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TRI-COUNTY ECONOMIC FORECAST CONFERENCE
California Economic Outlook
Nancy D. Sidhu, Ph.D. VP & Senior Economist
January 11, 2007
THEMES FOR 2007THEMES FOR 2007
Slower economic growthSlower economic growth
Housing activity declinesHousing activity declines
Still Strength elsewhereStill Strength elsewhere
33
U.S. ECONOMIC GROWTHU.S. ECONOMIC GROWTH
3.7
4.5
0.9
2.6
4.2
2.5
3.6
4.5
1.5
3.7
4.4
3.3
0.0
1.0
2.0
3.0
4.0
5.0
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06e '07f
% Change in Real GDP, Year-Over-Year
Sources: BEA, estimate & forecasts by LAEDC
44
GDP COMPARISONSGDP COMPARISONS
4.53.7 3.6
6.3
7.9 7.6
5.2
2.6
4.4 4.2
1.50.9
-0.4
4.3
3.2
1.3
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
'98 '99 '00 '01 '02 '03 '04 '05
U.S.
California
% Change in Real GDP, Year-Over-Year
Source: BEA
CONSUMER INFLATION RATECONSUMER INFLATION RATE
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
'96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06YTD
San Francisco CMSALos Angeles CMSAU.S.
Year/Year % Change
Source: Bureau of Labor Statistics
SPOT ENERGY PRICESSPOT ENERGY PRICES
0
2
4
6
8
10
12
14
16Ja
n-9
8
Jul-
98
Jan
-99
Jul-
99
Jan
-00
Jul-
00
Jan
-01
Jul-
01
Jan
-02
Jul-
02
Jan
-03
Jul-
03
Jan
-04
Jul-
04
Jan
-05
Jul-
05
Jan
-06
Jul-
06
0
10
20
30
40
50
60
70
80West TX Intermediate -->
<-- Natural Gas (Henry Hub)
$/Mcf $/Barrel
Sources: EIA, Natural Gas Weekly
CALIFORNIA WHOLESALE ELECTICITY PRICE
0
50
100
150
200
250
300
350
Jul-00 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06
CA-OR Border
Source: Wall Street Journal
Average $ per Megawatt-Hour
Dec 2000$410
PRICE/COST PRESSURESPRICE/COST PRESSURES
-10
0
10
20
30
40
50
60
70
Lumber Energy FarmPrices
Textiles &Fibers
Metals
2003
2004
2005
2006 YTD
% Change vs. Previous December
Sources: BLS, USDA, Bridge/Commodity Research Bureau
LABOR COMPENSATION -- WESTLABOR COMPENSATION -- WEST
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
90:1 91:3 93:1 94:3 96:1 97:3 99:1 00:3 02:1 03:3 05:1 06:3Year: Quarter
Year/Year % Change
Source: BLS
UNEMPLOYMENT HAS COME DOWNUNEMPLOYMENT HAS COME DOWN
3
4
5
6
7
8
9
10
Jan
-90
Jan
-91
Jan
-92
Jan
-93
Jan
-94
Jan
-95
Jan
-96
Jan
-97
Jan
-98
Jan
-99
Jan
-00
Jan
-01
Jan
-02
Jan
-03
Jan
-04
Jan
-05
Jan
-06
U.S.
CA
Source: BLS, CA EDD
% (SA)
Latest4.5%
4.6%
AFTER-TAX CORPORATE PROFITSAFTER-TAX CORPORATE PROFITS
-20-15-10-505
10152025303540
88:1 90:1 92:1 94:1 96:1 98:1 00:1 02:1 04:1 06:1
Unadjusted, Yr/Yr % Change
Latest QuarterPlotted: 3Q 2006
Year: Quarter
Source: Bureau of Economic Analysis
U.S. EQUITY PRICES
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
1,500
96:12 97:12 98:12 99:12 00:12 01:12 02:12 03:12 04:12 05:12 06:12Year: Month
S& P Index
1,000
1,400
1,800
2,200
2,600
3,000
3,400
3,800
4,200
4,600
5,000NASDAQ Index
S&P 500
NASDAQ Composite
BUSINESS SPENDING -- EQUIPMENTBUSINESS SPENDING -- EQUIPMENT
0
40
80
120
160
200
94:1 95:1 96:1 97:1 98:1 99:1 00:1 01:1 02:1 03:1 04:1 05:1 06:1Year: Quarter
0
100
200
300
400
500
600
Information Processing [--->]Transportation [<---]Industrial [<---]Other [<---]
Billions of $ 2000
Source: Bureau of Economic Analysis
Sources: BLS, CA EDD
NONFARM EMPLOYMENT GROWTH
-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.04.5
90:1 91:3 93:1 94:3 96:1 97:3 99:1 00:3 02:1 03:3 05:1 06:3Year: Quarter
-2.0-1.5-1.0-0.50.00.51.01.52.02.53.03.54.04.5
Rest of U.S.
