The Post-Covid World

Beacon EconomicsBeacon Economics | beaconecon.com

Christopher Thornberg, PhDFounding Partner, Beacon EconomicsDirector, UCR SoBA Center for Economic Forecasting and Development

October 2021

The Post-Covid World

The Future of Downtown

Beacon EconomicsBeacon Economics

Miserabilism and the Pandemic

§ Economic Impact of the Pandemic§ The “v” was the only logical outcome, driven by mitigation and lack of long run

economic issues§ Politics led to excessive intervention, creating massive wealth creation.

Economy to grow rapidly until fuel runs out

§ The Future of Downtown§ Early hysteria—”downtowns are dead”§ Reality—acceleration of underlying trends has improved prospects for

downtowns§ Downtown LA also one of the few places in the County new housing for young

educated workers


Where Are We Now?

15000

16000

17000

18000

19000

20000

21000

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2018 2019 2020 2021

Real GDP and GDD

GDP GDP Trend GDD GDD Trend

-30.0%

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

Nov-19

Jan-2

0

Mar-20

May-20

Jul-2

0

Sep-20

Nov-20

Jan-2

1

Mar-21

May-21

Jul-2

1

Real Consumer Spending Relative to Trend

Durables Non-Durables Services


A Demand Driven Backlog

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

2005

-06-

0120

06-0

7-01

2007

-08-

0120

08-0

9-01

2009

-10-

0120

10-1

1-01

2011

-12-

0120

13-0

1-01

2014

-02-

0120

15-0

3-01

2016

-04-

0120

17-0

5-01

2018

-06-

0120

19-0

7-01

2020

-08-

01

Retail Inventory to Sales Ratio

7500095000

115000135000155000175000195000215000235000

2015

-01-

0120

15-0

7-01

2016

-01-

0120

16-0

7-01

2017

-01-

0120

17-0

7-01

2018

-01-

0120

18-0

7-01

2019

-01-

0120

19-0

7-01

2020

-01-

0120

20-0

7-01

2021

-01-

01

Monthly Goods Trade

Exports Imports


Venture Capital in Los Angeles

Source: PitchBook

200

400

600

800

1,000

1,200

0

2,000

4,000

6,000

8,000

10,000

12,000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

Dea

l Cou

nt

Cap

ital i

nves

ted

($, M

illio

ns)

Capital Invested and Deal Counts

Capital Invested Deal Count

Hotel Daily Rate ($) and Occupancy (%) 2021

Location Daily Rate

1-Yr Chg

Occupancy Rate

1-Yr Chg

California 159.2 48.8 68.5 24.1

Los Angeles County

164.1 51.6 70.7 28.0

Inland Empire 120.8 31.1 79.8 23.6

Orange County 172.2 48.0 63.4 27.0

San Diego County 180.0 69.4 74.6 33.4


The Delta Surge


Plenty of Rocket Fuel… For Now

Source: FRED 7

-15000

-10000

-5000

0

5000

10000

15000

20000

25000

30000

2006

-04-

0120

07-0

3-01

2008

-02-

0120

09-0

1-01

2009

-12-

0120

10-1

1-01

2011

-10-

0120

12-0

9-01

2013

-08-

0120

14-0

7-01

2015

-06-

0120

16-0

5-01

2017

-04-

0120

18-0

3-01

2019

-02-

0120

20-0

1-01

2020

-12-

01

YoY Change Household Net Worth $Bil

-3000

-2000

-1000

0

1000

2000

3000

4000

Jan-1

9

Mar-19

May-1

9Ju

l-19

Sep-19

Nov-19

Jan-2

0

Mar-20

May-2

0Ju

l-20

Sep-20

Nov-20

Jan-2

1

Personal Income Trends (2019 = 0)

Compensation Government Transfers Spending


Housing – U.S.

