Pierce County Economic Index Presentation

Dr. Doug Goodman, Ph.D.

And

Dr. Bruce Mann, Ph.D.

Department of Economics and Civic Scholarship Initiative University of Puget Sound

Special Thanks To:

Group Health Cooperative: Premier Sponsor Port of Tacoma: Premier Sponsor Puget Sound Energy: Premier Sponsor Totem Ocean Trailer Express, Inc.: Premier Sponsor Targa Sound Terminal: Premier Sponsor University of Puget Sound: Premier Sponsor Tacoma Public Utilities: PCEI Report Sponsor Waste Connections, Inc.: TV Broadcast Sponsor Clear Channel Outdoor: Media Sponsor Business Examiner Media Group: Social Media Sponsor Columbia Bank: Supporting Sponsor Pacific Lutheran University: Supporting Sponsor PJ Hummel & Company: Dcor Sponsor BCRA: Coffee & Connections Sponsor

The Pierce County Economy

A Journey Ahead

2012 2013 Forecast

Slow Boat Rough Seas

Recession To Recovery
Pierce County Economic Index 1985 = 100

210 205 200

Recession

Recovery

195
190

National and Local Recession

Rough Journey
Index 130

2000 = 100 for PCEI and RGDP

Down 3.25%

Pierce County Economic Index

120

Down 3.29%
Real Gross Domestic Product

110

100 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Pierce County Economic Index

2010: Calmer Waters
Sailing To Recovery
4

Pierce County Economic Index Annualized Percent Change

2.3 2 0.7 0 -1.1 -2.6 -4 2010.1 2010.2 2010.3 2010.4

Weak First Half Better Third Quarter Up 0.7% Strong Fourth Quarter Up 2.3% PCEI For Year Down 0.2%

-2

Pierce County Economic Index

2011: The Little Engine Could
Pierce County Economic Index Annualized Percent Change

Going Up
Q1 Up 3.0% Q2 Up 3.9% Q3 Up 3.9% Q4 Up 3.5%

5 4 3.0 3.9 3.9

3.5

3
2 1 0

Annual Gain 3.6%

2011.1

2011.2

2011.3

2011.4

Pierce County Economic Index

2012: Moderate Expansion
Continued Growth Amid Uncertainty
Q1 Up 3.0% Q2 Up 2.1% Q3 Up 1.7% Q4 Up 1.9%
Pierce County Economic Index Annualized Percent Change
4

3.0 2.1

1.7

1.9

Concerns
Europe Turmoil - Housing The Cliff - Unemployment

2012.1

2012.2

2012.3

2012.4

Pierce County Economic Index

2013: The Little Engine Did
Expansion Tracks
Q1 Up 2.1% Q2 Up 2.5% Q3 Up 3.2% Q4 Up 3.3%
Pierce County Economic Index Annualized Percent Change
4

3.2
3 2.5

3.3

2.1
2

Annual Growth of 2.75%

14 Up Quarters In A Row

2013.1

2013.2

2013.3

2013.4

Pierce County Economic Index

2000 2013
Index 220 210 200

1985 = 100 for PCEI

215.5 204.6

Up 2.8%
198.2

4% Growth
190 180 170 160 168.6

Down 3.5%

161.9 150

Down 0.7%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

The Recession Descent:

2008 2010
Housing And Financial Problems
Home Values Down 34% Stock Values Down 45%

Policy Implementation Issues

Monetary Low Rates Hurt Local Incomes Fiscal Debt and Deficit Produce Uncertainty

Trade Decline
U.S. Recession Reduces Imports European/Asian Problems Reduce Exports

The Updrafts: 2012 2013

Spending At Local Military Installations
$540 Million Construction 55,000 Troops And 40,000 Dependents

Trade Distribution Warehousing

Grand Alliance

Aerospace And Aircraft Production Health Care And Education Construction Sector
Residential And Commercial

Possible Downdrafts
Europe and Asia
Spillover To U.S. Financial Markets Reduced Trade At Port

