Economic Outlook Phoenix Chamber of Commerce Economic Outlook Breakfast September 30, 2011 Beckie Holmes Diretor, Marketing Science, Cox Communications Arizona

2 Overview The recession has left lasting damage Credit markets still fundamentally weak No political will for further fiscal support, unclear that monetary policy can help Bottom line: Slow and painful recovery continues into 2012; risk of recession is high

3 The Post-Recession Economy: More Services, Government, Exports, Less Investment, Durable Goods Source: Department of Commerce, Bureau of Economic Statistics

4 Dropping Out: Labor Force Participation at Decades Lows Source: US Bureau of Labor Statistics

55 Where Is the Job Growth? Employment still down 5% from 2007 Peak *US Jobs lost: Nov-07 to Jan-10. US Jobs gained Jan-10 to Aug-11 Source: US Bureau of Labor Statistics US Job Growth: Lost: -8.6M, -6% Regained +1.9M, +1% -5.7%-23.5%-14.5%-5.7%-1.7%+8.2%-7.7%-2.3%’07-’11 cg

6 US Job Openings vs Employment: July 2011 Jobs Being Created Different From Those Lost Source: US Bureau of Labor Statistics

7 Job Creation: Entrepreneurship Weak Layoffs Down Sharply But Expansions, Firm Creation Sluggish Source: US Bureau of Labor Statistics

8 Confidence Faltering Nearing Recession Lows

9 US Median Household Income Income Now at 1996 Levels Source: US Census Bureau

10 Deleveraging? Source: US Federal Reserve

11 Massive Fiscal Stimulus Closing The Gap Will Be Painful Source: US Department of Commerce, Bureau of Economic Analysis

12 Balancing The Federal Budget Revenues and Expenditures Must Be Addressed To Reach Historical Averages Source: US Department of Commerce, Bureau of Economic Analysis

13 Baseline Projections for Declining Debt Extension of Current Policy Results in Rising Debt

14 Conclusions Recovery at risk – Risk of another recession now about 50% – Fiscal contraction will subtract 2-4 points from GDP growth Good Signs – Household and corporate balance sheets healthy – Job creation has returned Worrying Signs – No turnaround in hardest-hit sectors – Lasting damage to labor market – Congressional discord on deficit reduction