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  • [ MUSIC ]

  • >> HELLO AND WELCOME TO TALKING POINTS.

  • I'M DAVE KELLY, DIRECTOR OF ADVANCED MEDIA PRODUCTION

  • AT CAL STATE LONG BEACH.

  • TODAY WE'RE GOING TO BE TALKING ABOUT RECENT ECONOMIC TRENDS

  • AND HOW THEY AFFECT US GLOBALLY, NATIONALLY

  • AND HERE IN CALIFORNIA.

  • MY GUEST TODAY IS DR. ROBERT KLEINHENZ.

  • DR. KLEINHENZ IS THE CHIEF ECONOMIST

  • FOR THE LOS ANGELES COUNTY ECONOMIC

  • DEVELOPMENT CORPORATION.

  • WELCOME, ROBERT AND THANK YOU

  • FOR JOINING US ON TALKING POINTS.

  • >> THANK YOU, MY PLEASURE.

  • >> WELL, LET'S START WITH THE BIG PICTURE

  • BECAUSE EVERYONE HAS BEEN HEARING ABOUT CHINA

  • AND THE SLOWDOWN IN CHINA.

  • WE KNOW THEY HAD OVER THE SUMMER ABOUT A 30% COLLAPSE,

  • IF YOU WANT TO USE THAT WORD, IN THEIR STOCK MARKET.

  • THEY'VE ALSO RECENTLY SUGGESTED THAT THEIR GROWTH RATE IS GOING

  • TO BE ABOUT 6.9% FOR THIS YEAR, WHICH IS BELOW THE TARGET

  • OF 7%, JUST A LITTLE BIT.

  • BUT IT'S DEFINITELY DOWN FROM PREVIOUS YEARS.

  • AND I KNOW THAT THAT'S CAUSED SOME CONCERN.

  • WE'VE HEARD A LOT ABOUT IT IN THE ECONOMIC PRESS.

  • I'VE GOT A QUOTE HERE FROM THE WASHINGTON POST

  • FROM JUST A FEW DAYS AGO.

  • AND THIS IS THE QUOTE FROM THE POST.

  • IT SAYS, "IT STARTS WITH THE SLOWDOWN IN CHINA,

  • WHICH IS ALREADY STRAINING THE GLOBAL RECOVERY."

  • "THE WORLD'S SECOND LARGEST ECONOMY HAS LOST ITS APPETITE

  • FOR THE RAW MATERIALS THAT FUELED ITS INDUSTRIAL BOOM."

  • "LEAVING THE SMALLER COUNTRIES THAT SUPPLIED IT WITH RESOURCES,

  • STUMBLING IN ITS WAKE."

  • "SLOWER GROWTH ABROAD,

  • TRANSLATES INTO WEAKER FOREIGN CURRENCIES

  • AND A STRONGER U.S. DOLLAR,

  • WHICH MAKES AMERICAN GOODS HARDER TO SELL

  • IN THE GLOBAL MARKETPLACE."

  • WHAT ABOUT THAT?

  • >> YEAH, SO, YOU KNOW, CHINA IS THE SECOND LARGEST ECONOMY HERE

  • ON THE GLOBE.

  • IT HAD ASTOUNDING RATES OF GROWTH FOR DECADES,

  • AS IT WAS GOING THROUGH THE INDUSTRIALIZATION PROCESS.

  • A BIG PART OF THAT INDUSTRIALIZATION PROCESS WAS AN

  • EXPORT ORIENTED STRATEGY.

  • AND IN RECENT YEARS, THE COUNTRY OF CHINA HAS GONE THROUGH

  • OR BEGUN TO GO THROUGH A TRANSITION

  • FROM THIS EXPORT ORIENTED INDUSTRIALIZATION STRATEGY,

  • TO ONE THAT IS MORE CONSUMER SPENDING DRIVEN.

  • AND THAT MEANS THEY'LL BE LESS RELIANT ON ALL SORTS OF THINGS,

  • INCLUDING RAW MATERIALS.

  • AND INDEED, THAT DOES CAUSE RIPPLE EFFECTS THROUGHOUT THE

  • GLOBAL ECONOMY.

  • MANY OTHER SMALLER ECONOMIES AROUND THE GLOBE ARE RELIANT

  • ON THOSE -- THE CHINESE MARKET

  • FOR THEIR COMMODITIES AND OTHER PRODUCTS.

  • SO, THERE WILL BE SOME ADJUSTMENT TO TAKE PLACE

  • OF OVER SEVERAL YEARS' TIME, I WOULD EXPECT.

  • >> PEOPLE HAVE USED THE WORD CONTAGION TO DESCRIBE THE FEAR

  • OF WHAT MAY HAPPEN WITH THE CHINESE ECONOMY AFFECTING THE

  • U.S. ECONOMY.

  • IS THERE ANY REAL THREAT OF CONTAGION?

  • >> SO, AS THIS STORY POINTED OUT, WE'RE ALL LINKED.

  • SO, IF THE CHINESE ECONOMY SLOWS AND THAT CAUSES A RIPPLE EFFECT

  • WITH ALL THESE OTHER ECONOMIES AROUND THE GLOBE,

  • OUR MARKETS FOR OUR PRODUCTS

  • THAT WE SELL ABROAD ARE GOING TO BE WEAKER.

  • CHINESE EXPORTS FROM THE U.S.,

  • ONLY MAKE UP ABOUT 1% OF OUR GDP.

  • AND MORE GENERALLY, THE TRADE COMPONENT

  • OF THE U.S. ECONOMY IS AMONG THE SMALLER COMPONENTS

  • OF THE U.S. ECONOMY.

  • SO, WE SHOULD BE FAIRLY INSULATED

  • FROM THE DIRECT DOWNSIDE EFFECTS.

  • BUT THESE REVERBERATIONS THAT YOU MENTIONED,

  • WE HAVE TO BE MINDFUL OF.

  • >> AND THERE'S ANOTHER INTERNATIONAL ISSUE INVOLVING

  • WHAT'S REFERRED TO AS THE BRICS COUNTRIES.

