1. The U.S. Economy: “Bracing for Higher Interest Rates” Eugenio J. Aleman, Ph.D. Director and Senior Economist September 11, 2015

2. Economics 2 Federal Government Expenditures Government expenditures have started to grow after several years in negative territory Source: U.S. Treasury and Wells Fargo Securities, LLC

3. Economics 3 Federal Fiscal Results Not very good at generating surpluses! Source: U.S. Treasury and Wells Fargo Securities, LLC

4. Economics 4 Real GDP Growth The U.S. economy continues to grow Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

5. Economics 5 U.S. Nonfarm Employment 2014 was the best year for employment growth since 1999 Source: U.S. Department of Labor and Wells Fargo Securities, LLC

6. Economics 6 U.S. Employment By Industry Employment growth is positive across the board Source: U.S. Department of Labor and Wells Fargo Securities, LLC

7. Economics 7 Government Employment It is not the Federal Government! Source: U.S. Department of Labor and Wells Fargo Securities, LLC

8. Economics 8 Unemployment Rate The rate of unemployment is closing in on what is called full- employment Source: U.S. Department of Labor and Wells Fargo Securities, LLC

9. Economics 9 The Employment Situation One of the reasons for the decline in the unemployment rate is tied to the drop-off in the labor force participation rate Source: U.S. Department of Labor and Wells Fargo Securities, LLC

10. Economics 10 Mean Duration of Unemployment Finally, the mean duration of unemployment has started to improve but it is still too high Source: U.S. Department of Labor and Wells Fargo Securities, LLC

11. Economics 11 Unemployment by Education Level Unemployment continues to come down, especially for those with education Source: U.S. Department of Labor and Wells Fargo Securities, LLC

12. Economics 12 Consumer Price Index Inflation is almost nonexistent Source: U.S. Department of Labor and Wells Fargo Securities, LLC

13. Economics 13 Federal Reserve Target Rate Monetary policy remains extremely expansive Source: Federal Reserve Board and Wells Fargo Securities, LLC

14. Economics 14 Federal Reserve Balance Sheet The Fed’s balance sheet is no longer growing Source: Federal Reserve Board and Wells Fargo Securities, LLC

15. Economics 15 New Home Sales New home sales are starting to show some recovery Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

16. Economics 16 Housing Starts Housing starts plunged in February, perhaps due to severe weather Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

17. Economics 17 Existing Home Sales Existing home sales have weakened a bit but remain relatively strong Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

18. Economics 18 Home Prices Home price growth seems to be picking up steam again Source: National Association of Realtors, FHFA, S&P Case-Shiller and Wells Fargo Securities, LLC

19. Economics 19 Home Mortgages Mortgage lending is still very weak but have improved over the past several months Source: Federal Reserve Board and Wells Fargo Securities, LLC

20. Economics 20 Negative Equity Negative equity continues to improve Source: CoreLogic and Wells Fargo Securities, LLC

21. Economics 21 ISM Manufacturing Index Manufacturing has weakened with the appreciation of the U.S. dollar Source: Institute for Supply Management and Wells Fargo Securities, LLC

22. Economics 22 ISM Non-Manufacturing Index The service economy continues to move along Source: Institute for Supply Management and Wells Fargo Securities, LLC

23. Economics 23 Consumer Credit Credit card lending is improving but it is still very weak Source: Federal Reserve Board and Wells Fargo Securities, LLC

24. Economics 24 Household Debt Households continue to deleverage Source: Federal Reserve Board and Wells Fargo Securities, LLC

25. Economics 25 Household Debt Households are feeling pretty good today! Source: Federal Reserve Board and Wells Fargo Securities, LLC

26. Economics 26 Consumer Confidence Consumer confidence is on the right path Source: The Conference Board and Wells Fargo Securities, LLC

27. Economics 27 Personal Saving Rate The saving rate has inched up a bit in the last several months Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

28. Economics 28 Mortgage and Treasury Rates Mortgage interest are still at almost historic lows Source: Freddie Mac, Federal Reserve Board and Wells Fargo Securities, LLC

29. Economics 29 Global Forecast Growth will continue to improve Source: Wells Fargo Securities, LLC

30. Economics Wells Fargo Securities, LLC Economics Group 30 John E. Silvia …....................... … john.silvia@wellsfargo.comjohn.silvia@wellsfargo.com Global Head of Research and Economics Diane Schumaker-Krieg ………………… …… ….diane.schumaker@wellsfargo.comdiane.schumaker@wellsfargo.com Global Head of Research & Economics Chief Economist Mark Vitner, Senior Economist……………....……….. mark.vitner@wellsfargo.commark.vitner@wellsfargo.com Jay H. Bryson, Global Economist …………………....…… …. jay.bryson@wellsfargo.com jay.bryson@wellsfargo.com Sam Bullard, Senior Economistsam.bullard@wellsfargo.comsam.bullard@wellsfargo.com Nick Bennenbroek, Currency Strategist……nicholas.bennenbroek@wellsfargo.comnicholas.bennenbroek@wellsfargo.com Eugenio J. Alemán, Senior Economist… …………eugenio.j.aleman@wellsfargo.comeugenio.j.aleman@wellsfargo.com Anika R. Khan, Senior Economist …. anika.khan@wellsfargo.comanika.khan@wellsfargo.com Senior Economists Erik Nelson, Economic Analyst erik.f.nelson@wellsfargo.comerik.f.nelson@wellsfargo.com Alex Moehring, Economic Analyst alex.v.moehring@wellsfargo.comalex.v.moehring@wellsfargo.com Economists Azhar Iqbal, Econometrician………………… ……………azhar.iqbal@wellsfargo.comazhar.iqbal@wellsfargo.com Tim Quinlan, Economist …………………… ……………..tim.quinlan@wellsfargo.comtim.quinlan@wellsfargo.com Eric J. Viloria, Currency Strategist eric.viloria@wellsfargo.comeric.viloria@wellsfargo.com Sarah House, Economist …………… ………… sarah.house@wellsfargo.comsarah.house@wellsfargo.com Michael A. Brown, Economist ……………… … michael.a.brown@wellsfargo.commichael.a.brown@wellsfargo.com Michael T. Wolf, Economist ………………… …. michael.t.wolf@wellsfargo.com michael.t.wolf@wellsfargo.com Economic Analysts Administrative Assistants Wells Fargo Securities Economics Group publications are produced by Wells Fargo Securities, LLC, a U.S broker-dealer registered with the U.S. Securities and Exchange Commission, the Financial Industry Regulatory Authority, and the Securities Investor Protection Corp. Wells Fargo Securities, LLC, distributes these publications directly and through subsidiaries including, but not limited to, Wells Fargo & Company, Wells Fargo Bank N.A., Wells Fargo Advisors, LLC, Wells Fargo Securities International Limited, Wells Fargo Securities Asia Limited and Wells Fargo Securities (Japan) Co. Limited. Wells Fargo Securities, LLC. ("WFS") is registered with the Commodities Futures Trading Commission as a futures commission merchant and is a member in good standing of the National Futures Association. Wells Fargo Bank, N.A. 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