12.05.2019 los angeleseconomy.scag.ca.gov/economy site document library...staff reporter, los...

12.05.2019 Thursday

LOS ANGELESCALIFORNIA

#SoCalEconomy@SCAGmpo@SCAGnews

NETWORK: SCAGPASSWORD: scag2019

The first Southern California Economic Summit was held in 2010, bringing partners and stakeholders together from throughout the region to discuss ways in which Southern California could work together to recover the over 1 million jobs lost in the Great Recession. Since then, this event has evolved into one of the region’s and state’s premier economic conferences, with increasingly complex and focused analyses and discussions on the state of the Southern California economy and the myriad of factors that have shaped the region in the post-Great Recession era. One of the core elements of the program is the annual SCAG Region Economic Update, which provides a unique overview and forecast for the entire six-county region. Notable products and events that have been developed directly or indirectly from the Southern California Economic Summit in the past decade include:

z Southern California Economic Recovery & Job Creation Strategy (2011) z Economic & Job Creation Analysis of the 2012-2035 Regional Transportation Plan/Sustainable

Communities Strategy (2012) z Analysis on the Economic Benefits from Accelerating Transportation

Infrastructure Investment (2012) z Analysis on the Economic Impact of the California Film and Television Tax

Credit Program (2014) z Fifty Years into the War on Poverty Summit (2014) z Regional Action Plan on Poverty (2014) z California Housing Summit (2017)

The program this year will dig into the major economic levers of the Connect SoCal plan, SCAG’s 2020 Regional Transportation Plan/Sustainable Communities Strategy. From generating new jobs to creating efficiency gains for commuters, shipping, and travel, realizing the goal of a strong regional transportation system has economic benefits for all of the region’s 19 million residents. The program will also address the question of how our region is going to tackle the growing challenge of housing affordability. Leading voices in business, industry, planning, and academia will be present to assess the status of the region’s economy and define strategies for keeping Southern California an economic powerhouse.

ABOUT THE SOUTHERN CALIFORNIA ECONOMIC SUMMIT

12.05.2019 The L.A. Grand Hotel Downtown

8:00 a.m. REGISTRATION & NETWORKING

9:00 a.m. WELCOME & OPENING REMARKSHon. Bill JahnSCAG President, City of Big Bear Lake

Hon. Toni G. AtkinsPresident pro Tempore, California State Senate

9:30 a.m. SCAG REGION ECONOMIC UPDATESCAG’s team of economists will provide an insightful look at the state of the region’s economy and the key issues that are affecting the region the most, as well as highlight opportunities for growth and updates on the region’s most important industry clusters.

Presenter: Wallace Walrod, Ph.D.Chief Economic Advisor, Orange County Business Council

Michael BrackenPrincipal, Development Management Group, Inc.

Matthew Fienup, Ph.D.Executive Director, Center for Economic Research & Forecasting, California Lutheran University

Eric HayesAssociate Economist, Institute for Applied Economics, Los Angeles County Economic Development Corporation

John Husing, Ph.D.Vice President, Economics & Politics, Inc.

10:00 a.m. FOCUS ON THE FUTURE: BUILDING A BETTER SOUTHERN CALIFORNIAKome AjiseExecutive Director, SCAG

10:15 a.m. TACKLING SOUTHERN CALIFORNIA’S HOUSING CRISISAlthough the Great Recession is in our rear view mirror, Southern California is still facing some daunting challenges to sustainable, long-term growth. The lack of affordable housing throughout our region is a critical challenge to local, regional and statewide economies. The Governor and Legislature have signaled a strong intent to address the housing crisis head on, but what can our elected leaders, local governments and developers do to get more shovels in the ground to produce more housing? This panel will discuss the importance of meeting our region’s housing needs and how an adequate housing supply will boost our economy.

Moderator: Liam DillonStaff Reporter, Los Angeles Times

Daryl Fairweather, Ph.D.Chief Economist, Redfin

Jennifer HernandezPartner, Holland & Knight

Scott LauriePresident & CEO, The Olson Company

Hon. Miguel SantiagoAssemblymember, 53rd District, California State Assembly

11:30 a.m. LUNCH

A . M . AG E N DA

AGENDA CONTINUES ON NEXT PAGE →

12.05.2019 The L.A. Grand Hotel DowntownA . M . AG E N DA

12:00 p.m. SUMMIT KEYNOTEF. Noel PerryFounder, Next 10

12:30 p.m. STRENGTHENING THE REGION THROUGH CONNECT SOCALThe Connect SoCal plan features projects and strategies with major economic benefits – generating hundreds of thousands of new jobs through construction and maintenance, reducing congestion and creating efficiency gains across the regional transportation network – but also identifies challenges on the horizon. With ambitious greenhouse gas reduction goals to meet, and transportation-related emissions actually trending upward, the need for bold solutions is stronger than ever. This panel will investigate the economic benefits of a strong regional transportation system, examine the role of new technologies and the changing nature of work, and outline ways for Southern California to maintain its status as the 15th largest economy in the world.

Moderator: Marlon Boarnet, Ph.D.Professor, Sol Price School of Public Policy, University of Southern California

Tiffany ChuChief Operating Officer and Co-Founder, Remix

Judy KrugerSenior Director, Strategic Initiatives & Industry Cluster Development, Los Angeles County Economic Development Corporation

Micah WeinbergChief Executive Officer, California Forward

Stephanie WigginsChief Executive Officer, Metrolink

1:45 p.m. WRAP-UP & CLOSING REMARKSKome AjiseExecutive Director, SCAG

2:00 p.m. ADJOURN

P. M . AG E N DA← AGENDA BEGINS ON PREVIOUS PAGE

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Southern California Association of Governments

AN ECONOMIC & JOB CREATION ENGINE

The enactment of SB 375 in 2009 introduced a requirement to reduce greenhouse gas (GHG) emissions, essentially codifying the integrated transportation and land use planning that our region had already initiated with the 2008 Regional Transportation Plan. Through our continuing efforts to better align transportation investments and land use decisions, we strive to improve mobility and reduce GHGs not just by building new infrastructure, but also by bringing housing closer to jobs, shortening commutes and making it easier to get around without a car. Guided by the leadership of the Regional Council, SCAG adopted the region’s first Regional Transportation Plan/Sustainable Communities Strategy (RTP/SCS) in 2012. We now refer to the RTP/SCS as Connect SoCal because it charts a path toward a more mobile, sustainable and prosperous region by making connections between transportation networks, between planning strategies and between the people whose collaboration can improve the quality of life for Southern Californians.

Connect SoCal was developed through a four-year planning process involving rigorous technical analysis, extensive stakeholder engagement and robust policy discussions with local elected leaders, who make up SCAG’s policy committees and Regional Council. SCAG’s leadership explored the challenges and barriers to the transformative change our region needs to address demographic and economic shifts, including an increasingly aging and economically inequitable society. Our analysis considered both the physical constraints and economic barriers of continuing to grow rapidly on the fringes of the region. Our policy committees reviewed and discussed emerging technologies and transportation innovations aimed at relieving congestion, while reducing emissions.

Through this extensive planning process, we discovered not just one technological advancement or signature transportation project to advance our goals and vision, but many. Reflecting the size and diversity of our region, Connect SoCal continues to aim toward transformative change by providing a clear vision for collective action. Our critical mission is to complete the core vision of our decades-long planning efforts and continue to build on past plans and successes. We must enhance and build out the transit network as the backbone of a mobility system that allows people to move freely without the expense of a car. We have to create complete streets across our communities such that people are prioritized over vehicles. And we must maintain the system we have and expand where necessary to ensure useful life and efficiency. We will adopt policies to encourage emerging technologies and mobility innovations that support rather than hamper regional goals. We will locate housing, jobs and transit closer together in priority growth areas while preserving natural lands and open spaces.

Altogether, the multimodal transportation projects and strategies proposed in Connect SoCal represent an investment of over $638 billion over the next 25 years. In addition to meeting our GHG reduction target, Connect SoCal will deliver significant benefits to the region with respect to mobility, safety, health outcomes, travel time reliability, air quality, economic productivity, environmental justice, and transportation asset condition. Technology will be integral to the solutions we need. The way we work, shop and travel has been transformed by a device that fits in our pockets. These innovations point to the tremendous opportunity to shift travel behaviors through small changes: the potential to unlock the promise of our big sustainability vision with insightful investments in access, connectivity and technology.

As the largest metropolitan planning organization in the country, SCAG has worked collaboratively with transportation agencies across Southern California for the last fifty years to align and better connect transportation investments across the six-county region through the adoption of Regional Transportation Plans.