  • BRICS IS THE ACRONYM FOR BRAZIL, RUSSIA, INDIA,

  • CHINA AND SOUTH AFRICA.

  • AND THERE'S CONCERN THAT THEY MAY BE A DEVELOPING AN

  • ALTERNATIVE BASKET OF CURRENCIES,

  • THAT'S THE PHRASE THEY USE, TO REPLACE THE U.S. DOLLAR

  • AS THE WORLD'S RESERVE CURRENCY.

  • FIRST OF ALL, MAYBE EXPLAIN TO OUR VIEWERS WHAT WE MEAN

  • BY WORLDS RESERVE CURRENCY.

  • AND IF THERE IS ANY REAL THREAT

  • THAT THE DOLLAR WILL BE REPLACED.

  • >> THIS SITUATION HAPPENS FROM TIME TO TIME.

  • SO, THE U.S. DOLLAR IS KNOWN

  • AS THE RESERVE CURRENCY AROUND THE GLOBE.

  • AND WHAT THAT MEANS IS THAT MANY FOREIGN TRANSACTIONS ARE

  • DENOMINATED IN U.S. DOLLARS.

  • IT'S ALSO A CURRENCY THAT CENTRAL BANKS KEEP --

  • LITERALLY KEEP IN THEIR VAULTS,

  • AS A PART OF THEIR HARD RESERVES AGAINST DEPOSITS.

  • SO, FOR DECADES, THE U.S. DOLLAR HAS BEEN THE RESERVE CURRENCY.

  • WELL, WHY IS THAT?

  • IT'S BECAUSE IT IS BACKED BY A STABLE COUNTRY.

  • AND THE VALUE OF THAT CURRENCY ITSELF IS STABLE.

  • AND THOSE ARE 2 THINGS, THAT TAKEN TOGETHER,

  • OFTEN TIMES ARE THE DETERMINANTS OF WHETHER

  • OR NOT A RESERVE CURRENCY WILL CONTINUE TO BE REGARDED AS SUCH

  • OR IF IT WILL LOSE CREDIBILITY.

  • IT'S ALL ABOUT THE CREDIBILITY OF THE CURRENCY

  • AND WHO'S BACKING IT, WHICH IS THE GOVERNMENT

  • OF THE UNITED STATES.

  • >> AND WHAT ABOUT THIS IDEA OF A BASKET

  • OF ALTERNATIVE CURRENCIES?

  • IS THAT GOING TO HAPPEN?

  • ARE WE GOING TO SEE THAT HAPPENING?

  • >> WELL, IT COULD BE THAT SOMETHING

  • LIKE THAT WILL HAPPEN IN THE FUTURE.

  • BUT DO KEEP IN MIND YOU'VE GOT TO GENERALLY LOOK

  • FOR SOME BACKING BEHIND A RESERVE CURRENCY.

  • WITH A BASKET OF CURRENCIES, I MEAN, I COULD IMAGINE

  • FOR EXAMPLE, THAT MAYBE THE EURO AND THE POUND AND THE DOLLAR,

  • COULD BECOME A BASKET BASED RESERVE CURRENCY.

  • I JUST DON'T KNOW THAT IT WOULD NECESSARILY TRANSPIRE.

  • SO, AT LEAST AT THIS TIME, I DON'T THINK THIS IS SOMETHING

  • THAT WE NECESSARILY NEED TO CONTEMPLATE AS BEING INEVITABLE.

  • >> OKAY AND IF WE TALK ABOUT THE DOLLAR BECOMING THE WORLD'S

  • RESERVE CURRENCY, WHICH IT CERTAINLY DID

  • OVER THE LAST 50, 60 YEARS OR SO.

  • A LOT OF THAT WAS ALSO TIED TO THE FACT

  • THAT OIL WAS BASED ON THE DOLLAR.

  • SO, WE CALL IT PETRO DOLLARS.

  • SO, IF THE WORLD IS STILL RUNNING PRIMARILY ON OIL,

  • DOESN'T THAT SECURE THE DOLLAR'S PLACE

  • AS THE WORLD'S RESERVE CURRENCY?

  • >> SURE. I GUESS IT'S A GOOD IDEA FOR US TO THINK

  • ABOUT THE BENEFITS THAT ACCRUE TO THE U.S.,

  • BY VIRTUE OF BEING THE COUNTRY

  • THAT HAS THE RESERVE CURRENCY ON THE GLOBE.

  • IT DOES ALLOW US TO ENGAGE IN THINGS LIKE DEFICIT SPENDING,

  • MORE SO THAN WE'D HAVE TO.

  • IT DOES ALLOW US TO RUN A TRADE DEFICIT.

  • AND THESE ARE 2 THINGS THAT HAVE BEEN A PART

  • OF THE ECONOMIC LANDSCAPE IN THE U.S. FOR DECADES.

  • SO, THE RESERVE CURRENCY, IN AND OF ITSELF,

  • THAT'S AN IMPORTANT ROLE FOR THE U.S. TO PLAY.

  • BUT IT ALSO GIVES US SOME BENEFITS, VIS-À-VIS THE REST

  • OF THE WORLD, THAT WE'VE TAKEN ADVANTAGE OF, I WOULD SAY,

  • OVER THE LAST FEW DECADES.

  • >> WELL, LET'S TALK

  • ABOUT COMMODITY PRICES, PARTICULARLY OIL.

  • BECAUSE THAT'S THE COMMODITY THAT MOST PEOPLE ARE AWARE OF,

  • ALTHOUGH THERE ARE MANY OTHERS.

  • CERTAINLY AGRICULTURAL COMMODITIES AND PRECIOUS METALS

  • AND THAT SORT OF THING.

  • BUT IN TERMS OF OIL, LONG BEACH HAS ALWAYS BEEN A VERY BIG OIL

  • TOWN AND HAS BEEN SINCE 1921 WHEN WE DISCOVERED OIL HERE.

