PBCTPBCT Connecticut Economic Overview “Recovery Underway?” May 2002 Todd P. Martin 1st VP & Chief Economist People’s Bank  Todd P. Martin:

PBCTPBCT US Economic Outlook : The Recession is over - mild recovery underway Fed aggressively cut fed funds to 1.75% last year - lowest since Not expected to tighten until the summer of 2002, at the earliest. Economy responding to lower interest rates, stimulative fiscal policy, lower energy costs, and a swing in inventories. Unemployment rate still expected to rise through mid-2002 Risks to the downside: Additional terrorist attack - Escalating unrest in the Middle East - rising oil prices - risk of synchronized global recession - ‘Enronitis’ - weak corporate profits - delayed capital spending

PBCTPBCT Recession may have been the mildest on record? Source: BEA, Conference Board People’s Bank Real Chain Weighted Gross Domestic Product Growth - % change SAR 2nd Q th Q 2002 are forecast

PBCTPBCT CT Economic Outlook : CT economy not immune to recession but out-performs in terms of income growth & the unemployment rate Do not expect repeat of 1990s recession due to more diversified employment mix (defense a stabilizing factor) - balanced real estate markets - State fiscal position - banks have adequate capital & credit available CT has lost 28,500 jobs since 7/00 (1.7%) - Unemployment rate currently 3.5% rises to 4.0%-4.5% later this year. Risks: National recovery - continued Bear Market - high costs - deteriorating fiscal condition - exposure to energy shocks

PBCTPBCT People's Bank Business Barometer stalls Source: People’s Bank, Centerprise Advisors

PBCTPBCT PBBB YOY shows worst may be over for CT? Source: People’s Bank, Centerprise Advisors

PBCTPBCT Quarterly change in PBBB turned negative in 2001 Source: People’s Bank, Centerprise Advisors

PBCTPBCT CT has lost 28,500 jobs since mid-2000 Source: BLS, CT Labor Department  (Thousands)

PBCTPBCT Both US & CT employment down 1% YOY Source: BLS, CT Labor Department

PBCTPBCT CT has lost over 40% of its man. jobs since 1984 Source: BLS, CT Labor Department  (Thousands)

PBCTPBCT CT Service employment is up nearly 80% since 1984 Source: BLS, CT Labor Department  (Thousands)

PBCTPBCT Biggest job losses in Hartford & Bridgeport LMA’s Change in non-farm employment Mar vs. Mar (NSA) Source: CT Labor Dept.

PBCTPBCT Hardest hit employment sectors in CT Change in CT Non-Farm Employment Mar vs. Mar ( Not SA) Source: CT Labor Department

PBCTPBCT CT gained jobs in these sectors YOY Change in CT Non-Farm Employment Mar vs. Mar ( Not SA) Source: CT Labor Department

PBCTPBCT CT unemployment rate lower than US rate Source: CT Labor Department % of labor force (SA)

PBCTPBCT CT Initial unemployment claims may have peaked? Source: CT Labor Department

PBCTPBCT All LMAs have unemployment rates below 5.5% CT Unemployment Rates % by Labor Market Area (NSA. Mar. 2002) Source: CT Labor Dept.

PBCTPBCT Housing permits up in most areas YTD Source: CT DECD % Change in CT New Housing Permits Authorized YTD Jan. - Mar vs by LMA

PBCTPBCT Housing not overbuild like the mid-1980s Source:CT DECD, New England Economic Project Total housing permits authorized in CT in units is forecast

PBCTPBCT Auto registrations down 12.4% YTD Source: CT Labor Department Connecticut New Auto Registrations Processed YTD - (Jan. - Mar.)

PBCTPBCT Tax revenues are down 5.9% this year (FY 01-02) Source: State of CT Dept. of Revenue Services Year-to-Date % change in CT Tax Revenues ( FY vs. FY July - Mar. )

PBCTPBCT CT projects deficits after 10 years of surpluses Source: CBIA, CT OPM General Fund surplus or deficit from operations - fiscal years - $millions  are estimated

PBCTPBCT Summary Recession over - mild recovery underway CT economy - not a repeat of the early 1990’s Out-perform US - unemployment & income Under-perform US - population & job growth Pros: Wealth - productivity - tourism - bio-tech Cons: High costs - manufacturing - energy - Wall Street - State fiscal condition

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