10th Annual Southern California Economic Summit

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Rooted in past Regional Transportation Plan/Sustainable Communities Strategy plans, Connect SoCal’s “Core Vision” centers on maintaining and better managing the transportation network we have for moving people and goods, while expanding mobility choices by locating housing, jobs and transit closer together and increasing investment in transit and complete streets. Highlights of SCAG’s Core Vision include:

Connect SoCal’s “Key Connections” augment the Core Vision of the plan to address trends and emerging challenges while “closing the gap” between what can be accomplished through intensification of core planning strategies alone and what must be done to meet increasingly aggressive GHG reduction goals. These Key Connections lie at the intersection of land-use, transportation and innovation, aiming to coalesce policy discussions and advance promising strategies for leveraging new technologies and partnerships to accelerate progress on regional planning goals. The Key Connections include:

COMPLETE STREETS

TRANSIT BACKBONE

SYSTEM PRESERVATION & RESILIENCE

DEMAND & SYSTEM MANAGEMENT

SUSTAINABLE DEVELOPMENT

GOODS MOVEMENT

SMART CITIES & JOB CENTERS

ACCELERATED ELECTRIFICATION

SHARED MOBILITY & MOBILITY AS A SERVICE

HOUSING SUPPORTIVE INFRASTRUCTURE

GO ZONES

KEY CONNECTIONS

CORE VISION

7


ECONOMIC & JOB CREATION ANALYSISSo what will result from the plan? Connect SoCal, which will invest more than $638 billion into the region’s transportation infrastructure, will generate substantial benefits for the SCAG region, contributing meaningfully toward achievement of our regional goals for sustainability, transportation equity, improved public health and safety, and enhancement of overall quality of life in Southern California.

It is becoming increasingly clear that transportation investments—particularly programs as ambitious as the SCAG region’s—contribute importantly to economic growth. The economic impact of transportation infrastructure spending can be broadly divided into two parts:

z Construction, Maintenance and Operations: The direct spending in Connect SoCal will provide jobs for people in highway and rail construction, transportation and transit operations, and maintenance.

z Network Efficiency and Enhanced Economic Competitiveness: Connect SoCal will make the SCAG region a more attractive place to do business, by reducing congestion, allowing firms and employees to more seamlessly interact, and improving air quality while improving the quality of life.

Transportation expenditures throughout the planning horizon are provided by each of the county transportation commissions and the network efficiency is estimated by SCAG’s transportation demand model. SCAG’s economic team used the input data and TranSight, software from Regional Economic Models, Inc. (REMI) used to estimate the economic impact of Connect SoCal. TranSight models the direct, indirect and induced effects of the transportation expenditure of Connect SoCal by combining input-output approaches with demographic and economic migration.

CONSTRUCTION, MAINTENANCE AND OPERATIONSConnect SoCal will employ people to build, operate and maintain transportation projects as a result of the regional infrastructure investment outlined in the Connect SoCal Financial Plan. Those jobs are called the direct effect, which entails jobs in entities that construct and operate rail lines or build and maintain highways. These direct effect jobs, however, ripple through the economy and create additional jobs in two ways.

z Indirect Effects, which are the jobs in companies that supply inputs (both goods and services) for the direct jobs created by Connect SoCal spending. The firms and agencies that build and maintain the transportation system with Connect SoCal funding buy materials, office supplies and business services.

z Induced Effect, which is the impact that employees who build, operate and maintain projects in Connect SoCal will have on the economy since their wage income allows them to buy goods and services associated with daily living such as housing, food, clothing and entertainment.

A mix of transportation projects are planned in each of the six counties over the twenty-five year span of the plan. Of the total Connect SoCal expenditures exceeding $638 billion, more than 60% will be spent on projects in Los Angeles County. Over the twenty-five year period, the plan will generate an annual average of 167,100 jobs in the SCAG region. More than 45% of these will fall in Los Angeles County, with 21% in Orange County, 19% in Riverside County, 11% in San Bernardino County, 3% in Ventura County and a quarter-percent in Imperial County.


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COUNTY DESCRIPTION COMPLETION YEAR

Imperial Widening and Interchange Improvements – SR-111 from SR-98 to I-8 2030Imperial Road Widening – Forrester Rd. from I-8 To SR-78 2030Imperial Expressway – SR-115 from I-8/SR-7 Interchange to Evan Hewes/SR-115 Junction 2035Imperial Expansion of the Calexico East Port of Entry 2025Imperial Interchange Reconstruction – I-8 at Imperial Avenue 2026Imperial Interchange Improvements – I-8/SR-186 2024Imperial Widening – SR-98 From SR-7 To SR-111 2025Los Angeles Transit Corridor – Sepulveda Pass 2033Los Angeles Highway Improvements – I-710 South from Ocean Blvd. to Intermodal Railroad Yards 2040Los Angeles Light Rail Extension – Metro Gold Line Eastside to South El Monte 2035Los Angeles Subway Extension – Metro Westside from Century City to Westwood 2027Los Angeles Subway Extension – Metro Purple Line from Wilshire/Western to La Cienega Blvd. 2023Los Angeles Subway Extension – Metro Purple Line from La Cienega Blvd. to Century City 2026Los Angeles Transit Corridor and Light Rail Extension – Crenshaw/LAX 2020Orange Regional Capacity Program – Master Plan of Arterial Highways 2041Orange Mixed-Flow and HOT Lane Additions – I-405 from SR-73 to I-605 2026Orange Commuter Rail and Intercity Rail – Safety, Operations, Stations, and Maintenance 2041Orange Bikeways – Countywide 2045Orange Lane Additions – Eastern Transportation Corridor 2020Orange Mixed-Flow Lane Additions – SR-91 from SR-55 to SR-57 2030Orange OC Streetcar – Between Santa Ana and Garden Grove 2021Riverside Transportation Corridor – CETAP East-West 2045Riverside New Parkway – Mid-County Between I-215 and SR-79 2040Riverside Express Lanes – I-15 from Cajalco Road to SR-74 2028Riverside Express Lanes – SR-60 from SR-91/SR-60/SR-215 Interchange to Gilman Springs 2028Riverside Express Lanes – I-15 from SR-60 to Hidden Valley Parkway to Cajalco Road 2020Riverside Bus Replacements – Throughout the RTA Service Area 2026Riverside New Interchange – I-10/SR-60 2030San Bernardino Express Lanes – I-10 from the Los Angeles County Line to I-15 2022San Bernardino Express Lanes – I-10 from I-15 to Redlands 2024San Bernardino Redlands Passenger Rail – From Downtown San Bernardino to University of Redlands 2021San Bernardino Bus Rapid Transit – West Valley Connector Phase 1 2024San Bernardino Express Lanes – I-15 from SR-60 to Foothill Blvd. 2045San Bernardino Lane Additions – SR_210 from Highland Ave. to San Bernardino Ave. 2021San Bernardino Light Rail Extension – From Los Angeles County Line to Montclair 2028Ventura HOV Lane Additions – US-101 from Moorpark Rd. to SR-33 2040Ventura Road Widening – Pleasant Valley 2034Ventura Lane Additions – SR-118 from Route 23 to Tapo Canyon Rd. 2031Ventura Passenger Rail Service Improvements – Metrolink 2025Ventura Railroad Grade Separation – At Rice Ave./Route 34 2022Ventura Widening and Replacement – Harbor Blvd. 2024Ventura Multimodal Transportation Center – Downtown Ventura 2026

TRANSPORTATION PROJECTS THROUGHOUT THE SCAG REGION (2020-2045)

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IMPROVED COMPETITIVENESS

SUPPORTED BY

195,500*ANNUAL NEW JOBS

TRANSPORTATION INVESTMENTS

SUPPORTED BY

167,100*

ECONOMIC OPPORTUNITY

BENEFIT/COST RATIO

INVESTMENT$1.00

BENEFIT$1.54=

DAILY VEHICLE MILES TRAVELED (VMT) PER CAPITA

2016 BASE YEAR

23.2MILES

2045 BASELINE

21.9MILES

2045 PLAN

21.0MILES

-4.1%Baseline to Plan

ComparisonBase Year to Plan

Comparison

-9.5%

REDUCED DAILY MINUTES OF DELAY PER CAPITA

2016 BASE YEAR

10.5MINUTES

2045 BASELINE

11.6MINUTES

2045 PLAN

9.0MINUTES

Baseline to Plan Comparison

-22.4%Base Year to Plan

Comparison

-14.1%

HEALTHCARE

from increased walking/biking

ANNUAL SAVINGS$350M

IMPROVED PUBLIC HEALTH

LESS TIME SPENT DRIVING

PM2.5 EMISSIONS

13.0 tonsTREND

12.5 tonsPLAN

3.8%

IMPROVED AIR QUALITY

GHG REDUCTIONS

2020 2035

8% 19%ARB TARGET

8% 19%CONNECT SOCAL

0% 0%% DIFFERENCE


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NETWORK EFFICIENCY AND ENHANCED ECONOMIC COMPETITIVENESSA well-planned, well-functioning transportation system, with land use strategies that complement transportation investments, can improve the economy of a metropolitan area. Regional traffic congestion typically reduces employment growth. As drivers require more time to travel from place to place, the market area for firms’ products shrinks, employees find it more difficult to access jobs throughout the metropolitan area, and the benefits of interactions across different firms and employees is reduced as they are stuck in traffic rather than engaged in productive activity. Local congestion, on the other hand, is more-or-less associated with more employment growth because places with high congestion—downtowns or pedestrian-oriented neighborhoods—are high amenity locations that often attract businesses. Localized or neighborhood reductions in VMT can further improve the neighborhood economy.