  • WHEN WE LOOK AT OIL PRICES, WHEN WE GO TO THE PUMP

  • AND WE SEE THE PRICE GOING UP OR DOWN,

  • DO WE REALLY PUT TOO MUCH EMPHASIS ON THAT?

  • AND ISN'T OIL AND OIL PRICING MUCH MORE STABLE

  • AND LESS CAUSING OF DISRUPTION THAN WE MAYBE HEAR

  • ABOUT ON THE NEWS MEDIA?

  • >> WELL, IT'S SOMETHING THAT CERTAINLY CATCHES THE EYE

  • OF CONSUMERS AND BUSINESS ALIKE

  • AND ESPECIALLY HERE IN CALIFORNIA.

  • SO, A COUPLE OF THINGS ON THIS TOPIC, YOU KNOW,

  • YOU DON'T HAVE MUCH ELSE TO DO WHEN YOU'RE WATCHING

  • THAT GAS METER RUN WHEN YOU'RE PUTTING GAS IN YOUR TANK.

  • SO, SOME PEOPLE, I THINK, ARE PAYING ATTENTION

  • AND THEY'RE SEEING THAT ONE WEEK THEIR PUTTING GAS IN THE TANK

  • AT $3 A GALLON, NEXT WEEK IT'S $3.50.

  • HERE IN CALIFORNIA, ONE OF THE REASONS FOR THAT IS

  • THAT WE HAVE CONSTRAINT SUPPLY.

  • WE HAVE A LIMITED NUMBER OF REFINERIES AND A LIMITED NUMBER

  • OF FIRMS THAT ARE RUNNING THOSE REFINERIES.

  • SO, THAT ADDS A LITTLE MORE VOLATILITY TO OUR MARKET.

  • OF COURSE, WE HAVE SPECIAL GAS HERE.

  • ALL OF THESE THINGS MAKE FOR A MORE VOLATILE SET OF PRICES HERE

  • IN CALIFORNIA, THEN ELSEWHERE AROUND THE COUNTRY.

  • AND THEN ON TOP OF THAT, WE HAVE HEAVIER TAXES ON OUR ENERGY.

  • SO, IT DOES CATCH THE EYE OF THE CONSUMER IN THE BUSINESS.

  • THERE'S NOT A LOT THAT WE CAN REALLY DO

  • ABOUT IT AT THE PRESENT TIME.

  • THERE'S A STUDY THAT JUST CAME OUT THAT SHOWED

  • THAT THE OIL PRODUCERS IN CALIFORNIA MAY BE COLLUDING,

  • BUT IT'S VERY DIFFICULT TO VERIFY.

  • >> IT'S ALWAYS HARD TO PROVE THOSE THINGS.

  • >> RIGHT.

  • >> WELL, LET'S TALK ABOUT THE U.S ECONOMY IN GENERAL.

  • WE KNOW THAT THE UNEMPLOYMENT RATE HAS BEEN COMING DOWN.

  • WE'RE NOW LISTING THE OFFICIAL, WHAT THEY REFER

  • TO AS THE U-3 UNEMPLOYMENT RATE AT 5.1%.

  • BUT THE U-6, WHICH IS PERHAPS A BETTER MEASUREMENT

  • OF THE UNCOMFORTABLE NATURE OF EMPLOYMENT IN THE COUNTRY,

  • IS CLOSER TO 10% OR ACTUALLY IS AT 10%.

  • THAT MEANS, PEOPLE THAT ARE WORKING PART-TIME JOBS,

  • BUT WOULD REALLY PREFER TO HAVE FULLTIME WORK, BUT CAN'T FIND IT

  • AND THOSE THAT ARE FULLY UNEMPLOYED.

  • SO, WHAT ABOUT UNEMPLOYMENT?

  • WE'VE SEEN IT DROP.

  • IT'S NOW AT ABOUT 7% HERE IN L.A. COUNTY.

  • ARE WE SEEING UNEMPLOYMENT STARTING TO LEVEL

  • OUT WITH THE DEMAND OF JOBS?

  • AND ALSO, WE'RE GOING TO TALK ABOUT LABOR PARTICIPATION.

  • BUT FIRST, WHAT ABOUT THE RATE ITSELF?

  • >> SO, THE RATE YOU REFER TO, THE U-3 RATE,

  • I CALL THE HEADLINE RATE OF UNEMPLOYMENT

  • BECAUSE THAT'S WHAT WE HEAR ABOUT IN THE NEWS, AS A RULE.

  • SO, AT 5.1%, ITS COME DOWN, IT'S ABOUT HALF

  • OF WHAT IT WAS DURING THE WORST DAYS OF THE RECESSION.

  • TYPICALLY, THE U-6 RATE, WHICH ADDS IN DISTRESSED WORKERS,

  • PEOPLE WHO WOULD LIKE TO WORK FULLTIME,

  • BUT ARE WORKING PART-TIME AND SO ON, THAT RATE IS USUALLY

  • ABOUT DOUBLE THE HEADLINE RATE.

  • SO, WHEN THE UNEMPLOYMENT RATE WAS ALMOST 10%,

  • THE HEADLINE RATE, THE U-6 RATE, WAS ABOUT 20%.

  • IT'S COME DOWN QUITE A BIT, ARGUABLY.

  • IT'S STILL A LITTLE BIT ON THE HIGH SIDE.

  • AND MAYBE SOME PEOPLE WOULD SAY THAT IT'S MORE THAN A LITTLE BIT

  • ON THE HIGH SIDE, BUT IT HAS IMPROVED OVER TIME.

  • AND OTHER ASPECTS OF THE LABOR MARKET,

  • BEHIND THAT HEADLINE RATE, HAVE ALSO IMPROVED.

  • >> WHAT ABOUT THIS LABOR PARTICIPATION RATE

  • THAT WE ARE HEARING ABOUT A LOT THESE DAYS?

  • WE NOW HAVE 94 MILLION PEOPLE NATIONALLY

  • THAT ARE NOT PARTICIPATING IN THE LABOR FORCE.

  • THAT'S A PRETTY BIG NUMBER.

  • >> ABSOLUTELY.

