The Los Angeles City Council Districts Report, 2019 October 2019

Christopher Thornberg, PhD Founding Partner, Beacon Economics Director, UCR SoBA Center for Economic Forecasting and Development

Beacon Economics Beacon Economics | beaconecon.com Overview

§ The Good News No, the economy is not about to tip into a recession The impact of the trade war is far less than reported LA City continues to outpace County on growth Incomes in the City are up Housing cost burdens are falling

§ The Bad News Financial turmoil has slowed investment nationally and locally Political turmoil will maintain uncertainty Labor supply constraints are impacting job growth across the state Some districts’ economies are being hurt by the lack of available labor Housing supply problems will intensify in the coming months

Beacon Economics When Bears Attack!

Beacon Economics How do economies grow / fail?

§ Economic growth is the default mode Resource Accumulation Increase in efficiency (market or technological) § A recession is an anomaly Short run disruption to growth caused by a large, rapid and sustained shock to the system Pain compounded by a negative feedback loop Recovery is a given Local economy’s exposure depends on direct exposure to cause, and structure of local labor force

Beacon Economics GDP: 2018 2.9% Year over Year

2017 2018 2019H1 Real GDP Growth (YoY) GDP 2.80 2.50 2.55 5.0% Final Demand 3.02 2.65 2.74

4.0% Consumption 2.00 1.79 1.94 Goods 1.06 0.62 1.05 3.0% Services 0.94 1.17 0.89 Investment 0.86 0.61 0.18 2.0% Structures 0.05 0.08 -0.09 Equipment 0.49 0.30 0.02 1.0% IPP 0.17 0.40 0.33 Residential 0.16 -0.18 -0.08 0.0% Net exports -0.16 -0.43 0.01 -1.0% Exports 0.66 0.05 -0.11 Imports -0.82 -0.49 0.11 -2.0% Government 0.15 0.27 0.64 Federal 0.11 0.17 0.33 State and local 0.04 0.09 0.31 2001Q1 2002Q2 2003Q3 2004Q4 2006Q1 2007Q2 2008Q3 2009Q4 2011Q1 2012Q2 2013Q3 2014Q4 2016Q1 2017Q2 2018Q3

Beacon Economics Consumer Spending

Real Consumer Personal saving as a Financial Obligations Spending Growth (yoy) percentage of DPI % DPI 5.0 12 18.5 4.0 18.0 10 17.5 3.0 17.0 2.0 8 16.5 1.0 6 16.0 0.0 15.5 4 -1.0 15.0 14.5 -2.0 2 14.0 -3.0 0 Q3 Q3 Q3 Q3 Q3 Q3 Jan-03 Jan-08 Jan-13 Jan-18 Sep-04 Sep-09 Sep-14 May-06 May-11 May-16 1990Q1 1995Q1 2000Q1 2005Q1 2010Q1 2015Q1 1980-01-01 1985-01-01 1990-01-01 1995-01-01 2000-01-01 2005-01-01 2010-01-01 2015-01-01

Source: FRED Beacon Economics 6 Housing Markets: Stabilizing

US Existing Home Sales SAAR US New Home Sales SAAR 7500 1200 7000 1000 6500 6000 800 5500 5000 600 4500 400 4000 3500 200 3000 2500 0 Jul-11 Oct-08 Apr-14 Jan-06 Jun-12 Jan-17 Mar-15 Feb-16 Dec-06 Nov-07 Dec-17 Nov-18 Sep-09 Aug-10 May-13 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19

Source: FRED Beacon Economics 7 Home Prices (Case Shiller) 17-18 18-19 DC-Washington 2.8% 2.9% 0.1% NC-Charlotte 5.7% 4.6% -1.1% GA-Atlanta 5.7% 4.6% -1.2% US Price Growth YoY AZ-Phoenix 7.2% 5.8% -1.4% 15.0% IL-Chicago 3.0% 1.6% -1.4% OH-Cleveland 5.1% 3.5% -1.6% 10.0% MI-Detroit 6.3% 4.2% -2.1% FL-Tampa 7.0% 4.7% -2.2% MN-Minneapolis 6.2% 3.8% -2.3% 5.0% FL-Miami 5.2% 2.8% -2.4% TX-Dallas 5.3% 2.7% -2.6% 0.0% MA-Boston 6.9% 3.9% -3.0% NY-New York 4.2% 1.2% -3.0% -5.0% National-US 6.2% 3.2% -3.1% OR-Portland 5.7% 2.4% -3.3% -10.0% CO-Denver 8.3% 3.4% -4.9% CA-San Diego 6.8% 1.3% -5.5% -15.0% CA-Los Angeles 7.4% 1.6% -5.8% NV-Las Vegas 13.0% 5.5% -7.5% CA-San Francisco 10.8% 0.8% -10.0% Jul-99 Jul-04 Jul-09 Jul-14 Oct-00 Oct-05 Oct-10 Oct-15 Apr-03 Apr-08 Apr-13 Apr-18 Jan-02 Jan-07 Jan-12 Jan-17 WA-Seattle 12.7% -1.4% -14.0%