For some neighborhoods, reduced driving brings amenities that can be an economic development tool. Yet an economically thriving metropolitan region cannot be comprised wholly of congested neighborhoods with no good regional backbone transportation system. The small, often pedestrian- or transit-oriented neighborhoods need to be connected by a regional network of well-functioning transit lines, highways and arterial streets. Hence at the regional level, congestion can impede economic growth.

The network benefits (from reduced commuting, accessibility, and transport costs) are the bulk of the economic competitiveness impacts from improvements to the transportation system, while the amenity benefits are largely the impact of measurable quality of life changes or increased consumer spending power that results from lower transportation costs. Network efficiency would result in an annual average of 195,500 jobs in the SCAG region during the 2021-2045 planning period. These jobs are in addition to construction jobs and are economic opportunities available to the SCAG region as a result of increased competitiveness.

CONCLUSIONWhen investments are made in the transportation system, the economic benefits go far beyond the jobs created building it, operating it and maintaining it. Unlike spending to satisfy current needs, infrastructure delivers benefits for decades. The infrastructure, once built, can enhance the economic competitiveness of a region. Projects that reduce congestion may help firms produce at lower cost, or allow those firms to reach larger markets or hire more capable employees. An economy with a well-functioning transportation system can be a more attractive place for firms to do business, enhancing the economic competitiveness of the SCAG region.

Throughout the 25-year planning period of Connect SoCal, our region is expected to invest more than $638 billion on transportation improvement projects. The findings show that over the 25-year period for the six-county SCAG region, Connect SoCal will generate an annual average of more than 167,100 jobs through construction, maintenance and operations expenditures. An additional 195,500 annual jobs will be created by the increased competitiveness and improved economic performance that will result from enhanced network efficiency due to implementation of Connect SoCal.

Connect SoCal could bring additional economic benefits to our region beyond the economic outcome described above. The contribution of Connect SoCal to GHG emission reduction and climate risk mitigation could bring economic benefits by avoiding future costs and smoother transition to a low-carbon economy. The Plan aims to build transportation projects and effectively distribute resources and investment to reach vehicle miles traveled (VMT) reduction goals while enhancing mobility across the region. Such efforts to meet GHG emissions targets will serve to mitigate the risks posed by a rapidly warming globe and to furthering both economic vitality and sustainability of the region.

To read more about Connect SoCal, including the full Draft Economic & Job Creation Analysis, please visit connectsocal.org/draft.

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United States

9.1%

3.3%4.8%

California

12.1%

3.7%5.9%

SCAG Region

12.0%

4.1%5.5%

Ventura

9.1%

3.4%4.8%

San Bernardino

13.0%

3.5%

6.0%

Los Angeles

12.3%

4.5%5.7%

Riverside

13.3%

3.9%

6.6%

Orange

9.1%

2.5%

4.2%

Imperial

27.8%21.3%

18.5%

DEC/2007

DEC/2010

OCT/2019

LEGEND

The Southern California economy is in the midst of a steady period of growth and the outlook for the six-county SCAG region is strong as unemployment rates continue to fall. The graphs on this page illustrate this progress, comparing unemployment in December 2007 (pre-Recession), December 2010 (peak Great Recession unemployment), and October 2019 (the most recent employment figures). As the job market continues to improve, wages and income trends are also pointing upward in most parts of Southern California.

Southern California’s strong economic performance is powered by job growth in diverse set of sectors:

z PROFESSIONAL & BUSINESS SERVICES, a growing sector throughout the SCAG region which includes occupations such as architects, engineers, IT consultants, accountants, and lawyers;

z LEISURE & HOSPITALITY, driven by a robust economy, increased tourist visits and spending,

and significant tourism-related investments throughout the region;

z EDUCATIONAL & HEALTH SERVICES, due to aging population demographics throughout the region, new legislation, and technological advances such as healthcare IT allowing for new, innovative treatments and better patient care; and

z In some counties, CONSTRUCTION AND TRANSPORTATION & WAREHOUSING are leading the way in terms of driving employment growth due to strong housing markets and rising e-commerce infrastructure investment in some SCAG counties.

Looking forward, unemployment rates will likely continue to fall for the rest of 2019 as the labor market nears full employment. Estimates for 2020 show continued employment growth in the SCAG region, leading to lower unemployment rates and growing wages and incomes.

AT-A-GLANCE

UNEMPLOYMENT IN SOUTHERN CALIFORNIA


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ECONOMIC UPDATE

SCAG REGION

SCAG REGION ECONOMIC UPDATESince 2010, SCAG’s team of independent economists have aggregated, analyzed and reported a variety of trends in their counties, including economic growth and job creation, major industry sectors, educational attainment, workforce development opportunities, and related issues such as affordability, housing, and demographic shifts. By understanding current and projected opportunities and challenges, stakeholders ranging from local and regional elected officials, business executives, city managers, and economic development professionals will be better able to create actionable strategies to short- and long-term economic opportunities for all regional residents.

2019 SCAG TEAM OF INDEPENDENT ECONOMISTS

Imperial County Michael Bracken, Development Management Group, Inc.

Los Angeles County Eric Hayes, Los Angeles County Economic Development Corporation

Orange County Wallace Walrod, Ph.D., Orange County Business Council

Riverside & San Bernardino Counties John Husing, Ph.D., Economics & Politics, Inc.

Ventura County Matthew Fienup, Ph.D., California Lutheran University

ECONOMIC GROWTH, JOB CREATION, INCOME, AND EDUCATION IN THE SCAG REGION With a seasonally adjusted unemployment rate of 3.6% in October 2019, the national labor market is becoming increasingly tighter, with rising wages with employers finding it harder to fill vacant positions. According to the National Federation of Independent Business, finding qualified workers to fill job openings reached a record high of 27% in August 2019. Overall, 57% of businesses surveyed were hiring or trying to hire while 50% of businesses reported no qualified candidates for open positions.

California’s seasonally adjusted unemployment rate in October 2019 reached a new record low of 3.9%, with total employment reaching 18.7 million and total unemployment dropping to 765,300, a decline of over 33,000 since October 2018. Southern California’s unemployment rate followed statewide trends, declining to 4.1%, a rate that will likely remain steady or continue to drop as retail hiring ramps up for the holiday season. Overall, the SCAG region employed 8.99 million workers, with total unemployment of only 380,900, highlighting the continuing strength of the regional labor market.

Since 2012, SCAG region employment has grown faster than national employment growth rate, translating to 185,000 additional jobs in the region. A large component of this outperformance is due to the significant ongoing investment that Southern California is making in its regional transportation infrastructure, which is critical for the region’s key industries such as:

z Goods Movement/Logistics/International Trade

z Tourism & Hospitality

z Entertainment & Recreation

SCAG region industry sectors that exceeded U.S. employment sector growth trends are those that benefit from a more efficient, well-functioning transportation system:

z Construction

z Wholesale Trade

z Transportation & Warehousing

z Arts, Entertainment, Recreation

z Accommodation & Food Service

The increased demand for qualified workers has driven up salaries in the SCAG region, where the median household income has reached $71,666, a 4.5% increase year-over-year. In fact, beginning in 2016, SCAG region median household incomes have risen faster than U.S. trends:

SCAG REGION UNITED STATES

2015 +3.7% +3.8%

2016 +2.4% +2.0%

2017 +3.1% +2.3%

2018 +3.7% +0.7%

GROWTH IN MEDIAN HOUSEHOLD INCOMES, SCAG REGION COMPARED TO U.S., 2015-2018

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Despite this wage growth, the Bay Area continues to outperform the SCAG region with median household incomes 53% higher and totaling $109,732 in 2018, a 5.7% increase. With educational attainment correlating strongly to median household incomes, one reason for this regional disparity in incomes is the disparity in educational attainment; 31.3% of SCAG region residents have a Bachelor’s degree or higher compared to 48.9% in the Bay Area. While the SCAG region has seen continued improvements in educational attainment, it still trails overall state and national rates of 34.2% and 32.6%, respectively.