Fiscal Policy Issues

Debt And Deficit Reduction Defense Budget Reductions Addressing The New Cliffs

Labor Market Concerns

Wage Increases Bargaining Impasses

Labor Market Activity

Employment And Jobs

Employment: 2008 2010

Total Employment

Brake Quickly, Accelerate Slowly Losses Since 2008

By Mid-2010 21,000 Jobs Lost 8.5% Decline

(Thousands)
300

290

280

270

Gain in 2010 Q4
2,300 More Jobs Up 0.9%
260
250

2008

2009

2010

Employment: 2011 2012

2011: In Neutral
More Productive Workers Wary Of Adding Full Time Just 500 New Jobs
3.00 2.50 2.00 1.50 1.00 0.50 0.00 -0.50

Percent Change Of Employment

2012: In Drive
Q1 Up 1.25% Q2 Up 1.8% Q3 Up 2.6% Q4 Up 2.6% 5,500 New Jobs Up 2.1%

Employment: 2013
Potholes And Curves
Heath Care Costs International Trade Taxes And Entitlements
Percent 3.00 2.50 2.00 1.50 2.3

2.0 1.6 1.5

Slow Forward
Q1: Up 2.3% Q2: Up 2.0% Q3: Up 1.6% Q4: Up 1.5%

1.00
0.50 0.00

5,000 New Jobs

Employment: Joy Ride

Annual Employment In Thousands
300 290
281

280

3.3%
270

11,500 New Jobs 17,000 Lost Jobs

275

260 250

2005

2006

2007

2008

2009

2010

2011

2012

2013

2013 Employment: 2.1% Below Pre-Recession Peak

Labor Market Activity: Labor Force

Workers

Labor Force: 2007 2011

Civilian Labor Force In Thousands 425

Leaving On The Train From 2009 To 2011

Labor Force Down By 8,000 Workers Off By 1.9%

400

395 387

375

350

325

Labor Force: 2012

Inbound Train
Q1 Up 1.1% Q2 Up 1.8% Q3 Up 1.8% Q4 Up 1.0%
2.5 2.0 1.5

Civilian Labor Force Annualized Percent Change

1.8 1.8

1.1
1.0 0.5 0.0

1.0

Annual Increase 5,600 Workers

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Labor Force: 2013

Outbound - Inbound
1.00

Civilian Labor Force Annualized Percent Change

Outbound Commute Outside Continue In School Remain Discouraged Annual Growth Less Than 1.0%

0.5
0.50

0.4

0.2
0.00

-0.1
-0.50

Just Over 1,000 New Workers

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Labor Force: 2007 2011

425

Few Inbound Arrivals

Labor Force Recovers To 2008 Level Still Below 2009 Peak
400

Civilian Labor Force In Thousands

393 395

394

375

350

Labor Market Activity Unemployment

Unemployment: 2005 2011

Percent

11 10 9 8 7 6 5 4 2005 2006 2007 2008 2009

5.9
5.1 4.8 5.7

10.2

9.7

9.8

2010

2011

Take-Off In 2008 To Peak In 2010

Unemployment: 2012
Quarterly Unemployment Rate

Descent
9.5% - Q1 9.0% - Q2 8.8% - Q3 8.2% - Q4

10.0
9.5

9.5

9.0
9.0 8.8

8.5

8.2

Annual Rate = 8.9%

8.0
First Quarter Second Quarter Third Quarter Fourth Quarter

Unemployment: 2013
Mild Descent
9.0% - Q1 8.1% - Q2 8.0% - Q3 7.9% - Q4
Quarterly Unemployment Rate

10.0 9.5 9.0 8.5 8.0 7.5

8.0 8.1 7.9 9.0

Annual Rate = 8.2%

7.0
First Quarter Second Quarter Third Quarter Fourth Quarter

Unemployment: 2005 2013

Annual Unemployment Rates

11 10 9 8 7 6 5 4
2005 2006 2001 2008 2009 2010 2011 2012 2013

Continued Caution For Hiring Reliance On Over-Time, Part-Time, And Contingent Labor