Beacon Economics Market Fundamentals

Vacant Units Mortgage Origination by Credit 6.0% Score 5.5% 800 5.0% 750 4.5% 700 4.0% 650 3.5% 600 3.0% 550 2.5% 500 Q1-85 Q1-87 Q1-89 Q1-91 Q1-93 Q1-95 Q1-97 Q1-99 Q1-01 Q1-03 Q1-05 Q1-07 Q1-09 Q1-11 Q1-13 Q1-15 Q1-17 99:Q2 00:Q3 01:Q4 03:Q1 04:Q2 05:Q3 06:Q4 08:Q1 09:Q2 10:Q3 11:Q4 13:Q1 14:Q2 15:Q3 16:Q4 18:Q1 For Sale / Rent Held Off Market Median 25th percentile 10th percentile

Beacon Economics 9 A Rate Bump

30 Year Mortgage Rates 5.50

5.00

4.50

4.00

3.50

3.00

2.50

2009-09-102010-09-102011-09-102012-09-102013-09-102014-09-102015-09-102016-09-102017-09-102018-09-10

Source: Freddie Mac Beacon Economics 10 Labor Markets

Change Payroll Jobs YoY Unemployment and Job Openings 4000 10 9 3000 8 2000 7 4.6% 6 1000 5 0 4 3 -1000 2 3.7% 1 -2000 0 -3000 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jul-05 Apr-01 Oct-09 Apr-18 Jan-97 Jun-98 Jan-14 Jun-15 Job Opening Rate Unemployment Rate Feb-04 Mar-11 Nov-99 Sep-02 Dec-06 Aug-12 Nov-16 May-08

Source: BLS, JOLTS Beacon Economics 11 Consequences

Real Wage Growth FT Workers (Atl Fed) Median Growth by Region 5.0 02-07 14-19 4.0 Pacific 3.86 3.87 West North Central 3.81 3.52 3.0 Mountain 4.14 3.23 2.0 Overall 3.75 3.16

1.0 New England 3.79 3.12 South Atlantic 3.89 3.03 0.0 East South Central 3.54 3.03 -1.0 East North Central 3.41 2.87 Middle Atlantic 3.71 2.81

Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 West South Central 3.75 2.63 Median Real Average Real

Source: Atlanta Fed Wage Tracker, Census Beacon Economics 12 Workforce Growth

US Labor Force Growth (Smoothed) 2017 Population by Age (Millions) US Population Forecast 2.5% 25 0-24 25-64 65+ 2.0% 20 Current 104.5 169.4 49.2 1.5% 15

10 1.0% 2016-26 0.9 4.7 17.8 5 0.5% 2026-36 2.0 6.2 11.9 0 0.0% 2036-46 2.3 9.4 4.8 -0.5% 5 to 9 5years to Under 5Under years 10 to 14 yearsto 1410 yearsto 1915 yearsto 2420 yearsto 2925 yearsto 3430 yearsto 3935 yearsto 4440 yearsto 4945 yearsto 5450 yearsto 5955 yearsto 6460 yearsto 6965 yearsto 7470 yearsto 7975 yearsto 8480 Total 5.3 20.3 34.5 Jan-81 Jan-94 Jan-07 Sep-89 Sep-02 Sep-15 May-85 May-98 May-11 years85 over and

Source: BLS Beacon Economics 13 Beacon Economics Source: Business Insider/Census Bureau Beacon Economics 15 Industrial Production

IP: Manufacturing New Orders: Durable Goods 12.0 280000 10.0 260000 8.0 240000 6.0 4.0 220000 2.0 200000 0.0 180000 -2.0 -4.0 160000 -6.0 140000 -8.0 120000 100000 Jul-99 Jul-10 Jan-94 Jan-05 Jan-16 Mar-03 Mar-14 Nov-95 Sep-97 Nov-06 Sep-08 Nov-17 May-01 May-12 Jul-09 Oct-04 Apr-14 Manufacturing Jan-00 Jun-17 Jan-19 Mar-03 Feb-11 Aug-01 Dec-07 Sep-12 Nov-15 May-06

Source: Board of Governors Fed Reserve, BEA Beacon Economics 16 Trade War? What trade war?

Real Imports and Exports (GDP) June. June. YOY % YOY % 4000 Exports 2019 Imports 2019 Growt Growth YTD YTD h 3500 Total $823.6 -1.0% Total $1,235.8 0.3% 3000 Canada $148.1 -3.1% China $219.0 -12.4% Mexico $129.3 -1.7% Mexico $179.6 6.3% 2500 China $52.0 -18.9% Canada $158.1 -1.1% 2000 Japan $36.8 2.6% Japan $72.9 3.9% UK $34.1 0.2% Germany $62.3 -0.1% 1500 Germany $30.4 3.2% Korea $39.2 10.7% 1000 Korea $28.3 4.4% UK $31.0 5.7%

Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Q2 Q3 Q4 Netherland $26.1 10.2% Vietnam $30.4 33.4% Brazil $20.8 9.3% Ireland $29.9 6.2% 2000Q1 2005Q1 2010Q1 2015Q1 Exports Imports France $19.4 5.5% France $29.7 15.5%

Source: National Bureau of Statistics of China, Board of Gov. Fed. Reserve Beacon Economics 17 LA Ports