The SCAG region’s declining poverty rates are especially important in the context of the region’s high cost of living. Driven by improvements in San Bernardino, Orange and Los Angeles Counties, the SCAG poverty rate registered a 0.7% decline from 2017, dropping to 13.3% in 2018. While nearly all regions saw declines in poverty rates, Imperial County continues to struggle with rates actually increasing from 20.7% to 23.1%.

ACROSS THE SCAG REGIONWhile the SCAG region’s economy continues to improve, as illustrated by continued job creation and wage growth, several key emerging trends have surfaced from this year’s county reports from across the SCAG region.

z Los Angeles, Orange, Riverside and San Bernardino Counties have seen employment growth and declining unemployment and poverty rates in recent years, while total employment has trended downward in Ventura and Imperial Counties.

z With unemployment rates hovering near record-lows, many industry sectors are demonstrating strong growth trends. Overall job growth in the SCAG region has been primarily focused in:

� Educational and Health Services

� Construction

� Information

� Transportation & Logistics/Warehousing

� Professional and Business Services

� Leisure and Hospitality

� Manufacturing

z SCAG counties have generally seen an increase in median household income due in part to recent minimum wage increases.

z Regional job growth in some areas, however, tends to be concentrated in lower-paying, lower-skill jobs, a troubling trend considering the lack of affordable housing. For example, in Los Angeles County, more than 60% of jobs created between 2018 and 2023 will require a high school diploma or less.

z The region’s lack of workforce housing supply near major job centers is driving housing prices and rents. A lack of sufficient workforce housing is a pressing issue regionally, with many potential ramifications:

� Recent population declines in Los Angeles and Ventura counties.

� Obstacles, such as strict zoning, NIMBYism, CEQA, and other land use regulations, have all contributed to difficulties in finding and implementing viable new housing development solutions.

� Insufficient workforce housing encourages longer commutes, increasing traffic congestion across the SCAG region.

z Technological advances, especially automation, stand to dramatically impact the regional labor market. While many expect automation has the potential to impact overall employment levels, it is important to note that automation may create a significant number of jobs as well. Industries with the highest potential disruption from automation include:

� Manufacturing

� Office Support and Services

� Transportation, Logistics, and Warehousing


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Imperial County is located in the southeast corner of California and shares borders with San Diego County, Riverside County, Yuma County (Arizona), and Mexico (and the region and City of Mexicali). The County has an estimated population of 190,266. The economy of the region is based on the following industries:

• AGRICULTURE (Livestock and Crops)

• ENERGY PRODUCTION (Solar, Wind, Geothermal)

• PRISON/DETENTION FACILITIES (Federal and State)

• BORDER SECURITY (namely Department of Homeland Security)

• LOGISTICS (Goods Movement of Agriculture Products and Products Assembled in Mexicali through the Maquiladora Program).

• LOCAL SERVING SMALL BUSINESSES (Traditional Retail, Restaurants and Service-Oriented)

• LOCAL/REGIONAL GOVERNMENT AND RELATED SERVICES (Police, Fire, Education)

EMPLOYMENTThe Imperial Valley continues to struggle with high unemployment (20.6%, over 5 times both the state and national rates of 4.0% and 3.6% respectively). There are 57,700 jobs for a labor force of 72,700, leaving some 18,000 unemployed. The three industry occupations with the largest job growth (from 2015 to 2019) were farming (+2,300), food preparation/service (+1,700), healthcare practitioners (+900), and education (+600). There were job losses in construction (-1,800), sales (-900), and office/administrative (-600).

Employment continues to largely be tied to agriculture and government. The Department of Homeland Security, State prisons, and local governments (including school districts) account for 30% of all jobs. Unfortunately, the largest individual categories of employment (sales/retail, transportation/logistics, farming, and personal care/services) are also among the lowest paying, all falling below the median pay of $46,600 annually (Exhibit IM-1).

ECONOMIC REPORT

IMPERIAL COUNTYContributed by: Michael Bracken, Development Management Group, Inc.

MANAGEMENT 2,300$99,300

LIFE/PHYSICAL/SOCIAL SCIENCES 300$85,200

HEALTHCARE PRACTIONERS 2,500$84,800

ARCHITECTURE/ENGINEERING 300$76,800

LEGAL OCCUPATIONS 300$76,200

PROTECTIVE SERVICE 3,600$69,100

BUSINESS & FINANCIAL 2,000$68,500

EDUCATION/TRAINING 5,000$66,500

CONSTRUCTION 1,400$55,600

ARTS/DESIGN/ENTERTAINMENT/SPORTS 400$54,400

COMPUTER & MATHEMATICSAL 300$53,900

COMMUNITY/SOCIAL SERVICE 1,400$53,900

INSTALL/MAIN/REPAIR 2,100$48,200

ALL OCCUPATIONAL MEDIAN 58,600$46,600

PRODUCTION 1,200$44,500

OFFICE/ADMIN SUPPORT 7,600$38,300

TRANSPORTATION/LOGISTICS 4,000$36,700

HEALTHCARE SUPPORT 1,100$34,500

SALES 6,300$33,300

BUILDING/GROUNDS CLEAN/MAINTENANCE 1,500$33,100

FOOD PREPARATION/SERVING 4,000$29,100

FARMING 6,200$27,300

PERSONAL CARE/SERVICE 4,800$26,000

EXHIBIT IM-1 2019 (1Q) OCCUPATIONS BY MEDIAN PAY (# OF WORKERS)

15


RENEWABLE ENERGY GENERATIONAs the renewable portfolio standard (RPS) requirements continue to increase, so has investment in the region. California has met the RPS standard of a minimum of 33% and is now working toward the implementation of SB 350, which increases the RPS standard to 50% by 2030. In September 2018, Governor Jerry Brown signed SB 100 into law, which sets the bar for California to generate 100% of energy through renewable sources by the year 2045.

Imperial County has been a leader in renewable power generation. In 2018, Imperial County produced 8,067 GWh of renewable energy, which ranks them as sixth by county in renewable energy production in the State of California (behind Kern, Los Angeles, Contra Costa, San Bernardino and Riverside Counties). Overall, Imperial County produces about 13% of California’s 62,960 GWh of renewable energy.

AGRICULTUREAgriculture is the largest private sector industry in the Imperial Valley. While the jobs associated with the industry are traditionally low paying jobs, agriculture supports many families in a variety of occupations (direct farming, professional/business (including accountants), and transportation. In 2019, agriculture production totaled $2.226 billion (Exhibit IM-2). This represents an increase of about $357 million since 2014. In 2018, 534,000 acres of land was in production (a land mass 80% of the size of Orange County), with almost 9% of that land (46,850 acres) dedicated to organic crops. Crop prices are largely stable at present, although the trade war between the United States and China is putting market pressures on certain farmers. The Imperial Valley agriculture community produced the following in 2018:

• VEGETABLE/MELONS: $984.5 million

• LIVESTOCK: $532.1 million

• FIELD CROPS (ALFALFA/BERMUDA GRASS): $507.9 million

• SEED/NURSERY PRODUCTS: $109.2 million

• FRUIT & NUT CROPS: $85.2 million

• APIARY/HONEY: $8.5 million

Water supplies at present appear to be stable, although there always seems to be potential changes to “water rights” for the region. The Imperial Valley is continuing to see an increase in higher value crops—namely citrus and tree nuts—that may be relocating from the Central Valley (which has greater water uncertainty). While Imperial County has one of the most stable supplies of water and an intricate delivery system for farms, the Colorado River must be able to supply water from snowpack in order to provide the resource.

OUTLOOK • The overall economy is stable (by historic

Imperial County standards).

• Renewable energy standards for years 2030 and 2045 will create additional renewable energy opportunites.

• Agriculture is seeing increased capacity for livestock (cattle), but is struggling with the current trade war with China.