  • >> WHAT DOES THAT MEAN, I KNOW THERE'S SOME TRENDS,

  • SUCH AS BABY BOOMERS, ARE TURNING 65 AT THE RATE

  • OF 10,000 PER DAY NOW.

  • SO, ONE WOULD THINK THEY WOULD BE EASING INTO RETIREMENT?

  • IS THAT WHAT'S HAPPENING?

  • >> SO, YES, THE LABOR FORCE PARTICIPATION RATES BEEN

  • DECLINING FOR SEVERAL YEARS.

  • IN THE IMMEDIATE AFTERMATH OF THE RECESSION, THE CONCERN WAS

  • THAT THIS WAS SYMPTOMATIC OF SOMETHING STRUCTURALLY WRONG

  • WITH OUR LABOR MARKET.

  • AS TIME HAS PASSED, WE HAVE TAKEN THE STANCE,

  • I MEAN ANALYSTS HAVE SORT OF SURMISED

  • THAT IT'S MORE AN ARTIFACT OF THE DEMOGRAPHICS.

  • AND SO, YOU'RE RIGHT, THE BABY BOOMERS ARE LEAVING THE LABOR

  • FORCE, AS THEY HIT RETIREMENT AGE.

  • THE INTERESTING THINK ABOUT THAT IS IT'S NOT QUITE WHAT YOU SEE

  • ON THE SURFACE.

  • THE LABOR FORCE PARTICIPATION RATE

  • OF OLDER AMERICANS IS ACTUALLY ON THE RISE,

  • RELATIVE TO HISTORIC STANDARDS.

  • AND AT THE SAME TIME AND THIS IS WHAT SHOULD BE MOST CONCERNING,

  • YOUNG ADULT LABOR FORCE PARTICIPATION RATE IS LOW

  • AND HAS BEEN FALLING FOR THE LAST FEW YEARS.

  • AND I THINK THAT'S PARTLY STILL SYMPTOMATIC OF THE LONG SHADOW

  • OF THE GREAT RECESSIONS THAT'S EFFECTED YOUNG ADULTS

  • IN A LOT OF WAYS.

  • >> AND WHEN WE TALK ABOUT THE NATIONAL ECONOMY,

  • WE HAVE THIS ONGOING DIALOGUE IN OUR PRESS ABOUT WILL THEY

  • OR WON'T THEY AND THAT'S THE FEDERAL RESERVE,

  • IN TERMS OF INTEREST RATES.

  • AND THEY'VE BEEN HELD NEAR OR AT ZERO FOR SEVERAL YEARS NOW.

  • AND PEOPLE KEEP SAYING WELL,

  • I THINK THE NEXT MEETING THEY'RE GOING

  • TO RAISE IT AND THEN THEY DON'T.

  • AND TYPICALLY THEY SITE THE LOW LABOR PARTICIPATION RATE,

  • WE'VE BEEN TALKING ABOUT, THEY TALK ABOUT LOW INFLATION RATE.

  • AND THEY ALSO TALK ABOUT THE SLOW RATE OF WAGE GROWTH,

  • WHICH IS ALSO A PROBLEM.

  • SO, WILL THEY OR WON'T THEY SOON?

  • AND WHY WOULD THEY, IF TIMES ARE SO UNCERTAIN?

  • >> YOU'RE RIGHT.

  • THE MORE COMPLETE PICTURE OF THE LABOR MARKET GOES BEYOND

  • THAT HEADLINE RATE OF UNEMPLOYMENT.

  • IT LOOKS AT LABOR FORCE PARTICIPATION RATE;

  • ABOUT WHICH WE ALREADY SPOKE.

  • IT ALSO LOOKS AT WAGE GROWTH AND THE SHARE OF PEOPLE

  • WHO HAVE FULLTIME WORK.

  • ALL OF THOSE INDICATORS ARE MOVING IN THE RIGHT DIRECTION.

  • ARGUABLY, THE FED COULD RAISE RATES NOW

  • AND OVER THE NEXT SEVERAL QUARTERS,

  • WITHOUT DOING MUCH DAMAGE OR SLOWING

  • DOWN THE NATIONAL ECONOMY ALL THAT MUCH.

  • SO, FROM THE NATIONAL PERSPECTIVE,

  • FROM THE U.S. PERSPECTIVE, IT COULD DO SO.

  • BUT IT'S ALSO LOOKING AT WHAT'S HAPPENING AROUND THE GLOBE.

  • AND WE'RE LOOKING AT ECONOMIC WEAKNESS AMONG OUR

  • TRADING PARTNERS.

  • WE ALREADY TALKED ABOUT SMALL ECONOMIES, EMERGING ECONOMIES

  • AND HOW THEY'RE STRUGGLING AT THIS TIME.

  • A HIGHER FED FUNDS RATE AND A HIGHER RATE STRUCTURE

  • FOR THE U.S., IS GOING TO DO DAMAGE TO THE CREDIT MARKETS

  • IN THESE OTHER PLACES.

  • SO, THE FED COULD RAISE RATES.

  • I THINK IT'S HOLDING OFF IN LIGHT

  • OF THE INTERNATIONAL PICTURE.

  • BUT IF YOU WANT A PREDICTION, I THINK IT WILL BE THIS DECEMBER.

  • >> ALL RIGHT.

  • ON THAT NOTE, WE'RE GOING TO TAKE A BREAK.

  • STAY WITH US.

  • WHEN WE COME BACK, WE'LL TALK MORE SPECIFICALLY

  • ABOUT CALIFORNIA.

  • STAY TUNED.

  • [ MUSIC ]

  • >> SHOULD YOUR COMPANY BUY OR SELL?

  • EXPAND OR NOT?

  • RELOCATE OR SIMPLY STAY THE SAME?

  • IF YOU LIKE TO EXAMINE PAST AND PRESENT PREDICTIONS,

  • INTEGRATING FINANCES AND PEOPLE

  • AND MAKE FUTURE PREDICTIONS BASED ON ALL THAT INFORMATION,

  • A CAREER IN ECONOMICS IS FOR YOU.