Exports Imports

120 90 80 100 70 80 60

50 60 40 30 40 Imports ($, Billions) Exports ($, Billions) 20 20 10 0 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 YTD 2018 YTD 2019 LA Long Beach YTD 2018 YTD 2019 LA Long Beach

Source: Wiser Beacon Economics 18 United States-Mexico-Canada Agreement (USMCA)

§ Basically NAFTA 2.0 with some adjustments: i. Stronger Country of Origin rules ii. Stricter Labor Standards iii. Increased access to Canada’s Dairy Market iv. More Intellectual Property protections v. Sunset Clause

§ Currently held up in Congress for the following reasons: i. 2020 Presidential Election (politics) ii. A push for more stringent labor and environmental standards

Source: Vox Media Beacon Economics State Rankings Employment Growth California Unemployment Rate 14.0 14-19 18-19 Current 12.0 1Utah 3.5% 3.6% 1558.1 10.0 2Nevada 3.4% 3.3% 1426.4 8.0 3Idaho 3.1% 3.0% 769.1 6.0 4Florida 2.9% 2.9% 8892.7 5Washington 2.8% 3.1% 3528.1 4.0 6Arizona 2.8% 2.8% 2861.5 2.0 7Colorado 2.6% 2.1% 2802.7 0.0 8Oregon 2.5% 2.3% 1942.8 9California 2.4% 1.9% 17378.9

10South Carolina 2.3% 1.6% 2181.7 1976-01-01 1978-12-01 1981-11-01 1984-10-01 1987-09-01 1990-08-01 1993-07-01 1996-06-01 1999-05-01 2002-04-01 2005-03-01 2008-02-01 2011-01-01 2013-12-01 2016-11-01

Beacon Economics New Housing Supply

How Much Housing New Home Permits Backlog 45000 Needed? Housing Needed to maintain Avg Growth 291 40000 2% State Job Growth 35000 Avg Vacancy 676 30000 Method 1 Total 967 25000 Total 722,022 Per Year 206,674 20000 High Growth 1,408 15000 Current 111,185 Avg Vacancy 676 10000 Shortfall 100,489 5000 Total 2,084 Method 2 0 Total 911,001 Texas Growth 1,849 Per Year 263,667 Q1-95 Q3-96 Q1-98 Q3-99 Q1-01 Q3-02 Q1-04 Q3-05 Q1-07 Q3-08 Q1-10 Q3-11 Q1-13 Q3-14 Q1-16 Q3-17 Current 111,185 Avg Vacancy 676 Single-family Multi-family Shortfall 157,482 Total 2,525

Source: CIRB Beacon Economics 21 Housing Permits

California California -2893 108503 -10.7% 60000 Los Angeles -1125 20674 -21.8% 50000 Santa Clara -914 6484 -56.4% San Diego -864 7949 -43.5% 40000 Alameda -838 6225 -53.8% San Bernardino -348 4586 -30.4% 30000 Ventura -164 1434 -45.6% 20000 San Mateo -91 1492 -24.3%

10000 Riverside 184 8795 8.4% Sonoma 278 3617 30.8% 0 Yolo 281 2103 53.5% San Francisco 302 5323 22.7%

Q1-95 Q4-96 Q3-98 Q2-00 Q1-02 Q4-03 Q3-05 Q2-07 Q1-09 Q4-10 Q3-12 Q2-14 Q1-16 Q4-17 Kern 412 3300 49.9%

Beacon Economics Los Angeles Economy

Employment LA Economy Labor Force Growth by MSA 4,900,000 2018Ch Gr TX Dallas 3,945 452 12.9% 4,700,000 AZ Phoenix 2,430 364 17.6% 4,500,000 GA Atlanta 3,088 299 10.7% CA Los Angeles 6,832 295 4.5% 4,300,000 TX Houston 3,439 245 7.7% MA-NH Boston 2,822 243 9.4% 4,100,000 CA San Francisco 2,637 226 9.4% 3,900,000 WA Seattle 2,125 212 11.1% FL Miami 3,151 212 7.2% 3,700,000 NY-NJ-PA New York 10,102 206 2.1% CA Riverside 2,088 189 9.9% 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 CO Denver 1,649 182 12.4% Civilian Employment Total, All Industries

Beacon Economics 23 City to County Comparisons Employment and Annual Average Wages

Employment Annual Average Wage Index at 100 70 115 City of LA Employment (Q3-2018): 1.46 Mil County of LA Employment (Q3-2018): 3.87 Mil 65 110 2008 - 105 60

100 55 95

Index at 100, Q1 50 90

85 & Smoothed) Thousands, SA ($, Wages 45

Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17 Q1-18 Q1-08 Q1-09 Q1-10 Q1-11 Q1-12 Q1-13 Q1-14 Q1-15 Q1-16 Q1-17 Q1-18 City of LA County of LA County of LA City of LA