• The region must address systemic and multi-generational poverty (20.7% of all persons, 31% of children).

• A culture of educational achievement must take hold (29.8% of adults 25 years old or older lack a high school education and only 14.7% of the same group have a bachelor’s degree or higher).

• The region must work to expand geothermal energy production, which generates significant construction and ongoing jobs as well as cross-border industry growth with Mexicali, Mexico.

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$1.365B

$1.369B

$1.684B

$1.452B

$1.598B

$1.964B

$1.946B

$2.158B

$1.859B

$1.926B

$2.063B$2.066B

$2.226B

EXHIBIT IM-2 IMPERIAL COUNTY TOTAL AGRICULTURE PRODUCTION (LIVESTOCK & CROPS)


16

ECONOMIC REPORT

LOS ANGELES COUNTYContributed by: Eric Hayes, Los Angeles County Economic Development Corporation

Los Angeles is a region of unrivaled diversity and opportunity which is home to over 10 million residents, forming a labor force of over 4.5 million. Los Angeles remains a beacon of creativity and economic dynamism, although it now faces substantial challenges in the form of a dramatic housing shortage and substantial inequality.

ECONOMIC OVERVIEW AND OUTLOOKThe September unemployment rate in Los Angeles County was 4.5% (not seasonally adjusted), significantly below its July 2010 peak of 13.2 percent and has largely leveled off. Nonfarm employment in September 2019 totaled over 4.5 million adding nearly 70,000 jobs over the year for an annual growth rate of 1.1%. The bulk of major industry sectors experienced growth in employment over the year.

County employment is projected to grow at an average annual rate of 0.9% over the next five years, adding 202,000 jobs across a range of industries (Exhibit LA-1).

Wage growth has strengthened sizably on the back of the excellent labor market, and, although there are major risks and uncertainty on the horizon, economic growth should continue to improve employment and wages for the majority of residents.

LEADING INDUSTRIESMost industries will add jobs over the next five years, but overall, the industries with the best growth opportunities in terms of employment and wage growth will be:

z Health Services, which is estimated to grow at 9.6% over the next five years and add 66,000 jobs, driven by an aging population and increased access.

z Construction is projected to add around 19,000 jobs over the next five years, as the expansion drives regional development.

z Information is projected to add 13,000 jobs over the next five years driven by continued technological adoption across the economy.

z Transportation and Warehousing is projected to add almost 22,000 jobs over the next five years, driven by growth in logistics.

These industries are major growth opportunities, not just because they are adding large number of jobs, but because they are likely to see sustained growth and increases in wages in the future. Many other industries such as accommodation and food services are adding as many or more jobs but suffer from low wages and employment precarity.

OCCUPATIONAL OUTLOOKWhile jobs are being added across industries, the highest number of overall new jobs will be found in those occupations that require a high school diploma or less, and which pay less than the County’s median annual wage of $40,970. Roughly one quarter of projected new jobs over the next five years require workers without a high school diploma. Another 37% will require workers with a high school diploma (Exhibit LA-2).

Those with a graduate or professional degree earn an annual wage premium of around $57,000 over those with less than a high school education (Exhibit LA-3). The strong correlation between educational attainment and earnings signals challenges ahead as those with less than a high school degree face limited jobs prospects, are more likely to be unemployed, and are less likely to be able to support their households.

INCOME AND POVERTYHousehold incomes have increased steadily for the last 25 years, from $34,965 in 1990 to $68,093 in 2018. Inflation-adjusted household incomes had been falling, but the substantial increase in household earnings in recent years has reversed the trend, with real incomes in 2018 approaching their 1990 peak. Households in Los Angeles County have failed to achieve the same real incomes as in the 1990s primarily due to excessive regional inflation in a few areas, predominantly housing and medical services (Exhibit LA-4).

Economic expansion is also causing poverty rates to keep falling, resulting ina steady year-over-year decline in individual poverty rates. The individual poverty rate is now at 14.1%, a substantial decrease from the peak of 19.1% reached in 2012, making large improvement in the past five years (Exhibit LA-5). As with earnings, there is a strong correlation between lower levels of educational attainment and higher rates of poverty. Over one-fifth of adults in the county with less than a high school education are in poverty, while those with a BA or higher have a poverty rate of only 5.8% (Exhibit LA-6).

17


EXHIBIT LA-2 ENTRY LEVEL EDUCATION & EXPERIENCE REQUIREMENTS ALL JOBS 2018-2023

Source: Estimates by LAEDC

High School36.6%None25.3%Bachelor’s23.5%Post Secondary Non Degree6.3%Associates2.7%Doctoral or Professional2.0%Some College1.9%Master’s1.7%

4.454.65

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

F

2020

F

2021

F

2022

F

2023

F

Source: CA EDD; forecast by LAEDC

3.92

Jobs lost during Recessionrecovered by 2015

EXHIBIT LA-1 NONFARM EMPLOYMENT IN LOS ANGELES COUNTY (MILLIONS OF JOBS)

EXHIBIT LA-3 MEDIAN EARNINGS & EDUCATIONAL ATTAINMENT 2019

$80,940

$56,577

$36,830

$30,563

$23,416

Graduate orProfessional

Bachelor'sDegree

Some College orAssociate's

High School orEquivalent

Less than HighSchool

Source: 2018 ACS 1-yr estimates

Median EarningsPopulation25+ years:

$36,954

EXHIBIT LA-4 MEDIAN HOUSEHOLD INCOME NOMINAL AND 2018 DOLLARS

$34,965

$42,189

$52,684

$68,445 $65,408

$62,029

$68,093

1990 2000 2010 2018

Nominal

Real

Source: ACS 2018 1-year estimates; BLS

4.45

Nominal

Real

EXHIBIT LA-5 INDIVIDUAL POVERTY RATES 2008 TO 2018

17.5%

15.2%16.1%

18.3%19.1% 18.9% 18.7%

16.6% 16.3%14.9%

14.1%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: 2018 ACS 1-yr estimates

EXHIBIT LA-6 POVERTY RATES & EDUCATIONAL ATTAINMENT 2018

Sources: 2018 ACS 1-yr estimates; BLS

Less than High School21.1%

High School or Equivalent14.3%

Some College or Associate’s10.6%

Bachelor's Degree of Higher5.8%

Population BelowPoverty Level

25+ Years:

14.1%


18

ECONOMIC REPORT

ORANGE COUNTYContributed by: Wallace Walrod, Ph.D., Orange County Business Council

Over the past year, a number of factors have fueled Orange County’s strong economic performance: near record-low unemployment rates, meaningful wage growth, a strong housing market, thriving educational systems and a continued focus on innovation. The demand to live and work in Orange County has continually increased, which has led to consequences such as new highs in home and rental prices and a persistent lack of available workforce housing supply. While the county faces several other challenges, such as a persistent skills gap, it benefits from a variety of competitive advantages, from a high quality of life and robust labor market to a deep talent pool, excellent educational systems and world-class infrastructure. Together, these advantages form a strong foundation for future growth and prosperity.

2019 ORANGE COUNTY ECONOMY IN NUMBERS:

z Orange County’s September 2019 unemployment rate was 2.4%, lower than the state (3.5 %) and national (3.3%) rates (Exhibit OC-1).

z The number of employed individuals in the region has grown to 1,592,800 while the number of unemployed has shrunk to 39,100.

z Orange County’s median household income grew by $3,542 or 4.1% between 2017 and 2018, reaching $89,759 in 2018.

z Occupational groups with the largest year-over-year salary increases Life, Physical and Social Science; Arts, Design, Entertainment, Sports and Media; and Education, Training, and Library.

z Orange County industries with the largest year-over-year salary increases included Management of Companies, Manufacturing, and Construction.

z In 2018, Orange County had a Gross Domestic Product (GDP) of $296 billion.

z Orange County’s strong, diverse economy is led by Professional and Business Services (19.5% of employment), Leisure and Hospitality (13.8%), and Educational and Health Services (13.7%), and these key sectors have been the largest generators of new jobs in the last 12 months.

z An internationally famous tourist destination, Orange County has greatly benefited from increased tourism visits and spending; a record 50.2 million travelers visited the county in 2018, an increase of 1.6% over the past year, while visitor spending increased by 4.2% to $13 billion.

z Tech initiatives play key roles in supporting the county’s next generation of entrepreneurs in emerging sectors such as Medical Devices, Biotechnology, Health IT, Robotics and Automation.