California
Latest MonthPlotted: Nov 2006
Year/Year % Change
108,30023,800
0
-10,200
-1,100
-200
2,000
33,600
38,600Government
Business Services
Health Services
Other Manufs.
Leisure & Hospitality
Motion Picture/TV
Aerospace/Defense
Hi-Tech
Construction
Source: California Employment Development Dept.
CHANGE IN NONFARM EMPLOYMENT -- CHANGE IN NONFARM EMPLOYMENT -- MAJOR INDUSTRIES IN CALIFORNIAMAJOR INDUSTRIES IN CALIFORNIA
(Nov ‘06 / Nov ‘05)(Nov ‘06 / Nov ‘05)0
1616
REGIONAL GROWTH PATTERNREGIONAL GROWTH PATTERN
-8
-6
-4
-2
0
2
4
6
8
94:1 95:1 96:1 97:1 98:1 99:1 00:1 01:1 02:1 03:1 04:1 05:1 06:1Year: Quarter
Los Angeles
Central Valley
Southern CA Outside L.A.
Bay Area
Year/Year % Change (Smoothed)
Source: CA Employment Development Dept.
Latest month: November 2006
PERSONAL INCOME GROWTH
0%
2%
4%
6%
8%
10%
12%
1990 1992 1994 1996 1998 2000 2002 2004 2006f
Y/Y % Chg
United States
California
TAXABLE SALES BY REGION
-15%
-10%
-5%
0%
5%
10%
15%
20%
92:1 93:2 94:3 95:4 97:1 98:2 99:3 00:4 02:1 03:2 04:3 05:4Year: Quarter
California
Southern California
Bay Area
Year/Year % Change
Source: CA BOE
CALIFORNIA VEHICLE REGISTRATIONSCALIFORNIA VEHICLE REGISTRATIONS
0200400600800
1,0001,2001,4001,6001,8002,000
66 69 72 75 78 81 84 87 90 93 96 99 02 05
000s of Passenger-type Vehicles
Source: CA DOF
CALIFORNIA HOUSING MARKET
0
100
200
300
400
500
600
700
90:1 91:3 93:1 94:3 96:1 97:3 99:1 00:3 02:1 03:3 05:1 06:3Year: Quarter
0
40
80
120
160
200
240
280New Home Permits [--->]
Existing Home Resales [<---]
000s of Units, Annual Rate
Latest MonthPlotted: Nov 2006
Sources: U.S. Census Bureau, California Association of Realtors
000s of Units, Last 12 Mos
MEDIAN HOME PRICE IN MEDIAN HOME PRICE IN CALIFORNIACALIFORNIA
$150
$200
$250
$300
$350
$400
$450
$500
$550
$600
Jan-
98M
ay-9
8S
ep-9
8Ja
n-99
May
-99
Sep
-99
Jan-
00M
ay-0
0S
ep-0
0Ja
n-01
May
-01
Sep
-01
Jan-
02M
ay-0
2S
ep-0
2Ja
n-03
May
-03
Sep
-03
Jan-
04M
ay-0
4S
ep-0
4Ja
n-05
May
-05
Sep
-05
Jan-
06M
ay-0
6S
ep-0
6
$ Thousands Nov ‘06$555,290
Source: California Association of REALTORS®
CALIFORNIA NONRESIDENTIAL CALIFORNIA NONRESIDENTIAL BUILDING PERMITSBUILDING PERMITS
0
5
10
15
20
25
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06f
Additions/Alterations
New Buildings
Billions of $ 2006
Source: Construction Industry Research Board
PUBLIC CONSTRUCTIONPUBLIC CONSTRUCTION
0
2
4
6
8
1012
14
16
18
20
22
1994 1996 1998 2000 2002 2004 2006f
Government Buildings
Heavy Construction
Billions of $2005
Source: Construction Industry Research Board
AGRICULTURE: BETTER(Gross Cash Income in CA)
27.6 27.8 28.6 28.8 30.0 31.7
26.023.9
25.727.7
31.7
0
5
10
15
20
25
30
35
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Billions of $
Sources: CA Dept. of Agriculture
DoD PRIME CONTRACT AWARDSDoD PRIME CONTRACT AWARDS
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1997 1998 1999 2000 2001 2002 2003 2004 2005
L.A. 5-Co.