Source: California EDD, QCEW Beacon Economics City to County Comparisons Employment by Industry Analysis Year over Year % Growth, Q3-18 County Q3-18 City Employment Employment Employment Industry Select Industries 1-Year % 1-Year % 000s 000s Gr Gr Total 1.46 m 2.2 3.87 m 1.3 Transport/Warehouse Health Care 291.0 4.2 705.6 3.8 Leisure and Hospitality 212.0 2.1 536.5 2.5 Construction Retail Trade 143.0 0 423.2 0.1 Prof./Business 151.2 0.6 351.1 3.6 Manufacturing 85.1 -3.2 342.0 -1.0 Prof, Sci, Tech, and Mgmt Admin Support 94.4 0.3 269.0 0.3 Financial Act. 101.3 1.5 222.3 0.9 Other Svcs. Wholesale Trade 66.9 -0.9 221.5 -0.5 Transport/Warehouse 79.5 14.2 197.5 6.6 Information 65.4 0.5 194.4 -2.4 Information Other Svcs. 70.6 3.5 155.5 -8.2 Construction 50.7 1.8 152.9 4.2 -10.0-5.0 0.0 5.0 10.0 15.0 20.0 Education 52.2 3.9 103.5 2.5 City County

Source: California EDD, QCEW Beacon Economics P S E E D PrivateEmployment Sector Employment andby Establishment District Statistics

Employment Statistics Wage Statistics Establishment Statistics Council Job Count (000s) Y-o-Y Growth (%) Average Y-o-Y Growth Estab. Average District Q3-16 Q3-17 Q3-18 Q3-17 Q3-18 Q3-18 ($000s) (%) Q3-18 Employees 1 62.5 63.7 64.1 +1.9 +0.7 45.9 +2.4 2,156 30 2 63.9 64.2 64.7 +0.5 +0.8 46.2 +1.8 2,937 22 3 106.9 109.4 111.7 +2.3 +2.1 58.5 +0.7 4,510 25 4 101.9 105.0 106.4 +3.0 +1.4 62.9 +0.5 4,508 24 5 162.2 167.0 172.5 +2.9 +3.3 102.1 +5.0 7,386 23 6 78.9 81.2 82.9 +2.9 +2.1 47.5 +2.6 3,253 25 7 50.3 53.3 53.4 +5.9 +0.1 48.8 +2.9 1,807 30 8 18.6 20.4 21.6 +9.6 +5.7 26.0 +1.1 859 25 9 65.2 65.3 64.9 +0.3 -0.8 59.7 +6.6 1,651 39 10 65.3 67.0 68.0 +2.6 +1.5 45.9 +3.9 3,255 21 11 162.2 169.9 179.0 +4.7 +5.4 84.6 +2.6 5,465 33 12 94.6 96.7 99.3 +2.2 +2.7 46.7 +1.6 3,928 25 13 88.3 91.2 93.3 +3.3 +2.3 64.1 +5.7 2,981 31 14 200.9 201.6 204.2 +0.4 +1.3 84.7 +4.8 7,430 27 15 59.3 60.2 61.0 +1.5 +1.4 56.0 +0.1 2,109 29 City 1,397.0 1,432.6 1,463.5 +2.5 +2.2 67.6 +3.5 54,383 27 Beacon Economics Source: Employment Development Department

Private Sector Employment Rankings, Q3-17 and Q3-18

Total Jobs Job Growth Average Wage District Q3-17 Q3-18 Q3-17 Q3-18 Q3-17 Q3-18 1 12 12 11 13 13 14 2 11 11 13 12 12 12 3 4 4 9 7 6 7 4 5 5 5 10 4 5 5 3 3 7 3 1 1 6 8 8 6 6 10 10 7 14 14 2 14 9 9 8 15 15 1 1 15 15 9 10 10 15 15 7 6 10 9 9 8 8 14 13 11 2 2 3 2 2 3 12 6 6 10 4 11 11 13 7 7 4 5 5 4 14 1 1 14 11 3 2 15 13 13 12 9 8 8 Source: Employment Development Department

5 Gross Tax Receipts – City of LA

Gross Tax Receipts % Change in Gross Tax Receipts

District 14 District 12 District 5 District 11 District 11 District 7 District 3 District 5 District 4 District 15 District 13 District 13 District 12 District 10 District 6 District 2 District 9 District 10 District 3 District 15 District 8 District 1 District 14 District 7 District 4 District 9 District 6 District 8 District 2 0 20 40 60 80 100 120 District 1 $, Millions -5 0 5 10 15

Source: LA City Office of Finance Beacon Economics Nonresidential Real Estate

Cost of Rent Vacancy Rate Office Permits Q2-2019 1-Year % Change Q2-2019 1-Year Change Century City 55.2 1.8 7.4 0.1 Hollywood 43.8 0.8 12.5 -1.7 Downtown 41.8 4.1 14.2 0.0 LA County 39.5 3.4 14.2 -0.3

Cost of Rent Vacancy Rate Retail Q2-2019 1-Year % Change Q2-2019 1-Year Change LA County 7.8 2.9 4.7 -0.5 Central LA 7.6 1.6 4.4 -0.2 East LA 7.6 2.4 5.3 -0.6 Mid-Cities 7.4 3.8 3.9 -0.8

Source: REIS Beacon Economics Nonresidential Real Estate

Top 10 Permit Valuations by City City of LA Share of City to Valuation County Permit ($, Millions) Permit Valuation ($ Type Mil.) % 2019 2018 Cities 2019 YTD 2018 YTD Change YTD YTD 2019 YTD 2018 YTD