EXHIBIT OC-1 UNEMPLOYMENT RATES (JAN. 2008 - SEPT. 2019)

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

CaliforniaUnited StatesOrange County

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: California Employment Development Department

19


OLDER GENERATIONS AN INCREASINGLY LARGE PROPORTION OF ORANGE COUNTY Orange County’s aging population – part of a statewide trend – will bring both challenges and opportunities. Most obviously it will put further pressure on the county’s Healthcare sector, especially in the form of increased demand for geriatric and home health care services. It will also shift the dependency ration of working age to non-working age residents. Estimates show the number of county residents aged 85 and older, for example, to increase by 488% by 2060, with the working aged population (25-64) increasing by only 2%. This ongoing transformation has significant consequences for Orange County’s talent pipeline, making it imperative that the county preserve its highly diversified industry base so that it continues to attract and retain businesses from a diverse range of industry sectors. In doing so, the region reduces the potential impact from an economic downturn in any one sector while also supporting continued growth and innovation for workers and businesses across the county.

Orange County’s population increased by only 10,962 in 2018 compared to more than 24,000 in 2017. The county lost 23,743 residents to domestic migration in 2018 and added only 17,676 international immigrants, with the remaining population increase coming from natural increase. The county’s high cost of living has encouraged many residents, especially young professionals, to relocate to more affordable neighboring counties or to move out of state. Increasing the county’s workforce housing supply will be key to reversing this

trend and preserving one of its most important competitive advantages, its deep talent pool.

Orange County is also growingly increasing diverse; Hispanic and Asian residents will grow to account for 40.4% and 17.1% of the county population, respectively, by 2060.

EDUCATIONAL ATTAINMENT CONTINUES TO RISE, SUPPORTING AN INNOVATIVE BUSINESS ENVIRONMENTOrange County remains one of the nation’s most educated areas; in 2018, 48.9% of residents had an Associate’s degree or higher while 26.4% and 14.7% held a Bachelor’s degree and Graduate or Professional degree, respectively. The percentage of UC/CSU-eligible high school graduates increased from 52% in 2017 to 55% in 2018, while the number of Science, Technology, Engineering, and Mathematics (STEM)-related undergraduate degrees conferred in 2018 increased to 4,117 over the same period. Supporting further improvements in the county’s educational attainment will be important for continued economic growth, as higher educational attainment correlates strongly with higher wages and decreased unemployment rates. Improved education will also help make Orange County’s world-famous quality of life accessible for all county residents.

EXHIBIT OC-2 ORANGE COUNTY INCOME & POVERTY RATES (2000-2018)

$0

$20,000

$40,000

$60,000

$80,000

$100,000

1990 2000 2010 2014 2015 2016 2017 2018Source: U.S. Census Bureau, 2017 American Community Survey, 1-Year Estimates

8.5%

10.3%

12.2%12.8% 12.7%

11% 11.5%10.5%

Per Capita IncomeMedian Household IncomePoverty Rate

Exis�ng New + Exis�ng

$100,000


20

INCREASED WAGES TEMPER AFFORDABILITY CONCERNS WHILE POVERTY DROPS SHARPLYOrange County’s median household income increased by $3,542 or 4.1% between 2017 and 2018, reaching a new high of $89,759, while the poverty rate decline from 11.5% to 10.5% during the same time period (Exhibit OC-2). These trends reflect both the county’s high level of economic prosperity and its highly diversified labor market environment with across a broad range of education, skill, and income levels. Entry-level positions are particularly crucial to Orange County’s workforce development because they act as gateways into the world of work for recent graduates and young professionals, helping these individuals development the necessary skills and abilities for career success.

EXHIBIT OC-3 MEDIAN HOME PRICE, NEW VS. EXISTING HOMES (2008-2019)

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

Exis�ng New + Exis�ng

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: California Association of Realtors, CoreLogic

New & Existing

Existing

AFFORDABILITY CONCERNS LINGER AS HOUSING COSTS REMAIN HIGH Orange County’s median new home price reached a new high of $842,000 in June 2019 before falling to $810,000 in August; existing home prices have remained steady at $719,500 during the same time perio (Exhibit OC-3). Meanwhile, the county’s average rent increased from $2,450 in 2017 to $2,665 in 2018, representing growth of $215 or 8.8%. Orange County’s high housing demand and lack of housing supply will keep both home and rental prices high for the foreseeable future.

21


ECONOMIC REPORT

RIVERSIDE & SAN BERNARDINO COUNTIESContributed by: John Husing, Ph.D., Economics & Politics, Inc.

GENERAL STATUS OF THE ECONOMYMost of the basic data available on the Inland Empire economy is for the two-county metropolitan area. Looking at the most reliable sources for 2019, it appears that the region is on track to add roughly 38,100 jobs (Exhibit RSB-1). This sets up the potential for a good start to 2020. Any forecast for next year, however, is subject to the potential difficulties impacting the U.S. economy. The nation and the local area are already in a manufacturing slowdown as the President’s tariff policies impact the ability of employers to determine demand for their products. This goes along with a general downward trend occurring in global economic growth. Another issue is the existence of an inverted interest rate yield curve. For several months, short-term rates that financial institutions pay to aggregate funds have been higher than the long-term rates that they earn when they lend 5-30 years. This means these institutions may become reticent to lend capital to firms needing it. Historically, this situation has forecasted the coming of a recession. Meanwhile, the President’s tariff policies are a particular problem for the Inland Empire’s near-term future since a good deal of its economic growth comes from processing imports with 2019 port volumes running below 2018 highs.

It appears that 2019 is on track to surpass its 2007 pre-recession high of 1,306,700 by 250,000 jobs or 19.1%, reaching an estimated 1,556,800. This occurred because job growth has surged for the past several years. If 2019 holds, the area will have created 390,300 jobs in the 2011-2019 period of recovery and expansion, nearly tripling the number of jobs lost (-140,200) in the Great Recession. Looking at the rest of 2018, there is every reason to anticipate growth levels will be sustained given the forces impacting the key sectors that make up the inland region’s economic base (logistics, construction, health care, manufacturing, high-end).

Unemployment in the inland area has remained low, averaging 4.2% in both 2018 and 2019. The unadjusted unemployment rate for September 2019 was 3.6%. This figure, however, was a little above the unadjusted levels for California (3.5%) and the United States (3.3%).

Importantly, the continuing rise in the Inland Empire’s employment markets has led to significant declines in poverty. In 2010, the share of children under 18 living in poverty was 24.1%. In 2018, that figure had jumped down to 19.1%. Poverty for all people dropped from 17.1% to 13.7%. A key metric dictating the nature of the Inland Empire’s economy is the fact that a combined 46.3% of adults 25 and over had high school

6,342 9,758

4,575 16,917

28,925 23,083

38,325 40,692

56,467 56,425

42,117 35,542

37,625

62,350 63,150

45,700

3,500

-42,675

-79,767

-17,775

3,683

30,817

47,692 56,150

64,342

48,742 51,475

49,308 38,100

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019e

Sources: CA Employment Development Department; U.S. Bureau of Labor & Statistics; Economics & Politics, Inc.

2008-2010 Job Loss2008-2010 Job GainNet Job Gain

-140,650349,778209,128

EXHIBIT RSB-1 WAGE & SALARY JOB CHANGE INLAND EMPIRE, ANNUAL AVERAGE, 1991-2019E


22

or less education in 2018. That compares to 39.2% for the rest of the SCAG region. Those with AA degrees or higher were 30.2%, well below the 41.6% for the rest of the six-county area. The share with BA’s or higher was 21.9% versus 34.2% in the balance of the SCAG region. These facts limit the kinds of firms for which the area is competitive. These shares have improved from 50.3% (high school or less), 23.1% (AA or higher) and 16.3% (BA or higher) in 2000, respectively.

An important consideration in looking at the status and future of the Riverside and San Bernardino County economy is to understand the conditions that affect the region as a whole. The U.S. Office of Management and Budget (OMB) delineates metropolitan regions based on a population nexus, a high degree of economic and social integration, and commuting patterns. Like many U.S. metros, the Riverside-San Bernardino-Ontario, CA metropolitan statistical area (MSA) is made up of more than one county. In this case, Riverside and San Bernardino counties largely respond to the same set of economic forces. Both are inland from coastal counties that are largely built out. They are thus subject to the outward migration of demographic and economic activity from those areas as Southern California expands. This has affected the nature of their residents, companies, commuting, and educational levels.

