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Innovation Napa Valley: Economic Outlook toward Innovation Napa , CA October 17, 2012

Innovation Napa Valley: Economic Outlook toward Innovation Napa , CA October 17, 2012. Robert Eyler, Ph.D. Professor, Economics Department Frank Howard Allen Research Scholar Sonoma State University eyler@sonoma.edu. Time to wake up.

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Innovation Napa Valley: Economic Outlook toward Innovation Napa , CA October 17, 2012

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  1. Innovation Napa Valley:Economic Outlook toward InnovationNapa, CA October 17, 2012 Robert Eyler, Ph.D. Professor, Economics Department Frank Howard Allen Research Scholar Sonoma State University eyler@sonoma.edu

  2. Time to wake up • Commercialized science from incentives solves problems • Competitive advantages for CA can be lost • Housing’s role in the economy is follower not leader • Markets are global, speedy and moving west

  3. Domestic National Economy • International concerns • European debt issues and solutions: looking better, but remain • What about US debt issues? • Chinese and East Asian growth beginning to slow: why? • Labor Markets • Unemploymentcontinues to fall nationally and in CA: can we live with 7%? • Structural issues versus cyclical: housing markets changed returns to trades • Election year makes hiring and investment difficult to predict • Monetary Policy: Lending markets • Recovery slowbut steady: US more vulnerable to global market changes • Deposits still rising, rates are still low: Federal Reserve now 2013-14 for next rate hike, maybe (why?)

  4. Source: BEA

  5. Source: BEA (www.bea.gov)

  6. Source: BEA (www.bea.gov)

  7. Lending markets: some considerations • Operation Twist (QE 2.5) + QE3 • Lower medium- and long-term rates meant to provide incentives to borrow: why not to lend? • Margin squeeze at banks continues: why is lending not happening? • European debt situation + China connections • If austerity works, European recession coming • May need to sell bonds en masse to pay refinance debts: want to attract China on demand side • American rates may rise slowly also: more cost for lending 7

  8. 8 Source: Federal Reserve Board

  9. Source: Federal Reserve Board

  10. Source: Federal Reserve Board

  11. California • Labor Markets • California continues to lag national employment • Continued slow income growth leads to demand uncertainty • Adaptation and Adjustment • Equity markets have softened pension debate: structural problems remain • Labor market bifurcation parallel to housing: (I-5 versus 101) • Public labor market issues may affect private markets • CA needs to be a place where businesses can grow and survive for labor markets to follow • Competition is global 11

  12. Payroll Employment, Seasonally Adjusted, US and CA, Jan 2000 = 100 Source: EDD

  13. Source: BEA (www.bea.gov)

  14. Source: BEA (www.bea.gov)

  15. Employment, Seasonally Adjusted, 2000 – June 2012, Index Jan 2007 = 100 Source: EDD

  16. Housing • 2013 continues momentum from 2012 • Distressed inventory still there, but falling quickly • Napa and Marin better than Sonoma for now: why? • Interest rates to be more a problem than help • Will remain low but likely to be volatile • Lending markets squeezed on both sides • Need job growth and stability for true recovery • Housing needs to be seen as a portfolio asset • Shift in demand due to land use, market forces

  17. Distressed Sales, California(Percent of Total Sales) SOURCE: California Association of REALTORS®

  18. Distressed Sales by County(Percent of Total Sales) SOURCE: California Association of REALTORS®

  19. Regional Economy: Part 1 • Business growth has been in small business and self-employed/1099 businesses • True across state, especially North Bay • NB job recovery faster than CA in general • Chicken-egg issue: job creation vs. business creation • Napa is moving toward a more complete export economy • Global marketplace, exposed to global market forces • Differentiated from other, regional competition

  20. Change in Self-Employed Businesses and Payroll Businesses, 2002-10, Napa County

  21. Asset Building as Economic Development: Regional Economy Part II • What “leakages” does Napa have with respect to • Supporting the wine/hospitality/tourism industries? • Utilization of vacant commercial space that can house diverse industries? • Can industrial diversity take place toward innovation? • Do entrepreneurs live in Napa and want to scale/finance businesses? • Are there VC/Angel/Seed financing in Napa that already invest in scalable tech businesses?

  22. Employment Proportions by Industry, Napa County, 1990

  23. Employment Proportions by Industry, Napa County, 2000

  24. Employment Proportions by Industry, Napa County, 2005

  25. Employment Proportions by Industry, Napa County, 2011

  26. Diversity of Employment, Napa County, 2011

  27. Where are we headed? • Recovery into 2013: continued, slow recovery • Investment needs to recover, labor markets to follow • Financial market uncertainty remains • Public labor markets likely to change in 2013 • Election results will help clarify issues • Will a shift of public workers stall progress? • Regional connections, competition to rise globally • Housing market continues to recover • All three macro markets beginning to move as one, just slower than in recent (but not all historic) cycles

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