Alterations 64.4% 49.7% Los Angeles 105.7 579.2 -81.8 1,278 656 Santa Clarita 57.7 7.4 680.2 Commercia Monterey Park 52.1 6.5 699.3 18.0% 63.6% l 106 579 Long Beach 42.7 8.9 377.0 Unincorporated Area 36.7 63.2 -42.0 Hotel 33.7% 28.3% 54 33 Azusa 33.7 0.0 -- Irwindale 32.2 2.3 1298.9 Retail 14.2% 67.6% 37 208 Arcadia 29.8 0.0 -- Torrance 26.9 3.0 786.0 Industrial 0 0.0% 46.0% 17 Culver City 26.6 11.6 128.8

Source: CIRB Beacon Economics District 1 – Gilbert Cedillo

Gross Receipts Tax in Top 8 Sectors 2018 Annual • Gross receipts of the Health Care sector Sector increased the most within District 1, growing ($000s) Growth (%) 41.7% annually in 2018. Total 13,134 -3.7 Health Care 2,211 41.7 • Employment industries such as Construction and Retail Trade 1,569 3.0 Information, as well as Leisure and Hospitality, enjoyed strong growth. Real Estate 1,136 4.2 Professional Services 1,105 -7.4 • The annual change of employed workers for Arts & Entertainment 790 25.5 District 1 (+5.3%) outpaced both the City and Wholesale Trade 598 -4.7 County of Los Angeles in 2017. Admin & Waste Services 582 -12.8 Accommodation & Food 571 14.2

Source: ACS, California EDD, LA City Office of Finance Beacon Economics District 2 – Paul Krekorian

Building Permit Value • Non mixed-use residential permitting was the 400 strongest it’s been in recent memory, totaling 350 $339.2 million in fiscal year 2019. 300

250 • Industries such as Admin Support and Wholesale Trade, as well as Leisure and Hospitality, enjoyed 200 strong wage growth from the third quarter of 2017 to the third quarter of 2018 ($, Millions) 150 100

• The average commute time for residents of 50 District 2 (33.4 minutes) was close to city and 0 countywide averages in 2017. FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Mixed-Use Nonresidential Residential

Source: ACS, California EDD, LA City Dept. of Building and Safety Beacon Economics District 3 – Bob Blumenfield

Construction Permits 2017-18 2018-19 Permit Type ($ Mil.) ($ Mil.)

• District 3 enjoyed a strong year in the way of Total Nonresidential 79.2 145.7 nonresidential permit activity, issuing $145.7 worth Other 0.7 0.5 of commercial permits in fiscal year 2019. Commercial Buildings 5.1 56.5 Commercial Alterations 73.3 88.7 • District 3’s Construction industry enjoyed strong employment growth. Total Residential 475.1 225.4 Single-family Residential Units 47.8 47.7 • The share of public transit commuters within Single-family Alterations 58.2 61.2 District 3 (5.0%) was below those for the city and Multi-family Residential Units 298.6 35.7 county in 2017. Multi-family Alterations 31.5 16.7 Mixed-Use Buildings 37.4 63.8 Mixed-Use Alterations 1.5 0.3 Note: Data is for fiscal year.

Source: ACS, California EDD, LA City Dept. of Building and Safety. Beacon Economics District 4 – David E. Ryu

Taxable Sales and Growth • Taxable sales for District 4 grew by nearly 20.0% 30 from fiscal year 2018 to fiscal year 2019, which 50 was the largest gain among all Los Angeles city 20 council districts. 45 10

• Employment industries such as Admin Support 40 0 and Education, as well as Other Services and Logistics, enjoyed lively growth. -10 35 Annual Growth (%)

Taxable Sales ($ Millions) Taxable -20 • District 4’s Non-internet Broadcasting subsector 30 -30 saw an impressive gain of 7.1% from the third quarter of 2017 to the third quarter of 2018. FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 Taxable Sales Annual Growth

Source: California EDD, LA City Office of Finance Beacon Economics District 5 – Paul Koretz

Establishment Births and Deaths • Among all Los Angeles City Council Districts, Year Gain Loss Net District 5 had the greatest net establishment 2010 636 376 +260 change on a year-to-date basis in 2018. 2011 660 393 +267 2012 689 372 +317 • Employment growth in District 5 outpaced the City from the third quarter of 2017 to the third quarter 2013 647 355 +292 of 2018 2014 664 332 +332 2015 648 360 +288 • As of the third quarter of 2018, District 5’s average 2016 683 384 +299 wage of $102,100 is the highest among all Los 2017 676 379 +297 Angeles city council districts 2018 YTD* 520 333 +187 Note: Only includes establishments with more than 3 employees *Year-to-date through the third quarter of 2018

