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Economic Update 2014 ACMA July 23, 2014 Presented By: Jim Rounds Senior Vice President

Economic Update 2014 ACMA July 23, 2014 Presented By: Jim Rounds Senior Vice President Elliott D. Pollack & Company. Past “Headlines”. 2010 By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company. What The #$@&, I Thought It Was Getting Better?.

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Economic Update 2014 ACMA July 23, 2014 Presented By: Jim Rounds Senior Vice President

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  1. Economic Update 2014 ACMA July 23, 2014 Presented By: Jim Rounds Senior Vice President Elliott D. Pollack & Company

  2. Past “Headlines”

  3. 2010 By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company What The #$@&, I Thought It Was Getting Better?

  4. “The Not So Attractive Recovery” (But it has a great personality!) 2011 By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company

  5. 2012 By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company You Heard It Here First: Less Dreadful Times Ahead!

  6. 2013 By: Jim Rounds, Senior Vice President Elliott D. Pollack & Company What Will Firm Up This Recovery?

  7. How to Avoid the…

  8. Is there a story? • Does the data make sense? • If not, is there an explanation for why it is off? • If not, then worry.

  9. United States Real Gross Domestic Product*Annual Growth 1970 - 2015**Source: U.S. Bureau of Economic Analysis & Blue Chip Economic Indicators Recession Periods Q1 = -2.9% Q2/Q3 = ? 3.8% = 40-year avg during expansion * Based on chained 2009 dollars. ** 2014 and 2015 are a forecast from the Blue Chip Economic Indicators, July 2014. 3.2% = 20-year avg during expansion

  10. US Non-Farm EmploymentChange from Prior Month (S/A)June 2010 – June 2014Source: Bureau Labor of Statistics

  11. U.S. Unemployment Rate 1970 – 2014* Source: Bureau of Labor Statistics Recession Periods Underemployment = 12.1% *Seasonally adjusted data through June 2014

  12. U.S. Leading Indicators1971 – 2014* Source: The Conference Board Recession Periods *Data through June 2014

  13. 10 Components of U.S. Leading Indicators – June 2014 + • Interest rate spread • Leading Credit Index (inverted) • Stock Prices • Manuf. new order index • Manuf. new orders – capital goods • Manuf. new orders – consumer goods • Consumer expectations • Claims for unemployment (inverted) • Manuf. hours • Building permits -

  14. Risks?

  15. Consumers • Debt burden low. • Net worth improved. • Real income growth. • Liquidity improving. • Inflation low. • Government • Fed policy still expansive (2015).

  16. Business • No excess inventory. • No capacity issues. • Dollar not overly strong. • Housing • Prices up but leveled.

  17. U.S. Risks • Stock market? • International Risks: • China? • Russia?

  18. What’s slowing us down?

  19. 70s, 80s – Rapid increase in household formation.

  20. 90s – Huge increase in stock market.

  21. 1996 – 2005 – rapid increase in housing prices/housing based credit.

  22. Now?

  23. Consumers

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

  25. Recession Periods Consumer Confidence1978 – 2014* Source: The Dismal Scientist *Data through June 2014.

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

  27. Average Age of Auto Fleet (all light vehicles) • 2013 – 11.4 years • 2010 – 10.6 years • 2005 – 9.5 years • 2000 – 8.9 years • 1995 – 8.4 years Source: R.L. Polk Company

  28. Business

  29. Hours WorkedPercent Change from Year Ago1976 – 2014* Source: Bureau of Labor Statistics Recession Periods *Data through first quarter 2014

  30. Capacity Utilization Rate1970 – 2014* Source: The Federal Reserve Bank of St. Louis Recession Periods *Data through May 2014.

  31. Bottom Line Slower long term growth with some risk.

  32. Arizona

  33. Different this time? • Significant declines in population flows. • Steeper housing decline.

  34. Hawaii Arizona Population Growth Was Slow But Still Top 10 in 2013 Alaska 9 1 6 5 2 3 8 10 4 Growing Top 10 7 Declining Source: U.S. Census Bureau

  35. Arizona RankPopulation Growth1991-2013Source: Census Bureau

  36. Why did population flows slow? • Slow job growth • High unemployment • Delayed retirement • Difficulty in selling home • Difficulty in qualifying for a loan • S.B. 1070?

  37. Arizona Population Annual Percent Change 1975–2013Source: AZ Dept. of Administration Recession Periods ½ normal

  38. Arizona Population Annual Net Change 1975–2013Source: AZ Dept. of Administration Recession Periods ½ normal

  39. 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

  40. Hawaii Jobs growing Top 10 Jobs declining Job Growth 2013 Source: US BLS Alaska 47 9 14 1 11 7 46 6 2 3 4 16 10 44 5 8

  41. Hawaii Jobs growing Top 10 Jobs declining Job Growth 2014 YTD June 2014 vs YTD June 2013 Source: US BLS Alaska 47 11 30 1 7 35 33 2 5 8 9 6 27 15 50 10 3 4

  42. Job Growth 2014YTD June 2014 vs June 2013Source: U.S. Bureau of Labor Statistics

  43. Quality?

  44. Arizona Job Losses Exceeded U.S.Source: Bureau of Labor Statistics, Seasonally Adjusted Data

  45. Arizona Jobs Regained Since Bottom of Cycle– Most Industries Yet to Regain Lost Jobs Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted, As of June 2014

  46. U.S. Jobs Regained Since Bottom of Cycle Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted, As of June 2014

  47. AZ Has Regained 57% of Lost Jobs133,100 Jobs (43%) Still to Recover 2.68 million Oct. 2007 179,500 Jobs Regained (57%) 312,600 AZ Jobs Lost (12%) 2.37 million Feb. 2010 Source: U.S. Bureau of Labor Statistics, Thousands of Jobs, Seasonally Adjusted Data through June 2014.

  48. Greater Phoenix

  49. Greater Phoenix Population Annual Percent Change 1975–2015*Source: Arizona State University & AZ Dept. of Administration Recession Periods * 2014 & 2015 forecast is from Elliott D. Pollack & Co.

  50. Phoenix-Mesa Employment Growth(Ranking among all metro areas greater than 1,000,000)Source: Arizona State University, U.S. Bureau of Labor Statistics *YTD June 2014 vs. YTD June 2013

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