Growth in each county started with single family housing entering and accelerating, gradually spreading deeper inside of it. This has been followed by the movement of industrial activity (manufacturing, logistics) first into their western edges and now deeper to the east. The workers in the region move internally across their county lines in large numbers with over 90,000 Riverside workers going to San Bernardino and over 60,000 San Bernardino workers going the other way. A significant share of workers in each case, however, are forced to migrate outside the region (Riverside 22.6%; San Bernardino 20.7%) with those patterns remaining largely stable going back to 1990. Of the total commuters from the area, the shares are nearly even with Riverside at 49.9% and San Bernardino at 50.1%.

BASIC SECTORSLike all regional economies, the key for growth in Riverside and San Bernardino counties is the expansion of the economic base sectors for which it has competitive advantages. This is the group of activities bringing money to it from the outside world. Fundamentally, there are five key sectors:

z Logistics firms have located in the Inland Empire in response to its available land and the need to handle both the huge flow of goods moving in and out of the U.S. via the ports of Los Angeles and Long Beach plus the rapid expansion of fulfillment centers that handle

the explosive expansion of e-commerce. They are on track to be responsible for 23.5% of the area’s direct job growth in the 2011-2019 period (95,748). Based upon the BLS growth rate in early 2019 (6.1%), the sector’s total should reach 204,248 jobs in all of 2019.

z Health Care firms are expanding in part because the average worker in the sector is already serving 22.8% more people than California’s average. Meanwhile, the Affordable Care Act has cut the share of local residents without health insurance from 20.5% in 2012 to 8.4% in 2018, though the 2017 share was 7.8%. Health care providers are also responding to the fact that 24.5% of the population was 55 years or older in 2017. The area’s population growth was 366,042 people or 8.7% from 2010-2018. Based upon the BLS growth rate in early 2019 (4.1%), the sector’s total should reach 148,351 jobs in all of 2019.

z Construction has historically been the major driver of the Inland Empire’s economy given its undeveloped land and Southern California’s need for single family homes, apartments, industrial facilities, and infrastructure. The mortgage crisis upset the first of these needs and was largely responsible for the local sector losing -68,400 jobs from 2006-2011

z (-53.6%). From 2012-2018, it has gained back 46,495 jobs. In 2019, the sector has slowed. Based upon the BLS job growth rate (1.3%), it is estimated that the sector will add 1,353 jobs to reach 106,195 positions. That would still be -21,300 jobs or -16.7% below the 2006 peak.

z Manufacturing has been the economic base sector with sub-par performance in the Inland Empire. This stems from California’s punishing regulatory environment plus energy policies that in May 2019 had put the state’s industrial electrical cost at 12.65¢/kW-h. That was 140.0% above Nevada (5.27¢/kW-h) and 98.3% above Arizona (6.38¢/kW-h). As a result, the state has created only 86,300 manufacturing jobs (6.9% growth) since January 2011, and accounted for only a 7.0% of the 1,232,000 jobs (10.6% growth) created in the U.S. A good deal of job openings occur in the sector due to the need to replace aging baby boomer technicians. Based upon the BLS job growth rate in 2019, it is unfortunately estimated that the sector will add only 1,461 jobs in the Inland Empire to reach 102,764 positions. That would remain -20,836 jobs or -16.9% below the 2006 peak of 123,600 positions before the Great Recession.

For the first time, a high-paying sector is showing signs of starting to add to the economic base of Riverside and San Bernardino metro:

23


z Professional, management & scientific work has recently started expanding. This appears to be a reaction to three factors. First, it has seen a doubling in the absolute number of residents with bachelors or higher degrees from 2000-2017 (100.5%). Even though the inland area’s population is less well educated than its coastal county competitors, in this period its overall percentage of college graduates grew from 16.3% to 21.9%. The percent of those with AA degrees or higher went from to 23.1% to 30.2%. Second, the growth of the Riverside-San Bernardino metropolitan area economy requires increasing levels of professional service providers, given its 4.63 million people and 123,565 firms. Third, the re-emergence of the construction sector creates a need for engineers and other such specialists. Based upon the BLS job growth in 2019 (3.6%), it is estimated that the sector will add 1,816 jobs to reach 52,282 positions.

Given the high levels of poverty in the area, it is important to find sectors that offer workers median incomes at middle class levels. Provided families have a secondary wage earner in a lower paying sector, the data show that this is possible in several sectors due to their median pay levels over $45,000. In particular, it is important for this to be the case in sectors requiring minimal educational requirement given the 46.3% of adult workers with high school or less schooling. Looking at the economic base sectors and one related to them, the following is the situation:

z Logistics (2019 median pay: $49,106). In 2017, 78.4% of workers were in jobs requiring high school or less schooling. The sector is the fastest growing in the Inland Empire.

z Health Care (2019 median pay: $65,757). In 2017, 33.7% of workers were in jobs with minimal educational requirements. The sector has provided significant upward mobility for those with AA degrees or post-secondary training (30.2%). It grows continuously with those obtaining technical certifications finding good jobs and the ability to move up within the sector.

z Construction (2019 median pay: $52,482). In 2017, 82.2% of workers were in jobs requiring minimal levels of formal education, though apprenticeship is necessary for some types of work. The sector has become the second fastest growing in the inland area though firms continue having trouble finding workers.

z Manufacturing (2019 median pay $54,438) offers little job growth. Industry leaders, however, indicate that a large share of existing technicians are starting to

retire. Of workers in the sector in 2017, 66.5% needed only high school or less training.

z Professional, management & scientific (2019 median pay $72,431). In 2017, a relatively small share of workers were in jobs for marginally educated workers (34.5%). Another 9.2%, however, can step up to better paying jobs with AA degrees or post-secondary training.

z Finance, Insurance & Real Estate (2019 median pay: $51,231) is still in declining mode. In this sector, 65.6% of workers during 2017 were in jobs requiring minimal entry level educations though many require specific state certifications. Its growth requires more home sales and construction activity plus bank expansions.

Growth in these sectors for 2019 is anticipated to cause the area to add a total of 38,123 jobs in 2018 or 2.5%, fastest among major California metropolitan areas.

OUTLOOKThe need for change in the Riverside-San Bernardino metropolitan area’s economy is underscored by the fact that when inflation is taken into account, the estimated 2018 median household income ($65,512) has only exceeded its 1990 level by 0.6%. Per capita income has fared similarly in that period, up 0.5% from 1990-2018. Meanwhile, the two-county area continues to have an imbalance in its income distribution. Thus in 2018, the 14.1% of households making over $150,000 a year captured 35.8% of all income. And, the 16.4% of households receiving $100,000-$149,999 a year earned 24.8% of the region’s income. These two groups together constituted 30.5% of households but had 60.5% of the Inland Empire’s income. By contrast, the 38.5% of households earning below $50,000 received only a 12.1% share of the area’s income.


24

ECONOMIC REPORT

VENTURA COUNTYContributed by: Matthew Fienup, Ph.D., California Lutheran University

STATE OF VENTURA COUNTY’S ECONOMYVentura County remains in a prolonged period of economic weakness. As of September 2019, that period has stretched into a fifth year. Our latest estimate indicates that Ventura County GDP grew just 0.1% in 2018. Average growth over last five years is about 0%, representing the weakest five year period for which we have data. Average growth over the past four years is negative (Exhibit VC-1). During 2018, Ventura County’s economic growth was buoyed by relative strength in Durable Goods Manufacturing. The number of jobs in this high-value added sector grew by 5%. Were it not for the contribution of durable goods in 2018, our estimates indicate that the Ventura County economy would have contracted for the third straight year. Ventura County’s growth numbers are especially shocking compared to the broader State and National economies. As Ventura County’s economy has been contracting, the broader economy has been experiencing an acceleration of growth.

As with GDP growth, Ventura County jobs data also paint a picture of general economic weakness. With a few welcome year-over-year exceptions, jobs in high paying, high output per worker sectors are in a sustained decline, while jobs in low paying, low output sectors are growing. Despite strength in

2018, the number of jobs in Durable Goods Manufacturing is still down nearly 20% from the pre-recession number of jobs. The number of jobs in Non-durable Goods Manufacturing and Financial Activities, two of the sectors with the highest average salaries, are down more than 27%. Information & Technology has faired little better, with the number of jobs down 14% from the previous high. Educational & Health Services and Leisure & Hospitality, two sectors with low average salaries, are each up significantly since the Recession. Jobs in Education & Health Services are up an astounding 48% since 2007. Unfortunately, jobs in Educational & Health Service and Leisure & Hospitality very often do not pay wages which are sufficient for workers in these sectors to be able to afford to live in Ventura County.