Source: California EDD Beacon Economics District 6 – Nury Martinez

Avg. Wage Y-o-Y Growth Industry • Wages grew strongly across many sectors in ($000s) District (%) City (%) District Five. Total 47.5 +2.6 +3.5 Information 87.8 +6.8 +6.7 • Health Care was the fastest growing employment Manufacturing 61.8 +5.6 +3.8 sector in District 6, adding jobs at a yearly pace of Logistics 57.1 +3.7 +3.5 7.1. Financial Act. 53.7 +6.0 +3.4 Construction 50.6 +1.2 +5.4 • Nonresidential permit value in fiscal year 2019 Other Services 42.0 +4.6 +1.7 totaled 58.0% more than in the prior fiscal year. Retail Trade 37.7 +3.8 +2.5 Admin Support 36.5 +5.6 +5.2 Education 34.0 +4.4 +2.9 Hospitality 30.7 +8.8 +6.4 Note: Selected sectors

Source: California EDD Beacon Economics District 7 – Monica Rodriguez

Construction Permits • Residential permitting was relatively strong in 2017-18 ($ 2018-19 Permit Type fiscal year 2019, due in large part to multifamily Mil.) ($ Mil.) permit issuance. Total Nonresidential 36.3 22.2 Other 0.4 0.2 Commercial Buildings 2.3 1.5 • Six employment sectors saw average wages increase by more than 6.0% from the third quarter Commercial Alterations 33.5 20.5 of 2017 to the third quarter of 2018. Total Residential 81.2 143.1 Single-family Residential Units 23.7 38.0 Single-family Alterations 40.7 48.7 • Seven employment sectors contracted on a year- over-year basis within District 7 – tied for the most Multi-family Residential Units 13.3 42.1 sectoral declines alongside District 11. Multi-family Alterations 3.5 14.3 Mixed-Use Alterations 0.0 Note: Data is for fiscal year

Source: California EDD, LA City Dept. of Building and Safety Beacon Economics District 8 – Marqueece Harris-Dawson

Emplt. Y-o-Y Growth Industry • District 8’s year-over-year job growth of 5.7% (000s) District (%) City (%) outpaced the City. Total 21.6 +5.7 +2.2 Health Care 11.4 +7.9 +4.2 • Among all Los Angeles City Council Districts, Retail Trade 2.7 +1.2 -0.0 District 8 currently maintains the lowest average Hospitality 2.4 +2.3 +2.1 wage across its employment sectors. Other Services 1.1 +2.2 +3.5 Education 0.6 +5.6 +3.9 • Both Nonresidential and residential permit Financial Activities 0.5 +11.1 +1.5 valuation was strong in fiscal year 2019, Prof./Business 0.4 +3.1 +0.6 increasing 66.7% and 15.9%, respectively, from Construction 0.4 +1.2 +1.8 the previous fiscal year. Admin Support 0.4 +33.1 +0.3 Information 0.1 +6.1 +0.5

Note: Selected sectors

Source: California EDD, LA City Dept. Building and Safety Beacon Economics District 9 – Curren D. Price, Jr.

Avg. Wage Y-o-Y Growth Industry ($000s) District (%) City (%) • The average wage across all employment sectors Total 59.7 +6.6 +3.5 within District 9 grew by 6.6% from the third Information 182.0 +9.9 +6.7 quarter of 2017 to the third quarter of 2018. Education/Health 81.7 +3.5 +0.8 Wholesale Trade 51.2 +4.6 +1.9 • Altogether, total private employment contracted in Logistics 49.1 +51.6 +3.5 District 9. Construction 43.8 +2.5 +5.4 Financial Act. 43.0 +5.6 +3.4 • Residential permit valuation was quite strong in Manufacturing 42.8 +6.9 +3.8 fiscal year 2019 at $151 million (+120.0% YOY). Admin Support 34.3 +37.0 +5.2 Other Services 30.5 +5.2 +1.7 Hospitality 29.3 +4.3 +6.4 Note: Selected sectors

Source: California EDD, LA City Dept. of Building and Safety Beacon Economics District 10 – Herb J. Wesson, Jr.

• The average wage across all employment sectors Avg. Wage Y-o-Y Growth Industry within District 10 grew by 3.9% from the third ($000s) District (%) City (%) quarter of 2017 to the third quarter of 2018. Total 45.9 +3.9 +3.5 Information 155.5 +37.2 +6.7 • While Information wages grew over the year, Prof./Business 76.0 +6.0 +4.3 employment within Information contracted by Wholesale Trade 66.1 +3.5 +1.9 21.0% for the same period. Logistics 55.6 +7.9 +3.5 Construction 49.9 +0.7 +5.4 • Nonresidential permit valuation was relatively Other Services 40.8 +2.4 +1.7 strong in fiscal year 2019; issuance totaled $119.2 Health Care 40.2 +1.6 +0.3 million, due largely to commercial building. Retail Trade 34.1 +2.1 +2.5 Admin Support 32.2 +6.2 +5.2 Hospitality 24.9 +6.0 +6.4 Note: Selected sectors

Source: California EDD, LA City Dept. of Building and Safety Beacon Economics District 11 – Mike Bonin