  • YOU CAN BECOME A PART OF THIS EXCITING FIELD WITH A DEGREE

  • FROM CAL STATE LONG BEACH.

  • [ MUSIC ]

  • >> WELCOME BACK TO TALKING POINTS.

  • I'M DAVE KELLY.

  • MY GUEST TODAY IS DR. ROBERT KLEINHENZ.

  • ROBERT, BEFORE WE LEFT, YOU DIDN'T COMPLETELY ANSWER

  • THAT QUESTION ABOUT WHY THE FED WOULD WANT --

  • WHY THEY WOULD WANT TO RAISE INTEREST RATES,

  • IF WE HAVE THE TIME OF ECONOMIC UNCERTAINTY?

  • WHAT WOULD BE THE MOTIVATION FOR THAT?

  • >> YEAH. AND IT'S A VERY GOOD QUESTION,

  • I SHOULD HAVE MENTIONED IT EARLIER.

  • THE REASON THAT THE FED WANTS TO DO THIS IN THE FIRST PLACE,

  • SO KEEP IN MIND THAT RAISING INTEREST RATES IS

  • LIKE PUTTING THE BRAKES ON OUR ECONOMY.

  • AND THE ONLY REASON THE FED WOULD WANT TO DO THAT IS,

  • AT THE PRESENT TIME, IS TO MOVE THAT PARTICULAR POLICY TOOL

  • TO A MORE NEUTRAL POSITION.

  • SUCH THAT IF THE ECONOMY SHOULD SLOW DOWN OR TIP INTO RECESSION

  • AT SOME POINT DOWN THE ROAD, IT HAS THE CAPACITY TO ACTUALLY USE

  • THAT TOOL TO GET THE ECONOMY GOING AGAIN.

  • KEEP IN MIND THAT THE FED REALLY HAS BEEN THE PRIMARY POLICY

  • MAKER, AS FAR AS ECONOMIC POLICY IS CONCERNED.

  • OVER THESE LAST SEVERAL YEARS,

  • GIVEN WHAT'S BEEN HAPPENING ON CAPITOL HILL.

  • AND SO, THE FED KNOWS THAT IT NEEDS

  • TO MOVE ITS FUNDS RATE POLICY TOOL TO NEUTRAL.

  • IT'S GOING TO TAKE SOME TIME TO DO THAT.

  • AND IT DOESN'T WANT TO SLOW DOWN THE ECONOMY, BUT IT NEEDS TO DO

  • THAT IN ORDER TO POSITION ITSELF FOR WHAT MIGHT BE

  • OUT THERE IN THE FUTURE.

  • >> SO, IT'S TRYING TO CREATE SOME BREATHING SPACE,

  • I GUESS, WHEN THAT DAY COMES.

  • >> CORRECT.

  • >> OKAY, WELL, LET'S TALK ABOUT CALIFORNIA

  • AND SPECIFICALLY WHAT'S GOING ON HERE IN THIS STATE.

  • WE'VE ACTUALLY HAD SOME GOOD NEWS LATELY IN CALIFORNIA.

  • WE HAVE A BUDGET THAT'S NOT IN DEFICIT.

  • IT'S ACTUALLY IN SURPLUS THIS YEAR.

  • AND SPENDING FOR THINGS LIKE EDUCATION,

  • ACTUALLY TICKED UP A BIT THIS YEAR.

  • SO, ARE WE OUT OF THE WOODS YET?

  • >> YEAH, I THINK WE ARE OUT OF THE WOODS, IN THE SENSE

  • THAT WE HAVE A REVENUE STREAM.

  • PARTLY VOTED UPON AND VOTED IN, I SHOULD SAY,

  • BY THE VOTERS HERE IN CALIFORNIA.

  • A REVENUE STREAM THAT'S GOING TO ENSURE THAT WE HAVE THE CAPACITY

  • TO COVER THESE EXPENSES.

  • SO, BY THAT I'M TALKING ABOUT THE INCREASE

  • IN THE SALES TAX RATE, INCREASES IN MARGINAL TAX RATES.

  • ALL THESE WERE PUT INTO PLACE JUST A FEW YEARS AGO.

  • KEEP IN MIND THAT THERE IS A SUNSET ON THEM.

  • SO, WE'LL HAVE TO SEE WHETHER OR NOT THESE ARE KEPT

  • OR IF THEY'RE DROPPED AT SOME POINT IN THE TIME.

  • BUT CURRENTLY WE'RE DOING PRETTY WELL

  • WITH RESPECT TO OUR STATE BUDGET.

  • >> WELL, ONE OF THE VULNERABLE ASPECTS OF THE STATE BUDGET

  • IN CALIFORNIA IS THE INCOME STREAM AND WHERE IT COMES

  • FROM IN TERMS OF STATE INCOME TAXES.

  • TALK ABOUT WHERE THAT VULNERABLE SPOT IS.

  • >> SURE. AND SO, THE INCOME TAX IS THE LARGEST SOURCE OF REVENUE

  • FOR THE STATE OF CALIFORNIA.

  • FOR THE STATE ITSELF, AS OPPOSED TO ALL

  • OF GOVERNMENTS INCLUDING LOCAL, IT'S THE BIGGEST SOURCE.

  • AND THE BIGGEST CONCERN, WITH RESPECT TO THE INCOME TAXES,

  • WE RELY VERY HEAVILY ON HIGH INCOME EARNERS

  • FOR A BIG CHUNK OF THAT.

  • AND THOSE ARE INDIVIDUALS WHO SEE THEIR REVENUES COME

  • IN THE FORM OF STOCK RETURNS AND SO ON.

  • AND WE KNOW THAT THE STOCK MARKET IS VOLATILE.

  • SO, THAT PART OF THEIR INCOME IS VOLATILE AND IN TURN,

  • THEREFORE THE INCOME TAX REVENUE STREAM IS VOLATILE.

  • AND SO, THAT'S OFTEN BEEN WHAT'S GOTTEN THE STATE

  • OF CALIFORNIA INTO TROUBLE.