Source: National Association of Realtors, S&P Global

2000.0

3000.0

4000.0

5000.0

6000.0

7000.0

8000.0

Jan-

01M

ar-0

2M

ay-0

3Ju

l-04

Sep-

05N

ov-0

6Ja

n-08

Mar

-09

May

-10

Jul-1

1Se

p-12

Nov

-13

Jan-

15M

ar-1

6M

ay-1

7Ju

l-18

Sep-

19N

ov-2

0

Existing Home Sales18-19 19-20 20-21

Phoenix 5.8% 9.2% 28.3%San Diego 2.0% 5.5% 26.0%Seattle -0.6% 7.0% 24.1%Dallas 2.8% 3.3% 20.7%Tampa 4.6% 5.9% 20.7%San Francisco 0.2% 2.8% 20.4%Miami 2.7% 4.1% 19.4%Las Vegas 4.7% 3.4% 19.3%Denver 3.1% 4.4% 18.9%Charlotte 4.6% 6.0% 18.0%Portland 2.5% 5.1% 18.0%Los Angeles 1.2% 5.4% 17.2%New York 1.2% 2.3% 16.7%Atlanta 4.2% 4.9% 15.8%Cleveland 3.2% 5.4% 15.1%DC 2.7% 4.4% 15.0%Chicago 1.8% 1.3% 12.5%

Case Shiller HPI


A Labor Market Paradox?

90000

95000

100000

105000

110000

115000

120000

125000

130000

135000

Jan-

05D

ec-0

5N

ov-0

6O

ct-0

7S

ep-0

8A

ug-0

9Ju

l-10

Jun-

11M

ay-1

2A

pr-1

3M

ar-1

4F

eb-1

5Ja

n-16

Dec

-16

Nov

-17

Oct

-18

Sep

-19

Aug

-20

Jul-2

1

US Payroll Employment

Aug 2021: -5%, 6.3m jobs

0

2000

4000

6000

8000

10000

12000

Dec

-00

Feb

-02

Apr

-03

Jun-

04A

ug-0

5O

ct-0

6D

ec-0

7F

eb-0

9A

pr-1

0Ju

n-11

Aug

-12

Oct

-13

Dec

-14

Feb

-16

Apr

-17

Jun-

18A

ug-1

9O

ct-2

0

Job Openings and Quits

Openings Quits


The Labor Force Issue

-0.5

0.0

0.5

1.0

1.5

2.0

Jan-

80Ap

r-82

Jul-8

4O

ct-8

6Ja

n-89

Apr-9

1Ju

l-93

Oct

-95

Jan-

98Ap

r-00

Jul-0

2O

ct-0

4Ja

n-07

Apr-0

9Ju

l-11

Oct

-13

Jan-

16Ap

r-18

Jul-2

0

Growth in Working Age US Population


LA Numbers

75.0

80.0

85.0

90.0

95.0

100.0

105.0Ja

n-15

Jun-

15N

ov-1

5Ap

r-16

Sep-

16Fe

b-17

Jul-1

7D

ec-1

7M

ay-1

8O

ct-1

8M

ar-1

9Au

g-19

Jan-

20Ju

n-20

Nov

-20

Apr-2

1

Payroll Job Indexes

LA County Downtown LA

0.0

5.0

10.0

15.0

20.0

25.0

Jun-0

6

Jun-0

7

Jun-0

8

Jun-0

9

Jun-1

0

Jun-1

1

Jun-1

2

Jun-1

3

Jun-1

4

Jun-1

5

Jun-1

6

Jun-1

7

Jun-1

8

Jun-1

9

Jun-2

0

Jun-2

1

%

Unemployment Rate

Los Angeles Orange County


The Bigger Issue For LA

Source: California EDD

98

108

118

128

138

148

158

Jan-

00M

ar-0

1M

ay-0

2Ju

l-03

Sep-

04N

ov-0

5Ja

n-07

Mar

-08

May

-09

Jul-1

0Se

p-11

Nov

-12

Jan-

14M

ar-1

5M

ay-1

6Ju

l-17

Sep-

18N

ov-1

9Ja

n-21

Indexes of Labor Force

Inland Empire Los Angeles


Housing Affordability

Source: ACS

31

32

33

34

35

36

37

2005

2007

2009

2011

2013

2015

2017

%

Median Rent as % of HH Income

Los Angeles Orange County

0

1000

2000

3000

4000

5000

6000

7000

8000

Q1

-9

5

Q4

-9

6

Q3

-9

8

Q2

-0

0

Q1

-0

2

Q4

-0

3

Q3

-0

5

Q2

-0

7

Q1

-0

9

Q4

-1

0

Q3

-1

2

Q2

-1

4

Q1

-1

6

Q4

-1

7

Q3

-1

9

Q2

-2

1

Los Angeles County Residential Permits

SF MF

2% Job Growth

90,000 Jobs

1.5 Jobs / HH

60,000


Downtown Demographics2014 2019 Change

Total housing units 62,010 77,799 25.5%Occupied housing units 56,021 68,245 21.8%

