policy or state policy

that is going to turn around this long termsector nor should there be. okay, let's look at mining,utilities, and construction, lisa already talkedabout construction, so there's not reallymuch to say here. the interesting thing forlong beach is really mining, of course, there's not alot of mines in long beach, but what there is, is gas andpetroleum and as oil prices went up what happened is we saw a, anincrease in the amount of jobs

in that area, and in aminute, i'll show you that those are relatively highpaying jobs not much going on in the utilities sector. government appointment,let me deal first of all with the anomaly. lisa indicated quite properly that at the regional levelwe're losing federal jobs, that's not true in long beach. in long beach, we're gettingan increase in federal jobs

and that's really a function ofthe two transportation centers, the port and the airport, both of those facilitieseither directly or indirectly require morefederal presence in order to effectively do their jobin a secure environment. the state government that'smostly long beach city college, the california stateuniversity at long beach and our assisting headquarters,and you know the story there. with the state budget, weanticipate clear declines

in terms of unemployment. a similar argument is goingto happen with respect to local government, localgovernment is dominated really by long beach unifiedschool district, but both the local government and the educational sectorare going to have a tough time because of the budgetaryenvironment, so this clearly is going to be adrag on the long beach economy. logistics is a brighter spot.

i'm going to spend justa moment, it's not quite as volatile as the graphlooks like when you look at the support for activities. this is the problem werun into when we look at a small geographicalunit like a city because we're measuring jobsin terms of how their payroll. so if i have a payroll officethat dispatches workers to the long beach port,it's located in long beach, those are long beach jobs.

if that payroll office movesto a neighboring jurisdiction, then what happens is we losejobs even though they're still working at the port. so some of the declineyou see from 05 to 06 really didn'tactually occur in terms of overall economic activity,it's just the payroll location. but clearly, when we wentinto recession, we lost jobs and now we're starting to pickup jobs and as again when i get to the slide showingaverage wages,

you'll see that these arerelatively high paying jobs. this graph has an awfullot of information. on the left hand side of thescale, what we're looking at is we're looking at thepercent of loaded cargo that is bound for export and when we start off the periodwe actually have about 40% of the loaded cargo is forexport purposes, but when we had that tremendous growth andthe volume of traffic both at long beach and los angelesmost of that was imports

and it dropped down to below the30% mark for much of the period. now what's happened isthat the terminal operators in the ports have been muchmore interested given the lower levels of inbound traffic tostart facilitating exports and of course there'sa national initiative to facilitate exports,the port of long beach is, has several initiatives one of which is the grainoperation to facilitate that. i wouldn't, i would beremissive if we came away

from this discussionwithout still understanding that over the longer term muchof the traffic still is going to come in is going to be theinbound traffic of, of imports. this gives you an idea of what'shappened at the two ports. they peak in 2006-2007right around 8 million of the loaded containers, wewent through the recession. our forecast now suggeststhat by 2013 we'll be back to the pre-recessionary peak, which is essentiallyvery good news.

so this is the average payroll. i'm not going to go througheach of the sectors for you, but i do want to talk abouta, a couple of the sectors. the first one i'll talkabout is the logistics. it's about 13% of theemployment based in the city and it has a payrollon average of 68,000. the leisure and hospitality youcan see has a relatively low payroll, but almost 80% ofthat employment is in eating and drinking establishmentsand most

of that employmentis part time workers, so that's the consequence aswhy you get such a, a low wage. the manufacturingis relatively high and you can see thepolitical appeal of wanting to have more manufacturingjobs, but over the longer term, i don't think that that'sreally going to happen. what could happen is whatlisa pointed out in terms of professional andbusiness services, these are high paying jobsand we can start to try

to grow these jobs andour economy would do relatively well. and lastly, looking atconstruction, mining, and utilities that is an area that really has thehighest average wage and that's primarily driven by what we technicallycall the mining sector. now, this year we'restarting something new. we have a colleagueover in the college

of business administrationscott flexo, who has done a smallbusiness monitoring project. so the initial sampleis quite small and you can accessthat information. i'm just going to talkabout a couple of things that interested mein the report. first one, he askedabout past hiring and what happened here is thesmall businesses actually were a pretty good barometer in termsof what we saw in the aggregate,

we saw employmentflat, what his response to his survey indicated itwas pretty well balanced, about 15% of thepeople expected increase and 16% expected anincrease, so that sort of coincided withour own result. a little bit more interestingis what's going to happen in the future, the wayyou read this graph is at the 50 mark it's neutral; ifit's below 50, they're negative; if it's above 50,they're positive,

and the question reallydealt with sales and revenue as profits and stuff likethat and you can see no matter which way you cut the data,the small business community at least in his sampleis fairly optimistic and so we're lookingforward to working with scott and find a blend of twodifferent methodologies and seeing if we can getsome better insight in terms of what's going on inthe long beach area. the commercial off,office space,

frankly this style gameis a little bit different than the one i'm usuallyused to presenting. usually what happens isthe long beach airport area because of its proximity to the freeways has thehighest occupancy rate, but what's happened in the lastyear is boeing has consolidated some of its space and about200,000 square feet has become available and that's notquickly able to be absorbed. so the real winner hereis downtown long beach.

