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To: GFOAZ By: Jim Rounds Senior Vice President Elliott D. Pollack & Company February 21, 2014

Economic Outlook 2014-2015. To: GFOAZ By: Jim Rounds Senior Vice President Elliott D. Pollack & Company February 21, 2014. Economic Crisis Du Jour. European Debt; U.S. Debt Ceiling; Rating Downgrade; ObamaCare; Fiscal Cliff; Sequestration; Govt. Shutdown; Debt Ceiling…Again;

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To: GFOAZ By: Jim Rounds Senior Vice President Elliott D. Pollack & Company February 21, 2014

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  1. Economic Outlook 2014-2015 To: GFOAZ By: Jim Rounds Senior Vice President Elliott D. Pollack & Company February 21, 2014

  2. Economic Crisis Du Jour • European Debt; • U.S. Debt Ceiling; • Rating Downgrade; • ObamaCare; • Fiscal Cliff; • Sequestration; • Govt. Shutdown; • Debt Ceiling…Again; • And Again… No growth for you!

  3. What is real?

  4. United States Real Gross Domestic Product*Annual Growth 1970 - 2015**Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators Recession Periods 3.8% = 40-year avg during expansion * Based on chained 2009 dollars. ** 2014 and 2015 are a forecast from the Blue Chip Economic Indicators, January 2014. 3.2% = 20-year avg during expansion

  5. US Non-Farm EmploymentChange from Prior Month (S/A)June 2010 – January 2014Source: Bureau Labor of Statistics Feel Better When >200k

  6. U.S. Unemployment Rate 1970 – 2014* Source: Bureau of Labor Statistics Recession Periods Underemployment = 12.7% *Seasonally adjusted data through January 2014

  7. U.S. Leading Indicators1971 – 2013* Source: The Conference Board Recession Periods *Data through December 2013

  8. 10 Components of U.S. Leading Indicators – December 2013 + • Interest rate spread • Manuf. new orders index • Leading Credit Index (inverted) • Stock prices • Manuf. new orders – consumer goods • Manuf. hours • Consumer expectations • Manuf. new orders – capital goods • Building permits • Claims for unemployment (inverted) -

  9. Consumer Confidence1978 – 2013* Source: The Dismal Scientist Recession Periods Worried Weary P.O.’d Disenfranchised *Data through December 2013.

  10. WEALTH EFFECT Housing prices are up. Stock market is up.

  11. Financial Obligation Ratio**1980 – 2013* Source: Federal Reserve Recession Periods *Data through third quarter 2013 **Ratio of mortgage and consumer debt (including auto, rent and tax payments) to disposable income.

  12. Recession Periods Household Debt CompositionPercent Change Year Ago2004 – 2013* Source: The Federal Reserve Bank of New York * Data through third quarter 2013.

  13. How Rate Sensitive? $25,000 Car Loan Payments 5-Year Term

  14. For Comparison: Mortgage Payments 30-Year Term

  15. Business

  16. Business Spending on EquipmentPercent Change from Prior Quarter 2005 – 2013* Source: Bureau of Economic Analysis Recession Periods *Data through third quarter 2013

  17. Business Spending on Plant Percent Change from Prior Quarter2005 – 2013* Source: Bureau of Economic Analysis Recession Periods *Data through third quarter 2013 Note: Data smoothed in Q1 of 2011

  18. Hours WorkedPercent Change from Year Ago1976 – 2013* Source: Bureau of Labor Statistics Recession Periods *Data through third quarter 2013

  19. US Non-Farm EmploymentPercent of Persons Working Full Time (S/A)1970 – 2013*Source: Bureau Labor of Statistics Recession Periods LT Average *Data through December 2013.

  20. Top Sources of New JobsU.S.Source: Bureau of Labor Statistics *Job growth January 2014/ January 2013

  21. Jobs are being created at a slow rate. Those that have jobs are spending a little more but will remain cautious. Unemployment should trend lower. Wealth levels are improving. Consumer Summary:

  22. Businesses are in better shape. Spending on equipment to continue to grow. Spending on plant will lag until capacity utilization goes higher…getting close. Employment to continue to grow. Business Summary:

  23. Federal Government

  24. Arizona At Risk For Spending Cuts Federal Spending as Percent of State GDP National Average = 5.3% Pew Center for the States

  25. What will they bring us this spring? Impact of the shutdown was overstated. We don’t want to go through this again though. Federal Government Summary:

  26. Arizona Jobs?

  27. Hawaii Jobs growing Top 10 Jobs declining Job Growth 2006 Alaska 24 Source: US BLS 10 7 9 5 1 4 3 15 14 23 8 2 11 6 50

  28. Hawaii Jobs growing Top 10 Jobs declining Job Growth 2010 Source: US BLS Alaska 2 8 48 18 1 27 39 7 46 5 9 50 4 23 6 40 32 41 10 49 43 3

  29. Hawaii Jobs growing Top 10 Jobs declining Job Growth 2013* Source: US BLS Alaska 50 8 21 1 17 4 49 11 10 2 14 5 26 9 43 6 3 7 *Pre-revisions

  30. Arizona RankEmployment Growth1990-2013Source: Bureau of Labor Statistics *Pre-revisions

  31. Arizona Employment*Source: ADOA *December 2013/ December 2012

  32. Top Sources of New JobsArizonaSource: Bureau of Labor Statistics, ADOA *Job growth December 2013/ December 2012

  33. Top Sources of New JobsU.S.Source: Bureau of Labor Statistics *Job growth December 2013/ December 2012

  34. Arizona Job Losses Exceeded U.S.Source: Bureau of Labor Statistics, Seasonally Adjusted Data Slide stolen from Lee McPheters…

  35. Arizona Jobs Regained Since Bottom of CycleMost Industries Yet To Regain Lost Jobs Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted, As of December 2013

  36. Greater Phoenix Employment*Source: ADOA *December 2013/ December 2012

  37. Employment Levels: Greater Phoenix back to Peak in 2016?Source: ADOA Recession Periods Peak *Based on seasonally unadjusted monthly data

  38. Tucson

  39. Tucson Total Nonfarm Employment NSA1990 – 2013*Source: Bureau of Labor Statistics Recession Periods *Data through December 2013.

  40. Tucson Employment*Source: ADOA *December 2013/ December 2012

  41. Remainder of State

  42. Balance of State Employment*Source: ADOA *December 2013/ December 2012

  43. Population?

  44. Why did population flows slow? • Slow job growth, • High un(der)employment, • Delayed retirement, • Difficulty in selling home, • Difficulty in qualifying for a loan, • Etc.

  45. Arizona Population Growth Was Slow But Still Top 10 in 2012 1 9 3 5 4 6 7 10 2 Percent Change 2012 8 U. S. Census Bureau

  46. Arizona Rank - Population Growth1991-2012Source: Census Bureau

  47. 31 States in Red Lost Domestic Population to 19 States in Green Texas, Florida, Arizona Attracted Most Domestic Migrants in 2012 9 10 5 4 Alaska Hawaii 6 3 7 8 Slide stolen from Lee McPheters… 1 2 U.S. Census Bureau

  48. Arizona Domestic Migration RankingSource: U.S. Census Bureau *No data available for 2010

  49. Arizona International Migration RankingSource: U.S. Census Bureau *No data available for 2010

  50. Housing?

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