  • WHEN THE STOCK MARKET PLUNGES, THOSE RETURNS PLUNGE

  • AND THE TAX PROCEEDS PLUNGE.

  • SO, THAT'S THE SORE SPOT

  • OR I SHOULD SAY THE WEAK SPOT IN THE TAX SYSTEM.

  • >> ALL RIGHT, WELL, OBVIOUSLY WE'VE SEEN SOME BRIGHT SPOTS

  • IN THE ECONOMY OF LATE.

  • WHAT ARE THOSE BRIGHT SPOTS IN THE CALIFORNIA ECONOMY?

  • >> WELL, IN AN OVERALL SENSE, WE HAVE SEEN

  • THAT THE UNEMPLOYMENT RATES COME DOWN.

  • SO, IT WAS 12 1/2% WHEN IT WAS AT ITS WORST.

  • IT'S NOW JUST UNDER 6%.

  • MOST IMPORTANTLY, I THINK, WITH RESPECT TO THE UNEMPLOYMENT RATE

  • IN CALIFORNIA, IT'S JUST ABOUT 1% HIGHER THAN THE NATIONS RATE,

  • WHICH IS 5.1, AS WE SAID EARLIER.

  • IT'S NORMALLY ABOUT 1 AND A HALF GAP BETWEEN THE 2.

  • SO, FOR US TO HAVE CLOSED THAT GAP TO SOMETHING LESS

  • THAN THE LONG TERM NORM, IS VERY GOOD.

  • ON TOP OF THAT, THE JOB GROWTH IN THE STATE

  • OF CALIFORNIA HAS BEEN QUITE STRONG FOR THE LAST 4 YEARS.

  • WE'VE BEEN ADDING JOBS AT A RATE OF ABOUT 3% YEAR OVER YEAR

  • VERSUS THE U.S. AT 2%.

  • SO, ARGUABLY OUR STATE ECONOMY IS FIRING ON ALL CYLINDERS

  • AND GOING FASTER THAN THE NATION'S ECONOMY AS A WHOLE.

  • >> WHAT ARE THE KEY INDUSTRIES

  • THAT ARE POSITIONED TO GROW AND PROSPER?

  • >> SO, WE'VE SEEN GROWTH IN PROFESSIONAL

  • AND BUSINESS SERVICES.

  • I JUST WANT TO STOP FOR A SECOND AND EXPLAIN WHAT THAT MEANS.

  • WE'RE TALKING ABOUT ARCHITECTURAL, ENGINEERING,

  • LEGAL SERVICES, IT CONSULTING SERVICES,

  • MANAGEMENT CONSULTING SERVICES,

  • OTHER TYPES OF ENGINEERING CONSULTING SERVICES.

  • AND SO, THERE'S BEEN A LOT OF GROWTH ALL

  • AROUND THE STATE IN THAT AREA.

  • WE'VE ALSO SEEN CONTINUED GROWTH

  • IN HEALTHCARE RELATED EMPLOYMENT.

  • INCREASES IN LEISURE AND HOSPITALITY.

  • INCREASES IN CONSTRUCTION.

  • THESE ARE THE AREAS WHERE WE'VE SEEN THE MOST GROWTH.

  • AND IT'S WORTH NOTING THAT IN TALKING

  • ABOUT ALL THOSE INDUSTRIES, YOU'RE LOOKING AT INDUSTRIES

  • THAT KIND OF COVER THE ENTIRE WAGE SPECTRUM.

  • SO, THAT'S GOOD.

  • >> SO, IT'S A GOOD TIME TO BE A CONSULTANT IN ONE

  • OF THE TECHNICAL FIELDS, IT SOUNDS LIKE.

  • >> OH, INDEED IT IS.

  • YOU KNOW, NOT ONLY IN THE SILICON VALLEY,

  • BUT ALSO DOWN HERE IN SOUTHERN CALIFORNIA,

  • BOTH LOS ANGELES COUNTY AND ORANGE COUNTY.

  • AND OF COURSE, DOWN IN SAN DIEGO.

  • IT CONSULTING AND OTHER KINDS OF INFORMATION BASED CONSULTING,

  • ARE GOING GANG BUSTERS.

  • NOT TO MENTION THE BIO MEDICAL SIDE OF THINGS.

  • SO, THERE'S A LOT HAPPENING

  • IN THESE EMERGING INDUSTRIES THESE DAYS.

  • THE JOB COUNTS AREN'T QUITE AS BIG AS THE NEWS ITEMS

  • THAT YOU HEAR ABOUT, THOUGH.

  • >> WHAT ABOUT THE ENTERTAINMENT INDUSTRY?

  • AS WE'RE TAPING THIS PROGRAM,

  • THEY'RE ACTUALLY FILMING A MAJOR MOTION PICTURE ON OUR CAMPUS.

  • NOT HERE IN THE STUDIO, BUT ELSEWHERE.

  • WHAT ABOUT THE OUTLOOK FOR THE ENTERTAINMENT INDUSTRY?

  • THERE'S BEEN A LOT OF TALK OVER THE LAST SEVERAL YEARS

  • ABOUT RUNAWAY PRODUCTIONS, MEANING THEY RUN AWAY

  • FROM CALIFORNIA AND GO TO CANADA

  • AND OTHER STATES IN THE SOUTHEAST.

  • WHAT ARE WE SEEING IN TERMS OF TRENDS THERE?

  • >> SO, THE RUNWAY PRODUCTION STORY REALLY BEGAN

  • IN THE EARLY 2000'S, WHEN A COUPLE OF STATES CAME

  • UP WITH INCENTIVE TO TRY TO LURE PRODUCTION AWAY FROM CALIFORNIA.

  • THEY WERE SUCCESSFUL.

  • AND SO, WE SAW THAT EMPLOYMENT

  • IN THE INDUSTRY FELL PRETTY CONSISTENTLY,

  • STARTING IN THE EARLY 2000'S THROUGH THE PRESENT.

  • SO, THE STATE OF CALIFORNIA HAS HAD A TAX CREDIT PROGRAM

  • IN PLACE FOR A FEW YEARS.