San Diego Co.
Bay Area 9-Co.
$ Billions
BOEING COMMERCIAL AIRCRAFT
0
200
400
600
800
1000
1200
1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Deliveries
Orders
Number of Commercial Aircraft
(Fcst)Sources: Boeing, LAEDC
2727
LOCATION PRODUCTION DAYSLOCATION PRODUCTION DAYS
0
10,000
20,000
30,000
40,000
50,000
60,000
'94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '05YTD
'06YTD
26,698
33,982
43,982
47,66945,653 46,410 46,808
43,976 44,442 44,231
52,707
All Others
Features
Source: FilmLA Inc.
54,904
42,198 41,619
TECHNOLOGY JOB TRENDS TECHNOLOGY JOB TRENDS IN CALIFORNIAIN CALIFORNIA
0
100
200
300
400
500
600
700
800
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06YTD
InternetComputer Systems DesignComputer & Electronic Prod Mfg.
Thousands of Jobs
Source: California Employment Development Department
CA EXPORTS BY INDUSTRYCA EXPORTS BY INDUSTRY
-10
0
10
20
30
40
High Tech Transp'nEquip
Agribus'n Textiles/Apparel
OtherManuf'rs
2003200420052006 YTD
Year/Year % Change
Source: MISER
TOTAL CARGO HANDLED TOTAL CARGO HANDLED AT LA/LB PORTSAT LA/LB PORTS
0
200
400
600
800
1,000
1,200
1,400
Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06
TEU in Thousands
Sources: Ports of Los Angeles & Long Beach
Latest month plotted: November 2006
TOTAL CARGO HANDLED TOTAL CARGO HANDLED AT PORT OF OAKLANDAT PORT OF OAKLAND
0
25
50
75
100
125
150
175
200
225
250
Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06
TEUs (000)
Source: Port of Oakland
Latest month plotted: November 2006
HOTEL OCCUPANCY RATESHOTEL OCCUPANCY RATES
40
50
60
70
80
90
100
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06
Los Angeles San FranciscoSan Diego
Source: PKF Consulting
Occupancy rates (%)
HOTEL AVERAGE DAILY ROOM RATESHOTEL AVERAGE DAILY ROOM RATES
$90$100$110$120$130$140$150$160$170$180$190$200
Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06
Los Angeles Co. San Diego Co.
San Francisco Area
Source: PKF Consulting
$
CALIFORNIA TAX REVENUESCALIFORNIA TAX REVENUES
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%A
ug-0
1O
ct-0
1D
ec-0
1Fe
b-02
Apr
-02
Jun-
02A
ug-0
2O
ct-0
2D
ec-0
2Fe
b-03
Apr
-03
Jun-
03A
ug-0
3O
ct-0
3D
ec-0
3Fe
b-04
Apr
-04
Jun-
04A
ug-0
4O
ct-0
4D
ec-0
4Fe
b-05
Apr
-05
Jun-
05A
ug-0
5O
ct-0
5D
ec-0
5Fe
b-06
Apr
-06
Jun-
06A
ug-0
6O
ct-0
6
Month: Year
Total
Personal Income
Sales & Use
Year/Year % Change
Source: CA Department of Finance
CALIFORNIACALIFORNIAECONOMIC FORECASTECONOMIC FORECAST
2004 2005 2006e 2007f
Nonfarm Jobs 1.0 1.4 1.5 0.9
Unemployment Rate 6.2 5.4 4.9 5.2
Total Personal Income 6.0 5.0 6.1 6.2
Taxable Retail Sales 9.4 7.5 6.0 5.9
Housing Unit Permits 212,960 208,972 164,900 157,000
Annual % change except housing permits, which are in units.
Forecast Source: LAEDC
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