Construction Permits • Nonresidential permit valuation for District 11 2017-18 2018-19 Permit Type totaled $1.6 billion in fiscal year 2019 – the most ($ Mil.) ($ Mil.) among all city council districts. Total Nonresidential 501.1 1,609.2 Other 1.4 1.3 • Seven employment sectors within District 11 Commercial Buildings 18.3 73.8 experienced contractions from the third quarter of Commercial Alterations 481.4 1,534.0 2017 to the third quarter of 2018. Total Residential 673.7 522.0 Single-family Residential Units 185.3 158.9 • Logistics employment grew by 26.1% year-over- Single-family Alterations 170.5 191.1 year, with its subsector Air Transport posting a Multi-family Residential Units 165.3 85.3 36.8% gain over the same period. Multi-family Alterations 80.8 65.9 Mixed-Use Total 71.8 50.8 Note: Data is for fiscal year

Source: California EDD, LA City Dept. of Building and Safety Beacon Economics District 12 – John Lee

Gross Receipts Tax in Top 8 Sectors • Gross receipts grew by 11.5% from 2017 to 2018 2018 Annual Sector – the most among all city council districts. ($000s) Growth (%) Total 25,224 +11.5 • Private employment within District 12 grew by Health Care 6,573 +10.3 2.7% to 99,300 from the third quarter of 2017 to the third quarter of 2018. Retail Trade 3,570 +8.0 Professional Services 1,593 +26.5

• Employment at establishments that manage more Real Estate 1,432 +19.7 than 150 employees grew by 5.9% on a year- Wholesale Trade 1,350 +19.7 over-year basis. Other Services 1,122 +27.3 Admin & Waste Services 1,067 +5.9 Construction 1,036 +40.4

Source: California EDD, LA City Office of Finance Beacon Economics District 13 – Mitch O’Farrell

Avg. Wage Y-o-Y Growth • The average wage across all employment sectors Industry ($000s) District (%) City (%) within District 13 grew by 5.7% from the third quarter of 2017 to the third quarter of 2018. Total 64.1 +5.7 +3.5 Information 159.1 +5.6 +6.7 Prof./Business 89.9 +3.8 +4.3 • Information was the largest growing sector in Construction 66.2 +5.5 +5.4 2018, growing over the year by 11.0% and overshadowing citywide growth of 0.5%. Health Care 60.9 +1.8 +0.3 Financial Act. 57.8 +2.6 +3.4 Other Services 42.1 +1.7 +1.7 • Residential permit valuation declined by $343.6 Admin Support 40.1 +11.4 +5.2 million between fiscal year 2018 and fiscal year 2019. Hospitality 39.3 +12.0 +6.4 Education 38.7 +1.0 +2.9 Retail Trade 36.0 +7.6 +2.5 Note: Selected sectors

Source: California EDD, LA City Dept. of Building and Safety Beacon Economics District 14 – Jose Huizar

Construction Permits • Small business was the greatest contributor to establishment growth in District 14, with a 3.6% 2017-18 2018-19 Permit Type expansion in the number of firms with less than 15 ($ Mil.) ($ Mil.) employees. Total Residential 275.5 322.2

Single-family Residential Units 17.9 16.2 • Permit issuance for mixed-use alterations was largely responsible for the leap in residential Single-family Alterations 26.6 27.1 performance. Multi-family Residential Units 22.2 65.8

• Logistics growth (0.9%) was considerably slower Multi-family Alterations 11.6 16.6 in District 14 compared to the citywide Logistics Mixed-Use Building 197.2 16.3 increase of 14.2%. Mixed-Use Alterations 0.0 180.2

Note: Data is for fiscal year

Source: California EDD, LA City Dept. of Building and Safety Beacon Economics District 15 – Joe Buscaino

Gross Receipts Tax in Top 8 Sectors • Total growth in the District was slower than the 2018 Annual City’s, at 1.4% compared to 2.2%. Sector ($000s) Growth (%) Total 15,801 +6.3 • Gross receipts saw impressive growth from the Professional Services, Admin & Waste Services, Wholesale Trade 1,936 +19.9 Logistics, Wholesale Trade, and Health Care Retail Trade 1,749 -6.0 sectors. Other Services 1,428 +6.7 Logistics 1,361 +28.6 • Single-family and multifamily residential permit valuations fell in District 15, by 38.1% and 47.6% Professional Services 1,066 +52.6 respectively. Admin & Waste Services 813 +30.4 Real Estate 706 +5.7 Health Care 548 +16.8

Source: California EDD, LA City Office of Finance Beacon Economics Households

Median Household Income 2018 Median 3-Year % 80000 Earnings ($, 000s) Change Education Level 75000 City County City County 70000

65000 Pop (25 & Over) 36.4 38.3 15.0 9.5

60000 Less than HS 22.4 23.4 21.0 14.7 55000 HS Grad 29.4 30.6 16.5 12.9 50000

45000 Some College 36.0 36.8 11.4 4.2

40000 Bachelors 52.4 56.6 2.9 8.9

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 California City of LA County of LA Grad 75.7 80.9 13.3 12.9

Source: ACS Beacon Economics Household Income

Median Household Median Household District Income 2017 YOY Change District Income 2017 YOY Change ($,000s) ($, 000s) City 60.2 10.6% District 14 50.8 8.5% District 11 99.2 7.3% District 15 50.7 3.6% District 5 88.6 3.6% District 6 49.1 7.1% District 12 87.0 5.8% District 13 46.8 8.8% District 4 82.4 5.4% District 10 43.6 6.7% District 3 71.8 5% District 1 40.0 9.9% District 7 63.1 8.5% District 8 37.0 6.1% District 2 59.8 4.6% District 9 33.5 9.2%