  • IT REVAMPED IT LAST YEAR WITH THE IDEA BEING

  • TO ENCOURAGE TELEVISION PRODUCTION AND ALSO

  • TO GIVE INCENTIVES FOR BIG FEATURE FILMS.

  • IN THE PAST, IT JUST MADE NO SENSE GIVEN

  • THAT THE INCENTIVE STRUCTURE FOR THOSE 2 AREAS

  • OF THE ENTERTAINMENT INDUSTRY TO COME BACK.

  • SO, WE'RE SEEING AN INCREASE IN TELEVISION PROGRAMMING.

  • THAT'S GOOD.

  • THE FEATURE FILM PROGRAMMING ISN'T QUITE WHERE WE WOULD

  • LIKE IT TO BE, BUT I THINK THAT IT'S PROBABLY ONE

  • OF THESE THINGS WHERE WE'RE GOING

  • TO HAVE TO, YOU KNOW, BE PATIENT.

  • AND I WOULD THINK THAT IN TIME, 2 OR 3 YEARS' TIME,

  • WE SHOULD BE ABLE TO SEE A RETURN OF SOME OF THAT ACTIVITY.

  • I DON'T THINK WE'RE GOING TO BE, YOU KNOW,

  • SEEING JOB COUNTS RETURN TO WHERE THEY WERE BACK

  • IN 1999, WHICH WAS THE PEAK.

  • BUT WE SHOULD SEE SOME ACTIVITY COME BACK.

  • >> WHAT ABOUT IN THE GLOBAL LOGISTICS

  • AND INTERNATIONAL TRADE ARENA?

  • ARE WE SEEING GROWTH THERE?

  • DOES THAT LOOK PRETTY STABLE?

  • >> ALSO SEEING NOT JUST GROWTH IN JOBS,

  • BUT ALSO GROWTH IN REAL ACTIVITY.

  • SO, HERE IN SOUTHERN CALIFORNIA, AS WELL AS UP IN THE BAY AREA,

  • THERE WAS A WEST COAST PORT STRIKE EARLIER THIS YEAR

  • THAT DIVERTED A LOT OF ACTIVITY OVER TO THE EAST COAST.

  • AND IT REALLY STYMIED BUSINESS HERE LOCALLY.

  • AND THEN ON TOP OF THAT, THE SHIPS THAT ARE MAKING THEIR CALL

  • AT THESE PORTS, THE CONTAINER SHIPS,

  • ARE ABOUT TWICE THE SIZE WHAT THEY WERE,

  • EVEN 6 OR 7 YEARS AGO.

  • AND SO, THERE WAS A CONGESTION, KIND OF ISSUE,

  • THAT THEY NEEDED TO ADDRESS.

  • SO, MANY OF THESE KINKS HAVE BEEN WORKED OUT.

  • WE'RE ABOUT EVEN WITH LAST YEAR, IN TERMS OF TOTAL PORT ACTIVITY

  • IN SOUTHERN CALIFORNIA.

  • BUT WE EXPECT TO SEE NEXT YEAR WILL BE BETTER.

  • AND IN CONJUNCTION WITH THAT PORT ACTIVITY,

  • WE'VE SEEN JOB COUNTS RISE.

  • >> SO, GOOD NEWS ON A LOT OF FRONTS

  • THAT WE'VE BEEN TALKING ABOUT NOW.

  • SO, THINGS ARE ACTUALLY LOOKING UP.

  • THERE ARE BRIGHT SPOTS.

  • WE HAVE TO TALK ABOUT SOMETHING THAT'S NOT SO BRIGHT

  • AND THAT IS THE RATE OF POVERTY IN CALIFORNIA.

  • WE ARE THE LARGEST STATE IN THE NATION,

  • SO ONE WOULD ASSUME WE WOULD HAVE A LARGE PERCENTAGE

  • OF THE POPULATION IN POVERTY AS WELL.

  • BUT WE ARE ACTUALLY, ACCORDING TO THE CENSUS BUREAU,

  • SUPPLEMENTAL POVERTY INDEX OF 2013,

  • SO THAT'S A COUPLE OF YEARS AGO.

  • WE WERE NUMBER 1 IN THE NATION,

  • 23.4% OF OUR RESIDENTS BELOW THE POVERTY LEVEL,

  • SUPPLEMENTAL POVERTY LEVEL, WHICH IS ABOUT A FAMILY

  • OF 4, AROUND 25,000 A YEAR.

  • SO, WHAT DOES THAT SAY ABOUT OUR FUTURE PROSPECTS,

  • IF WE HAVE ALMOST A QUARTER

  • OF THE STATE LIVING BELOW THE QUOTE,

  • UNQUOTE "LIVABILITY INDEX?"

  • >> SURE. THIS IS NOT AN INDICATOR WHERE WE WANT

  • TO BE NUMBER 1, CLEARLY.

  • AND WE REALLY HAVE A BURDEN HERE BECAUSE THE COST OF LIVING

  • IN THE STATE OF CALIFORNIA IS HIGH.

  • IT'S PARTICULARLY HIGH IN THE METRO AREAS,

  • WHERE THE VAST MAJORITY OF OUR POPULATION LIVES.

  • AND SO, WE HAVE A HUGE PROBLEM WITH RESPECT TO POVERTY

  • THAT HAS BEEN SEEMINGLY INTRACTABLE.

  • THERE ARE PROGRAMS AT THE FEDERAL LEVEL,

  • AS WELL AS THE STATE LEVEL, TO DO THINGS LIKE SUBSIDIZE HOUSING

  • FOR LOW INCOME HOUSEHOLDS.

  • BUT WE HAVE TO LOOK AT SOME OF THE ROOT CAUSES.

  • WE HAVE TO CONSIDER OVER TIME, NOT JUST FOR THE PURPOSE

  • OF REDUCING POVERTY, BUT FOR THE OVERALL BENEFIT OF THE ECONOMY,

  • TRYING TO GET MANY OF THESE INDIVIDUALS,

  • WHO ARE OF WORKING AGE, TO THE POINT

  • WHERE THEY GET THE EDUCATION,

  • MAYBE COMPLETE A HIGH SCHOOL DEGREE

  • AND CAN BECOME GAINFULLY EMPLOYED.