they've excellent classa and class b facilities, close to the freeway, and theoccupancy rate looks very high. kraig kojian and histeam at dlba have shared with me an economic profile,i think you have some of that information on the tablethis morning and i encourage you to look at it because itgives us a very nice picture of what's going onin the downtown area. since the downtown hasa relatively high rate of occupancy you're notsurprised given the quality

of the buildings and theamenities of the downtown that the rates arerelatively high. lax and el segundo, they havea vacancy rate of about 25% and that's reallywhat's accounting for the relatively low price. if we look at long beachand compare long beach to the other citiesin the south bay, we're actually doing much betterthan the neighboring cities, although none of thecities are doing as well

as they were doing beforethe recession happened. now this gives you somethingabout information about housing and i'm going to try to gothrough these as quickly as possible because this issimply a depressing slide. so prices are heading downward, but the only good thingi can say is the rate of decrease is decelerating. when we look at housingprices and we look at the different zip codes,you're not surprised to find

out there's a lot of varianceor, or diversity of changes across the city of long beach. i'm going to just talk abouttwo, 90802 is the downtown, and while they didn't havea lot of houses that sold, you actually see thatthe housing prices were up by almost 30% where webuilt all those condos, those condos areselling and the rate of price decrease is actuallyquite small in comparison to what it was inthe prior year.

the other zip codei'll look at is 90814 which is belmont heightsand rose park area. you can see that both interms of housing and in terms of condos reallysignificant declines and i'll show you what'sgoing on there if we look at the forecast, excuseme, the foreclosure map. march of 2011, if you lookat the, the 90814 zip, you can see that it's in thedarker red color indicating that there's a lot offoreclosures, those banks want

to get rid of their propertiesso they cut the prices and that's really what wasgenerating the price decreases that what we saw inthe previous slide. if you look at this march, you can see that the belmontheights rose park area is a little bit better, not alot of foreclosures, but a, a disappointing news isthat the belmont shore, which was not much of aproblem last year seems to have a problem this year.

again the problemthat lisa mentioned with the foreclosures iswe're looking at backwards. if we look at the defaults,we're trying to move out of this one, so weget rid of this inventory, we'll be in a positionto move forward. so let's talk about the census. i believe i gave thisinformation last year, the surprise wasthat the population in long beach was relativelyflat from 20, from 2000 to 2010,

but 1990 to 2000, we pickedup about 30,000 new residents because we're flat,that means other areas within los angeles countyare growing so our share of the population isactually down somewhat. the median income numberis better than 2000, again this is adjusted forinflation so it's real, but the median income is stillbelow what it was in 1990. now realize thoseof you who have been in long beach a long time,

1990 was an entirelydifferent economy. we had the shipyards, wehad the naval hospital, we had a larger presence offederal government employees. mcdonnell douglas hada much larger payroll than does boeing today, so it'sa, a different environment, and in fact, this date it wouldbe very similar if i looked at la county in 1990and looked at 2010. this particular maptries to give you an idea where the population'sgrowing, the darker areas means

that we're losingpopulation, the areas that are, are more green indicates thatwe're picking up population and it tells you what youalready know is we built all those condominiums downtown andpeople moved to the downtown and that's where thepopulation primarily went up. we're using the traffic analysiszones for some technical reasons as opposed to thecensus track information. in terms of the trendsin race and ethnicity, there really wasn't much newin the census, the same trends

that we saw in theearlier release of 2000 are carrying forward. the hispanic population tends to be the dominant ethnicpopulation in the city of long beach as it isthroughout much of the region in southern california. in terms of the black and,and asian populations, their share is aboutwhat it was in 1990, but the trend issomewhat different.

the asian populationhas picked up some and the black populationhas dropped. this particular slide givesyou some information in terms of where are people living basedon different ethnicities or race and this particularone looks at latinos and the darker colors mean thatthey're more concentrated there, the lighter colorsthe less concentrated. and so we find out that thelatino population has to be in north long beach and onthe west part of long beach.

if we look at theblack population, the black populationhistorically has been in the north section of longbeach, but in the 2010 census, it's a lot more dispersed thanit was in 2000, so that's what that looks like, and lastly, the asian population mostlyconcentrated on the west side and along the alameda[inaudible] headquarter going through central long beach. this is some disappointing news.

we have about 24% of thehouseholds within the city of long beach that hadincome below 25,000, so this really is the sortof the issue of poverty and closely related to thatissue is educational attainment. and so we, we've done a betterjob with educational attainment in the last 10 years than wedid in the prior 10 years. so if we look at one end ofthe tail of the distribution, we have fewer people thatdon't have high school degrees in our economy andthat's a good trend.