# HH < $50k 36728 35396 -3.6%# HH 50-100K 11755 15698 33.5%# HH > 100K 7538 17151 127.5%

2014 2019 ChangePopulation 25 years and over 118,189 134,205 13.6%Less than Associates 90,158 90,724 -0.6%Associate's degree 4,854 7,261 49.6%Bachelor's degree 15,064 24,045 59.6%Graduate or professional degree 8,113 12,175 50.1%

Age < 24 54,815 58,714 7.1%Age 25-54 82,574 93,248 12.9%Age > 55 35,615 40,957 15.0%


Office Vacancies / Permits

Source: REIS

0

2

4

6

8

10

12

14

16

18

20

Q1-

99Q

1-00

Q1-

01Q

1-02

Q1-

03Q

1-04

Q1-

05Q

1-06

Q1-

07Q

1-08

Q1-

09Q

1-10

Q1-

11Q

1-12

Q1-

13Q

1-14

Q1-

15Q

1-16

Q1-

17Q

1-18

Q1-

19Q

1-20

Q1-

21

Los Angeles Office Vacancies

A BC

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

*

Commercial Permits Value

Alterations Office Retail *Q1


WFH Before, During, and After COVID

Source: Federal Reserve Bank of Atlanta. “WFH is Onstage and Here to Stay”


WFH – Time and Preferences

Source: Barrero, Jose Maria, Nicholas Bloom, and Steven J. Davis, 2021. “Why working from home will stick,” National Bureau of Economic Research Working Paper 28731. July Data.

0 10 20 30 40

Working on Second Job

Childcare

Outdoor Leisure and Exercise

Home Improvement/Chores

Indoor Leisure

Working on Primary Job

% of Time Saved from Commuting Allocated to:

How are you now spending time you saved by not commuting?

0 5 10 15 20 25 30 35

5 Days Per Week

4 Days Per Week

3 Days Per Week

2 Days Per Week

1 Day Per Week

Rarely or Never

% of Respondents Amongst Respondents able to WFH

Workers' desired amount of post-COVID WFH days


Density Distributions

18

$0

$20

$40

$60

$80

$100

$120

$140

0 2,000 4,000 6,000 8,000

Ave

rage

Indu

stry

Wag

es

Average Establishment Local Job Density

InformationFinance

Professional

Mgmt

§ When cities have high enough densities of firms and workers they can:

⏤ Share infrastructure and suppliers⏤ Achieve better matches between

employees and employers⏤ Communicate better and learn more

§ Great cities and neighborhoods rely on economies of scale

⏤ Wall Street⏤ Hollywood⏤ Silicon Valley⏤ Fleet Street


The Long Run Still Matters

• The Economy is back..• The “V” was the only logical outcome• Recovery hampered not by lack of demand but by

lack of supply

• US economy will remain heated for the next few years: a new roaring 20’s

• Expect a sugar crash to come

• Policy Thoughts• Immigration policy

• Programs to encourage senior and female employment

• Infrastructure needs• Workforce of tomorrow

• Labor market slow recovery is a function of labor supply

• Good for workers at all skill levels, reduces inequality issues

• Bad for businesses, consumers in short run• Regions will compete for workers for economic

development

• The Future of Downtown• Expect consolidation of jobs in dense corridors • Employers will have to offer WFH, CTW options• More stratification of residential choices• Workforce of tomorrow wants to live close to jobs

in hip urban area


What can Beacon do for you?

20

Housing, Land Use, & Real Estate

Advisory

Sustainable Growth and

Development

Economic & Revenue

Forecasting

Economic, Fiscal and Social Impact

Analysis

Regional and Sub-Regional Analysis

Litigation and Testimony

For more information, see Slide 2.

Continue the conversation.

Contact Dr. Chris Thornberg directly at [email protected] or 310.571.3399

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Our 6 Practice Areas


Portfolio Spotlight

21

Housing, Land Use, &

Real Estate Advisory

Economic & revenue

forecasting

Litigation and

testimony

Sustainable Growth &

Development

Impact (Economic,

Fiscal, Social) & EB5

Analysis

Regional and Sub-

Regional Analysis

Beacon conducts analysis at an international, national, state, county, and city level -- and even down to the zip code, pending data availability. We analyze data on Employment, Industry, Real Estate, and Consumption.

Past Clients:

• City and County of Los Angeles• City and County of Riverside • East Bay Economic Dev. Agency

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The Post-Covid World