  • AND THEN HELP TO MOVE THEMSELVES

  • AND THEIR HOUSEHOLDS OUT OF POVERTY.

  • >> SO, THAT MAY BE ONE OF THE TROUBLE SPOTS

  • THAT WE REALLY NEED TO FOCUS ON.

  • >> CORRECT.

  • >> OKAY, WELL, LET'S TALK

  • ABOUT ANOTHER INITIATIVE THAT'S BEEN UNDERWAY RECENTLY.

  • AND THAT IS THE DRIVE TO BRING THE 2024 OLYMPICS

  • TO LOS ANGELES.

  • THOSE OF US THAT WERE AROUND DURING THE 1984 OLYMPICS

  • AND HAD THE CHANCE TO EXPERIENCE THOSE,

  • KNOW THAT WAS REALLY A FANTASTIC DEMONSTRATION OF THE, I GUESS,

  • THE COLLECTIVE SPIRIT HERE IN L.A. AND THE REGION AROUND IT,

  • TO PUT ON A GREAT SHOW AND TO ACTUALLY MAKE MONEY DOING SO.

  • BUT A LOT OF PEOPLE ARE SAYING IT'S NOT GOING TO BE THE SAME.

  • IT WON'T BE THE SAME KIND OF OLYMPICS

  • BECAUSE WE'VE LOST A LOT OF THAT CIVIC

  • AND CORPORATE UNITY THAT WE HAD THEN.

  • AND A LOT OF THE FORTUNE 500 COMPANIES THAT WERE BASED HERE,

  • HAVE NOW LEFT THE AREA.

  • WHAT DO YOU THINK ABOUT THAT?

  • >> WELL, I MEAN, YOU MAKE A GOOD POINT BECAUSE YOU NEED

  • TO REALLY HAVE A LOT OF FORCES COME TOGETHER IN ORDER

  • TO MAKE AN OLYMPICS A SUCCESSFUL EVENT FOR EVERYBODY INVOLVED.

  • AND LOS ANGELES DID A GREAT JOB IN 1984.

  • YOU LOOK AT THINGS TODAY, THERE WILL BE A NEED FOR THEM --

  • FOR PEOPLE, FOR BUSINESSES, FOR GOVERNMENT OFFICIALS

  • TO RALLY AND WORK TOGETHER.

  • WE HAVE NOT SEEN A LOT OF THAT IN LOS ANGELES FOR MANY YEARS.

  • YOU'RE RIGHT, WE'VE LOST MANY CORPORATE HEADQUARTERS.

  • ONE OF MY CONCERNS ABOUT LOS ANGELES COUNTY IS

  • THAT WE DON'T REALLY HAVE A LOT OF LARGE CORPORATE CIVIC LEADERS

  • WHO CAN BE CHAMPIONS FOR A CAUSE.

  • WHETHER IT BE FOR THE 2024 OLYMPICS,

  • WHICH WE ALL HOPE WILL COME OR FOR OTHER CAUSES THAT AROUND

  • WHICH WE AS RESIDENTS OF LOS ANGELES COUNTY AND PERHAPS ALL

  • OF CALIFORNIA, SHOULD BE RALLYING AROUND.

  • SO, IT'S A REAL CAUSE FOR CONCERN THAT WE DON'T HAVE

  • THAT KIND OF LEADERSHIP OR AT LEAST NOT VISIBLE AT THIS TIME.

  • THIS WOULD BE A GREAT OPPORTUNITY

  • FOR PEOPLE TO STEP UP.

  • >> WE'VE ONLY GOT ABOUT 30 SECONDS LEFT IN THIS SEGMENT.

  • MY LAST QUESTION TO YOU IS SOMETHING THAT WE'LL NEED

  • TO GET AN ANSWER IN ABOUT 20 OR 30 SECONDS.

  • AND THAT IS, WHAT ABOUT HOUSING IN CALIFORNIA?

  • AND WE ARE SEEING A DEMOGRAPHIC SHIFT

  • WITH THE BABY BOOMERS RETIRING OR HEADING TOWARD RETIREMENT,

  • MILLENNIALS COMING UP,

  • IS THE NEXT BIG LARGE POPULATION SECTOR.

  • HOUSING; IS IT GOING TO BE MORE LIKE MANHATTAN,

  • LIKE MANHATTAN NEW YORK, NOT MANHATTAN BEACH

  • AND LESS LIKE MISSION VIEJO?

  • >> I THINK THAT THERE ARE PREDICTIONS

  • THAT THE MILLENNIALS WOULD BE LESS INCLINED

  • TO HAVE SUBURBAN TYPE LIFESTYLES.

  • I THINK THE JURY IS OUT ON THAT.

  • WHEN THEY GET MARRIED, HAVE A FAMILY, THEY MAY CHOOSE TO MOVE

  • FROM THE LOFT IN DOWNTOWN LOS ANGELES TO SOMEPLACE

  • IN HUNTINGTON BEACH OR SIMILARLY,

  • FROM SAN FRANCISCO TO THE EAST BAY.

  • SO, I THINK WE'LL HAVE TO WAIT AND SEE ON THAT.

  • >> ON THAT NOTE, WE'LL HAVE TO COME TO A CLOSE.

  • THANK YOU FOR BEING WITH US TODAY.

  • >> THANKS, DAVE.

  • >> AND THANK YOU FOR JOINING US

  • ON THIS EDITION OF TALKING POINTS.

  • JOIN US SOON FOR THE NEXT EPISODE.

  • UNTIL THEN, I'M DAVE KELLY, HAVE A NICE DAY.

  • [ MUSIC ]

[ MUSIC ]

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経済動向。グローバル、ナショナル、カリフォルニア (Economic Trends: Global, National and California)

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    richardwang に公開 2021 年 01 月 14 日
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