John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP

1. Inland Empire Prosperity . . . John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP

2. After Losing 8.71 Million Jobs … Now At A Record Level of JobsU.S. Jobs Long Slow Growth - Not Over-Heating Now What?

3. Unemployment Rates: Full Employment 18.0% 10.6% 9.1% 4.4%

4. Cut Taxes … Increase Spending • Lower Taxes • Massive Increase in Spending on Infrastructure • Result: Increased Deficit Spending Increased Upward Pressure on Employment • Increased Pressure On Prices FED Rate Increase Needed to Slow Economy

6. California Job Gains/Losses Up 1,064,038 6.7% Up 2007 15,844,325 2016 16,908,363 Recovery 2,243,097 Great Recession -1,179,058

8. Inland Empire Population Greater Than 25 of 50 States 2010-2016 Growth: 6.2%

9. Inland Empire Economy Gaining Strength!

10. Job Quality

11. Inland Empire Growth was the 2nd LargestAbsolute Job Gain in California in 2015!

12. Unemployment Rates

13. The Issue: Poverty

14. Gold Mine Theory Secondary Tier Primary Tier

15. Health Care

16. Repeal & Replace Affordable Care Act • Repeal Without Replacement Could Unsettle Insurance Market • Impact of Repeal & Replace Together Depends Upon Conditions • Remove Penalty For Not Having Insurance • Previous Medical Conditions Use Subsidized High Risk Pool • Children Stay on Parents Insurance Until 26 • Eliminate Mandated Maternity & Mental Health Coverage • End Subsidies & Give Refundable Tax Credits For Coverage If No Employer Coverage • End Federal Subsidies for Medicaid, Use State Block Grants • Create Multi-State Insurance Markets

17. Potential Impact On Health Care Demand & Quality of Life -51.0% Drop in Uninsured -53.8% Drop in Share Uninsured

18. Health Care Jobs: Continuous Growth • 2011-2016 • 11.6% of Job Growth • Median Pay $59,494 Inland Empire’s Best Sector for Higher End Jobs

19. Sophisticated Warehousing Operations

20. Value of the Dollar:Helps Imports & Hurts Exports 100.0 2012-2016 25.6%

21. Port Container VolumesOn Pace To Tie 2nd Highest Import Level

22. Place Tariffs on Imports • Imports More Expensive • Lower Foreign Imports & Hurts the Inland Empire • Reduced U.S. Jobs Handling Imports • Improve U.S. Manufacturing Jobs except for Automation Losses • Higher Prices At Retail Stores

23. Corporate Taxes Based on U.S. Sales not Income • Retailer Buy Imports for $80 … Sell in U.S. For $100 … • Pay Tax on $100 • Firm Makes U.S. Goods for $80 … Sells Abroad for $100 … Pay No Taxes • Removes Incentive to Put HQ Abroad to Avoid U.S. Taxes • Discourages Imports & Hurts the Inland Empire • Encourages Exports • Could Bring Billions of Dollars Back to the U.S.

24. E-Commerce Growth RatesYear Over Year by Quarter 1.1% 8.4%

25. Industrial OverwhelminglyIn The Inland Empire

26. Industrial Asking Lease Rates Soaring Up 19.8% Up 73.3%

27. Logistics Powerful Job Growth • 2011-2016 • 23.1% of New Jobs • Median Pay $45,456

28. PM 2.5: Diesel Pollution -91.4%

29. Manufacturing: Should Be A Major Growth Source

30. California Manufacturing Job GrowthJust 4.8% of U.S. Growth

32. Inland Empire Manufacturing Jobs • 2011-2016 • 5.5% of Job Growth • Median Pay $50,106

33. Construction: Finally Coming Back

34. Massive Infrastructure Spending Tariffs Affect Imports Potential For Higher Interest Rates Privatize Fannie Mae & Freddie Mac But Leave FHA Alone • Dollars For Freeways, Airports Transit, Harbors, Rail Lines • Greater Union Construction Job Growth • CA Opposition to Trump & CA Environmental Policies • Reduced Construction of Logistics Facilities • Lower Construction Job Growth • Fed Already Discussing More Rate Rises In 2017 Due to Hot Economy • Housing More Expensive • Dampen Home Sales & Residential Construction Jobs • All Mortgages Rates Act Like Jumbo Rates – Some Increase in Rates • Housing More Expensive • Still Have Lower Down Payments For Qualifying Homes • Dampen Home Sales & Residential Construction Jobs

35. Home Price Trends 92.3% -21.3%

36. Long Term Competitive Price Advantage Still Exists

37. Inland Empire Homes Cheaper By$236,000 to $403,000 vs. Coastal Cos.

38. Little New Home Inventory Supply

39. Mortgage Market Has Stabilized …Low Numbers of Notices of Default

40. Some Increase in Single Family Homes Being Built

41. Building Permit Valuation Back to 1999

42. Apartment Rental Rates & Vacancies. Riverside $1,367 4.6% San Bernardino $1,418 3.9% Orange $1,637 3.4% Santa Barbara $1,682 2.7% San Diego $1,873 3.2% Ventura $1,890 3.9% Los Angeles $2,180 4.0% Source: CB Richard Ellis

43. Inland Empire Construction Jobs • 2011-2016 • 12.8% of Job Growth • Median Pay $51,915

44. High Paying Sectors Ahmad Adel Al-Khatib Jack Dangermond

45. BA or Higher

46. Office Market Net Space Absorption

47. Office Market Still Heavy in Vacancies 24.2% 13.8%

48. Office Asking Lease Rates Down -8.7% Up 2.9%

49. Professionals & Mgmt., Higher Ed., Mining Utilities, Information Group Slowly Adding Jobs 2011-2016 0.4% of Growth Median Pay $71,206

50. Shrink Government Expand Military • Continued Decline in Non-Defense Government Jobs • Increase in Civilians & Military Defense Positions • Twenty-Nine Palms Marine Corps, 29 Palms • Fort Irwin, San Bernardino Co. • March Air Reserve Base, Riverside Co. • Naval Surface Warfare Center, Corona