we need to raiseeducational attainment and of course this is goingto be a real challenge because we're trying to raisethe educational attainment, at the same time thatwe're cutting public education funding. the other thing i would have youlook at is the, the other tail of the distribution, bachelordegrees and graduate degrees. 27% of our residents haveeither a bachelor degree or an advanced degreeand these are the people

who have the most value addedin an information based economy and these are thepeople that we have to increase theirpercentage if we're going to actually grow the economy and when president alexandercame here, he indicated one of the things that we needto do in this city is we need to capture more of those 9000graduates that are going to walk across the stage in may, weneed to make sure that they stay in long beach as residentsand workers if we're going

to build this economy forward. so just to reallyquickly summarize, we're expecting only modestgrowth this year in the city of long beach around 800 jobs. the primary engines ofgrowth remain the same as what we've always saidthey were is transportation, healthcare, and tourism. government is clearlygoing to be a drag on the overall performanceto the economy and my look

of the census is there reallywasn't very many surprises other than the fact that thepopulation remained relatively flat. i want to acknowledgethe work of jacky mills in our geography department thathelped us with the maps as well as scott flexo in thecollege of business who has undertakenthe business monitor. and with that i thankyou for your support. i gave you a lot of information.

we'll give a couple ofminutes for questions. if you have any questions,we'll be glad to answer them. i want lisa back on the stage because all the difficultquestions are directed to her. >> dr. lisa grobar: well i,i think you're exactly right. definitely we'reseeing the large sort of institutionalinvestors coming into the real estatemarket and our prediction is for further tighteningin rental rates.

so i think a, a bigger issuelater in this decade is going to be how do we maintainaffordability because i think that although the homeownership rate is going to recover a littlebit, it's not going to quite reach the levels thatit did before the recession. i think the other thingthat's not going to go back to the pattern beforethe recession is lending. i think it's going to be,it's going to ease further, but it's never going tobecome as loose in terms

of the lending standardsand so you're going to have a permanentlylower home ownership rate, which means you're goingto have a, a larger segment of the populationin rental units and so i do thinkyou're exactly right. i think that we'regoing to see this as a greater publicpolicy issue in terms of how that's goingto be managed. [ inaudible ]

>> dr. lisa grobar:well, i mean the, the baseline forecast doesinclude some assumptions with regard to taxesat the national level. >> dr. joe magaddino: at thenational level, you know, the, the assumption is that the lameduck congress will do the really courageous thing and temporarilyextend the bush tax cuts and everything else until thenew administration takes office. but eventually, we don't believe that the funds willbe sequestered.

there will be somereductions in terms of the entitlement programsas well as some tax increases. so, but we didn't doany particular modeling at the state level. anyone else? >> which is the numberone agricultural country if we are not? >> dr. joe magaddino: the numberone agricultural country is china, but not by a whole lot.

remember that's a large countrywith a large number of people to feed, so they're nota tremendously well known exporting country becausethey're feeding their own people, but in terms ofthe overall added value of agricultural goods, chinais actually number one. >> dr. joe magaddino:well actually the, the fact that we have alarge amount of baby boomers in our economy, we actuallycompare more favorably to other developed nations.

so part of the reason whywe think the us is going to grow faster than europe even without the sovereign debtcrisis and faster than japan is that in some sense wehave a younger population, so that over the near term thatshould work to the advantage. although i'm reminded of,of the cartoon i saw earlier in the week where the, thephysician tells the person that the life expectancy hasgone up and this is nature's way of helping you payoff your student loan.

>> dr. lisa grobar: oh, i thinkyou're looking at the, the, the graph of the fed dataon the real estate lending. >> dr. lisa grobar: yeah. that's just actuallyhistorical data that is provided by the fed. so we're just looking atthe year over year change in the volume of, of lending as,as the banks are reporting it to the fed, so thisis commercial banks. >> dr. lisa grobar: nothat's not a forecast,

that's, that's historical. yeah. so all of thatdata you can find on the, on the federal reservewebsite and they monitor all of these things very closely. >> dr. joe magaddino: okay i take this lastquestion over here. >> dr. joe magaddino:well, it's, the, the question is can we spendour way to economic prosperity? and the comparison is witheurope because the problem

in europe is in joiningthe european union, the countries gaveup any ability to have a monetary policy andso if you had a monetary policy and say you're greece,one of the ways of, of solving this problem isyou simply would devalue your currency and you'lltry to inflate your way out of the problem and sokrugman in my opinion is arguing that in the short term he'swilling to pay the price of having more inflationin the economy

to get the economymoving forward faster. i don't agree with thatparticular prescription. >> dr. lisa grobar: buti would, i would add. >> dr. joe magaddino: so thisis an, this is the example of the economist disagreeing. >> dr. lisa grobar: right. this is something that we'reactually actively debating in the, in our departmentbecause definitely there are, there're different views here

and you know here you havebernanke who's an esteemed scholar and krugmanwith a nobel prize, but they can't quite agree. i mean i would argue thatlooking in retrospect the, the obama stimuluscould have been bigger. but the problem is can youreally fix that now given that these things take, takesome time to affect the economy and the economy isalready on a recovery path. you know there's, there'sdiffering views on this

and also certainly differingviews on how, how much risk of inflation you think thatthe economy should be taking, how do you weigh theproblems of unemployment and inflation and all of that. so this is, this is definitelyan area of raging debate within the, withinthe discipline of economics for sure. >> dr. joe magaddino:i thank you very much for your attention.

we're going to stayaround a little bit to handle any otherquestions, and again, i appreciate your support.