Personal Income

Total And Per Capita

Total Personal Income

2007 2011
Tail Winds Help
2010 Up $800 Million Gain Of 2.3% 2011 Up $2.1 Billion Gain Of 6.6% Lost Income Recovered
Total Personal Income Billions Of Dollars
$40 $35 30.4 $30 $25 $20 $15 34.5 32.6 31.6 32.4

Total Personal Income

2007 2013
Cruising Ahead
2012 Increase Of 4.25% Gain Of $1.5 Billion 2013 Up $2.0 Billion Gain Of 5.5% High Water Mark $38 Billion
Total Personal Income Billions Of Dollars
$45 $40 $35 34.5 32.4 36.0 38.0

$30
$25 $20 $15

Real Total Personal Income

2007 2013
Inflations Head Winds Remain Moderate
2011 Up 3.4% 2012 Up 2.1% 2013 Up 2.8%
Annual Percent Change
7 6 5 4 3 2 1 0 -1 -2 -3 2007 2008 2009 2010 2011 2012 2013

Per Capita Personal Income

2009 2013
Annual Percentage Change

Catching The Wind

2009: 2010: 2011: 2012: 2013: Down 4.2% Up 2.5% Up 4.7% Up 3.5% Up 3.9%

6
4 2 0 -2 -4 -6

2009

2010

2011

2012

2013

Per Capita Income

2008 2013
Dollars

The Ride Gets Better

2009 Turbulence Down $1,750 2010-11 Loss Recovered 2012-13 Calmer Skies Up $3,200 Gain In Altitude 2013: $45,900 2009: $39,735

Per Capita Personal Income

50,000

47,500
45,000 42,500 40,000 37,500 35,000

45,852 44,121

39,735

2008 2009 2010 2011 2012 2013

Real Per Capita Personal Income

2008 2013
Moderate Inflationary Winds
2011 Up 1.5% 2012 Up 1.3% 2013 Up 1.3% Since 2009 Gained $1,900 Up 5.1%
Real Per Capita Income Growth
3 2 1 0 -1 -2 -3 -4

-5

2008 2009 2010 2011 2012 2013

Retail Sales
Shopping And Activity

Retail Sales: 2005 2009

$

Millions Of Dollars

A Down Hill Drive

Retail Sales Fall Jobs Lost Equity Vanished Portfolio Shrunk 2008 2009 Loss: $960 Million 16% Decline

6,200

6,000
5,800 5,600 5,400 5,200 5,000 4,800 4,600

2005 2006 2007 2008 2009

Retail Sales: 2010 2011

10 8 6 4

Annualized Percent Growth 8.1 5.6 4.9 1.8 0.1 4.9 1.8

1.3
2 0

2010

2011

Pent-Up Demand Accelerates Spending

Big Ticket Items Start To Move

Retail Sales: 2012

Traffic Up During Year
First Quarter Up 4.1% Second Quarter Up 4.8% Third Quarter Up 6.4% Fourth Quarter Up 3.4% Holiday Sales Up $50.4 Million
Annualized Percent Growth
7

6.4 4.8 4.1 3.4

6
5 4 3 2

1
0

2012.1

2012.2

2012.3

2012.4

Retail Sales: 2013

Traffic Concerns
Road Hazards
Fiscal Cliff Effects European Turmoil Housing Troubles
3
4

Annualized Percent Growth

2.4
2

2.4

2.4

2013 Sales Growth Slows

Q1 Up 1.6% Q2, Q3, And Q4 Up 2.4% Holiday Up $37 Million
1

1.6

Annual Sales Up By 2.2%

2013.1

2013.2

2013.3

2013.4

Travelling The Retail Highway:

Hills And Valleys
$ 6,200 6,000 5,800 5,600 5,400 5,200 5,000 4,800 4,600

Millions Of Dollars
5,879 5,752

5,569

5,496

Dollar Volume Back To 2005 - 2006 Level

Real Estate Activity

Housing Index: 2006 2011

A Downhill Race
1990 = 100
250 225

24% Drop From 2006 to 2011

200 175

150

Housing: 2012
A Better Pace
New Direction
Rates Down Terms Ease
9
7.3

Housing Index Annualized Percent Change

7.2
6.0

First Quarter Up 7.3% Second Quarter Up 7.2% Third Quarter Gains 6.0% Fourth Quarter Up 2.9%
Annual Gain of 5.8%