Source: ACS Beacon Economics Housing

Median Home Prices City Q2-2019 Year-over-Year 850 Median Price % Growth

750 Glendale 979.4 -2.9 Pasadena 960.0 3.0 650 Burbank 866.9 2.7 550 Torrance 777.3 -2.2

450 Los Angeles 744.9 3.3 Inglewood 623.9 5.5 350 Long Beach 622.0 -0.3 Median Home Prices ($, Thousands) Median Home Prices ($, 250 Santa Clarita 618.8 4.5 Downey 607.5 7.9 Q2-04 Q1-05 Q4-05 Q3-06 Q2-07 Q1-08 Q4-08 Q3-09 Q2-10 Q1-11 Q4-11 Q3-12 Q2-13 Q1-14 Q4-14 Q3-15 Q2-16 Q1-17 Q4-17 Q3-18 Q2-19 City of LA County of LA West Covina 566.0 2.1

Source: DataQuick Beacon Economics Housing Vacancies and Affordability

Cost of Rent, Apartments Apartment Vacancy Rates 3500 18 16 3000 14 2500 12 2000 10

1500 8 Rate (%) 6 Cost of Rent ($) 1000 4 500 2 0 0

Q2-04Q2-05Q2-06Q2-07Q2-08Q2-09Q2-10Q2-11Q2-12Q2-13Q2-14Q2-15Q2-16Q2-17Q2-18Q2-19 Q2-04Q2-05Q2-06Q2-07Q2-08Q2-09Q2-10Q2-11Q2-12Q2-13Q2-14Q2-15Q2-16Q2-17Q2-18Q2-19

Downtown West Adams Los Angeles (MD) West LA Downtown West Adams Los Angeles (MD) West LA

Source: ACS, REIS Beacon Economics Residential Permits

Single-family Permits Multifamily Permits 14000 20000 18000 12000 16000 10000 14000

8000 12000 10000 6000 8000 4000 6000 4000 2000 2000 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2018 YTD 2018 YTD 2019 YTD 2018 YTD 2019 Rest of LA County City of LA Rest of LA County City of LA

Source: CIRB Beacon Economics Residential Permits by District

Total Number of Housing Permits (Includes Year over Year Change Mixed-Use, Single-family, Multifamily) (Includes Mixed-Use, Single-family, Multifamily) 10 11 10 14 11 1 14 12 1 13 12 2 13 3 2 4 3 District #

District # 4 5 5 9 There were 4,659 less 9 Average Year-over-Year % 6 permits issued in FY 2019 6 Growth in Housing Permits was 8 than FY 2018 8 -27% between all Districts 7 7 (FY 2018 to FY 2019) 15 15 0 500 1000 1500 2000 -1500 -1000 -500 0 500 Number of Units Change (Number of Units)

Source: LA City Dept. of Building and Safety Beacon Economics Total Housing Permits

Total Residential Total Residential District Units Permitted YOY Change District Units Permitted YOY Change FY-2019 FY-2019 City 13,186 -4,659 District 6 410 -98

District 9 677 +385 District 8 403 -179

District 11 1,558 +250 District 15 171 -513

District 12 1,031 +216 District 1 1,067 -709

District 7 328 +207 District 3 938 -842

District 14 1,067 +78 District 10 1,759 -1,087

District 5 876 +18 District 4 915 -1,170

District 2 972 -19 District 13 1,014 -1,196

Source: LA City Dept. of Building and Safety Beacon Economics 51 Housing Vacancy Rates

Vacancy Rate Vacancy Rate District YOY Change District YOY Change (%) (%)

City 7.5 0.7pp District 15 6 0.0pp

District 6 3.5 -0.1pp District 8 6.6 -0.7pp

District 12 3.6 -0.2pp District 10 6.9 0.6pp

District 7 4.6 -0.1pp District 14 6.9 0.0pp

District 2 5.1 0.2pp District 11 7.1 0.3pp

District 3 5.2 -0.3pp District 13 8.4 0.6pp

District 9 5.8 -0.7pp District 5 8.7 1.0pp

District 1 6 -0.3pp District 4 8.8 0.8pp

Source: ACS Beacon Economics Affordability

Median Rent as % of Household Income Monthly Owner Cost as % of Household 38 Income 32 37

36 30 35 28 34 %

33 % 26

32 24 31 22 30

29 20

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 California City County California City County

Beacon Economics The Big Picture

§ Positives: It will be a good year § Negatives: Problems Growing GDP Growth Outlook for 2019: 2%+ Labor shortages will be an issue Labor markets to remain tight Local housing supply tightening Rising wages to put pressure on profits Will the Fed continue to tighten, invert Exports, business investment continue the yield curve? to grow Equity markets behaving oddly Inflation to remain constrained Federal deficit widening sharply Interest Rates Still Low Bank lending still constrained Lending constrained, but commercial Political uncertainty to dominate markets steady headlines Debt Levels still safe Critical Policy Issues Remain Where people move (want to move) Undiscussed will drive regional growth Miserabilism warping our sense of reality

Beacon Economics 54 What can Beacon do for you?

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