The County’s monthly unemployment rate was 3.2% in September, near an all-time low. The most recent seasonally-adjusted quarterly figure was 3.5%. We view the unemployment rate, however, as a poor indicator of labor market strength. To understand why, consider the fact that the unemployment rate declined each year from 2013 until 2017, falling from 8.6% to 4.4%. During each of those same five years, the labor force contracted. In this case, labor force growth proved to be a better indicator than the unemployment rate of the true strength of the labor market and the broader regional economy.

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

0.0%1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

-0.6%

0.4% 1.1%

3.0% 2.3%

0.9%

5.3% 5.6%

8.2% 7.5%

-0.5%

2.6%

7.8%

5.3%

1.6%

3.3% 2.5%

-4.5%

0.7%

5.6%

2.1% 1.8% 2.1%

0.4% 1.0%

-0.9% -0.4% 0%

EXHIBIT V-1 REAL GROSS DOMESTIC PRODUCT, GROWTH RATE PERCENTAGE (1991-2018)

25


Early signs of weakness appeared in 2013 when a sustained decline in the size of the County’s labor force began. The County’s labor force contracted in each of five consecutive years, only returning to small positive growth in 2018 (Exhibit VC-2). The next major sign of weakness was County GDP. Driven by declines in Non-Durable Goods Manufacturing, total economic activity in Ventura County contracted in 2016 and again in 2017. By the end of 2017, Ventura County had experienced the worst four years of GDP growth on record, worse even than any four years that include the financial crisis and the Great Recession.

The latest, and perhaps the most arresting, sign of weakness arrived in the form of population data. According to the California Department of Finance, over the course of 2018, Ventura County’s population declined for the first time in the history for which we have data (Exhibit VC-2). The decline in the County’s population should be truly alarming to community leaders, elected officials, and concerned citizens alike. As the San Fernando Valley Business Journal appropriately noted, “Detroit loses population. Not Ventura County.” Population decline, however, is not an early warning sign. As discussed above, early signs began appearing six years ago. Population decline is a late-stage manifestation of significant economic weakness. As individuals and households have compared the economic opportunity that is available to them in Ventura County to opportunity available in other parts of the country, more and more have left to seek that opportunity somewhere else. In 2018, four thousand more people left Ventura County for another region of the country than came to Ventura County from another region. Accelerating net domestic out-migration has finally overwhelmed natural population growth and positive net international migration, tipping overall population growth negative.

WILDFIRES HAVE HIT THE ECONOMYIt is important to acknowledge that natural disasters have contributed to the current situation. The Thomas Fire, which burned more than 1,000 homes in Ventura County on its way to becoming the largest wildfire in California history as of December 2017, was followed by the devastating Hill and Woolsey Fires less than a year later. Not surprisingly, the decline of the County’s overall population was driven by declines in Ventura and Thousand Oaks, the two cities most impacted by these fires. Given the economic weakness that already existed in the County prior to December 2017, it is not surprising that the fires have had a serious impact. Strong economies can absorb unexpected shocks. Weak economies, unfortunately, cannot.

With the start of the 2019 fire season, the County has weathered a third consecutive year of destructive wildfires. As this report is being written, hotspot are still being extinguished in the Easy and Maria Fires. While only a handful of homes were lost this year, three difficult fire seasons in a row are surely working to increase net domestic outflows and population decline.

HOUSING MARKETSWhen you add home price growth to the list of economic variables already discussed, an economic puzzle emerges in Ventura County: the size of the county’s labor force has shrunk; total economic activity has declined; jobs are being lost in high paying sectors and added in low paying sectors; and the population is now declining; yet, home prices continue to rise. According to information from CoreLogic, Ventura County’s median home price has grown by an average of 5.7% over the past four years (and by an average of 8.4% over the

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

PopulationCivilian Labor Force

0.0%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

0.0%

1.8%

0.6%

1.3%

-0.4% -0.6%

0.5%

1.9%

2.2%

-0.3% -0.1%

1.8% 1.5%

0.9% 0.6%

0.9% 0.9% 0.8%

1.3%

0.3% 0.4%

0.7%

-0.2%

-0.9%

-0.6% -0.4%

-0.2%

0.2%

EXHIBIT V-2 VENTURA COUNTY CIVILIAN LABOR FORCE & POPULATION, PERCENT CHANGE (1991-2018)


26

past six years). While, at first, this seems to defy the laws of economics, it points to the fact that causality flows from poor housing affordability to poor regional economic performance, not the other way around. It simply can’t be the case that a fundamentally weak economy is causing home prices to soar. Instead, poor housing affordability is driving jobs and individuals from the region, increasing net domestic out-migration and decreasing total economic activity.

Ventura County’s three largest manufacturing companies are now on the record stating that housing affordability and the resulting inability to attract and retain talent is the single biggest obstacle to doing business in Ventura County. Recent decisions on the part of incumbent businesses to expand operations in other regions rather than in Ventura County and the relocation of whole business units from Ventura County to metropolitan areas with more favorable housing affordability are the link between Ventura County’s housing affordability crisis and the region’s economic woes.

As noted in previous years, one of the primary drivers of the lack of housing in Ventura County and the resulting housing affordability crisis and general economic weakness is a collection of land use policies known as SOAR (Save Open Space and Agricultural Resources). Representing the most stringent urban growth controls of any county in the United States, SOAR requires a majority vote of the entire county electorate in order to authorize the land use changes that are necessary for expansion of developable land in the county. Combined with a powerful anti-growth sentiment among the County’s electorate, SOAR results in a tremendous scarcity of new housing. Advocates of SOAR claim to be the protectors of Ventura County’s unique character and quality of life. Current economic conditions seriously undermine this claim. Unfortunately, its character and quality of life are being hollowed out as the County’s economic vitality wanes.

OUTLOOKThe economic forecast for Ventura County calls for continued slow growth in economic output. Annual growth of Ventura County GDP is forecasted to range from just 0.2% down to 0.1% from 2019 through 2021. This is an erosion of last year’s forecast, which anticipated that growth would average 1.0% over the three year forecast horizon. Given that our forecast for population growth is negative over the same period, there is considerable downside risk to the GDP forecast. It is very possible that economic activity will be zero or even negative during this period.

Jobs in high paying sectors of the economy will continue to decline. In particular, jobs that can be conducted somewhere else at lower cost will continue to leave the county. This

pattern will be most obvious in goods producing sectors. Jobs in non-tradable services, jobs which must be completed in proximity to the individuals paying for those services, will remain in the County and will continue to grow in number. We anticipate continued job growth in Educational & Health Services and Leisure & Hospitality in particular.

Near-zero GDP and jobs growth would portend stagnant per capita GDP, anemic wage growth and severely limited upward economic mobility for residents of the County, especially those who fall in the lower income brackets. If the current forecast holds, Ventura County will have experienced 8 years during which average economic growth is indistinguishable from zero. Eight years of zero growth. This is truly stunning considering the strong economic legacy of Ventura County. The same County that gave birth to Amgen, the world’s largest independent biotechnology company, the county which is still home to Naval Base Ventura County and the Port of Hueneme, and the County which boasts some of the most valuable agricultural land in the United States if not the world, will foregone nearly a decade of economic growth and the considerable social and environmental benefits that flow from it.

A return to robust economic growth in Ventura County will require fundamental changes to the policies which drive the current weakness. This must necessarily start with a determined effort to build more housing. Our advice to residents, business leaders, elected officials and policy makers is simple. Don’t wait any longer. If the current cohort of leaders refuses to heed the economic warning signs, they will preside over an entirely preventable economic malaise.

JW Marriott Desert Springs Resort & Spa74-855 Country Club DrivePalm Desert, CA 92260

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SOUTHERN CALIFORNIA ASSOCIATION OF GOVERNMENTS900 Wilshire Blvd., Ste. 1700, Los Angeles, CA 90017Phone: (213) 236-1800www.scag.ca.gov

IMPERIAL COUNTY1503 North Imperial Avenue, Suite 104El Centro, CA 92243Phone: (760) 353-7800

ORANGE COUNTYOCTA Building600 South Main Street, Suite 741Orange, CA 92868Phone: (714) 542-3687

RIVERSIDE COUNTY3403 10th Street, Suite 805Riverside, CA 92501Phone: (951) 784-1513

SAN BERNARDINO COUNTYSanta Fe Depot1170 West 3rd Street, Suite 140San Bernardino, CA 92418Phone: (909) 806-3556

VENTURA COUNTY950 County Square Drive, Suite 101Ventura, CA 93003Phone: (805) 642-2800

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