2.9

Q1

Q2

Q3

Q4

Housing: 2013
The Pace Quickens
Re-Energized Runners
More Income Interest Rates Low Affordable Pricing First Quarter Up 4.6% Second Quarter Up 6.9% Third Quarter Gains 8.9% Fourth Quarter Up 9.9%
10 9 8
8.9

Housing Index Annualized Percent Change

9.9

7
6

6.9

4.6
Q1 Q2 Q3 Q4

Annual Gain of 7.6%

Housing Sales: 2006 2013

250

Housing Index 1990 = 100

200

150

100

2005

2006

2007

2008

2009

2010

2011

2012

2013

Two Consecutive Years Up Back To 2008 Level New Unit Absorption Issue Point Roberts, Tahelah

Multi-Family Housing
Going Down The Track
Strong 2012
Vacancy Rate 6.5% Increased Supply Pushed Rate To 7% Rent Increased To Relative High

Demand Weakens/Supply Strengthens In 2013

Competition From Single Family Market New Units To Market Rents Flat And Vacancy Steady South County Markets Weaker North End/Peninsula Stronger

Industrial Real Estate

Smooth Travels
Demand Strong In 2012
320,000+ Square Feet Absorbed Rents Up 10% Vacancy Stable At 6%

2013 Remains Strong

Grand Alliance Rents Up Vacancy Low

Commercial Real Estate: 2012

Still In The Right Lane
Weakness Remained In 2012
Vacancy Problems One-Third Of Class A Space Empty County-Wide 50,000 Square Feet Lost Tenants Vacancy Rates In 15% To 20% Range Rents Declined

Commercial Real Estate: 2013

Some Hope For More Speed
Strong Demand For Medical Space New Lodging Facilities
Fairfield And Hampton Inns - Puyallup Holiday Inn - Tacoma Hampton Inn - DuPont

Retail Real Estate Hopes

Gig Harbor - Garfield North - Freighthouse Square Main Street Edgewood - Town Center UP

Overall Weakness Remains In 2013

Trade And Distribution

Port and Trade Activity

Steaming Ahead
More Ships, More Stuff 2011: Modest Gains
1.4% Activity Increase
2,200 2,000 1,800 1,600 1,400 1,200 1,000

Containerized Cargo
(1,000 of TEUs)

2012: Nice Increases

New Shippers Containers Up 15% Break-bulk Up 62%

2013: Continued Growth

Containers Up 13.5% Break-bulk Down 10%

Source: Port of Tacoma

Pierce County Economy

The Trip Gets Better
Annual Pierce County Economic Index
250
(1985 = 100)

200
150

100
50 0

Special Thanks to
Tacoma-Pierce County Chamber
And

Its Staff

Special Thanks to
Gary Brackett For 25 Years Of Outstanding Assistance

Thanks For All The Support

Congratulations To The University Of Puget Sound On Its 125th Anniversary Go Loggers

Special Thanks To:

Group Health Cooperative: Premier Sponsor Port of Tacoma: Premier Sponsor Puget Sound Energy: Premier Sponsor Totem Ocean Trailer Express, Inc.: Premier Sponsor Targa Sound Terminal: Premier Sponsor University of Puget Sound: Premier Sponsor Tacoma Public Utilities: PCEI Report Sponsor Waste Connections, Inc.: TV Broadcast Sponsor Clear Channel Outdoor: Media Sponsor Business Examiner Media Group: Social Media Sponsor Columbia Bank: Supporting Sponsor Pacific Lutheran University: Supporting Sponsor PJ Hummel & Company: Dcor Sponsor BCRA: Coffee & Connections Sponsor

Aloha Farewell Auf Wiedersehen

Good Bye

Au Revoir

Yasou

Shalom Adios
So Long Ciao

Adieu

Arrivederci