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Economic Outlook February 18, 2010.

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Presentation on theme: "Economic Outlook February 18, 2010."— Presentation transcript:

1 Economic Outlook February 18, 2010

2 Economic Growth The ending of various stimulus programs will cause growth to slow during the middle of the year Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

3 Domestic Demand Real “core” GDP, or private domestic final sales, reflects the domestic economy more clearly and shows much more modest growth Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

4 Labor Market The labor market remains the primary concern as job losses have exceeded every post-World War II downturn Source: U.S. Department of Labor and Wells Fargo Securities, LLC

5 Unemployment by County
Large Portions of the United States Continue to Face Serious Unemployment Issues Unemployment Rate Unemployment Rate December 2009 Greater than 12.5% 10 .0% to 12 .5% 8 6 Less than 6.0% Source: US Department of Labor and Wells Fargo Securities, LLC

6 Reason for Unemployment
Reentrants and new entrants will likely account for a larger share of the unemployment rate Source: U.S. Department of Labor and Wells Fargo Securities, LLC

7 Income Proxy Income earned from work has fallen nearly 20 percent since the recession began. Declines have slowed more recently and modest growth is expected to return in 2010. Source: U.S. Department of Labor and Wells Fargo Securities, LLC

8 Inventories Businesses are finally bringing inventories back in line with underlying demand Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

9 Equipment & Software Investment
Demand for equipment and software has already turned positive and is expected to be a larger contributor to economic growth Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

10 Core retail sales are rising more closely with income
Consumer Spending Core retail sales are rising more closely with income Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

11 Credit Spreads The TED spread is now at its lowest level since the credit crunch began. Have conditions really improved that much? Source: British Bankers’ Association, Federal Reserve Board and Wells Fargo Securities, LLC

12 Mortgage Rates Mortgage rates were pushed lower by the Fed’s intervention in the MBS market. Now that the Fed purchase program is winding down, how much will spreads widen? Source: Freddie Mac, Federal Reserve Board and Wells Fargo Securities, LLC

13 Corporate Bond Spread The Baa corporate bond spread has come down substantially since the Fed began its quantitative easing policy and the stock market rallied. What happens when the Fed stops buying MBS? Source: Federal Reserve Board, Moody’s, S&P Corp. and Wells Fargo Securities, LLC

14 Corporate bond spreads have also come down quite substantially
Source: Moody’s and Wells Fargo Securities, LLC

15 Yield Curve The yield curve is steep but should flatten slightly over the course of this year Source: Moody’s and Wells Fargo Securities, LLC

16 The Global Recession The global economy contracted for the first time in 2009, but is expected to rebound solidly this year. Risks remain in China, Europe and the developing world. Source: International Monetary Fund and Wells Fargo Securities, LLC

17 The Dollar After reversing gains from a flight to safety last year, the dollar is expected to gradually grind higher against most major currencies Source: Federal Reserve Board and Wells Fargo Securities, LLC

18 Housing starts bottomed about one year ago
Homebuilding Housing starts bottomed about one year ago Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

19 Vacant Homes for Rent and Sale
The number of vacant homes for rent has risen faster than the number of vacant homes for sale has fallen Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

20 Home prices appear to have bottomed
Source: Federal Housing Finance Agency, National Association of Realtors, S&P Corp. and Wells Fargo Securities, LLC

21 Home Price Declines from Peak
The FHFA Price Index Show Smaller but Pervasive Price Declines FHFA (OFHEO) Home Price Index Source: FHFA and Wells Fargo Securities, LLC

22 Home Sales Incentives for first-time homebuyers have helped drive up home sales. A large portion of existing sales, however, are distressed sales. Source: National Association of Realtors, U.S. Department of Commerce and Wells Fargo Securities, LLC

23 Housing Indicator Forecasts

24 Preliminary data show a modest improvement in employment
North Carolina Preliminary data show a modest improvement in employment Source: U.S. Department of Labor and Wells Fargo Securities, LLC

25 The unemployment rate hit a new high in December
North Carolina The unemployment rate hit a new high in December Source: U.S. Department of Labor and Wells Fargo Securities, LLC

26 Building activity will remain slow for the foreseeable future
North Carolina Building activity will remain slow for the foreseeable future Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

27 Employment conditions in Charlotte may be turning the corner
Source: U.S. Department of Labor and Wells Fargo Securities, LLC

28 Like in the rest of the state, unemployment remains uncomfortably high
Charlotte Like in the rest of the state, unemployment remains uncomfortably high Source: U.S. Department of Labor and Wells Fargo Securities, LLC

29 Building activity has slowed to a crawl
Charlotte Building activity has slowed to a crawl Source: U.S. Department of Commerce and Wells Fargo Securities, LLC

30 Charlotte CSA Job losses continued to mount in the greater Charlotte area as of mid last year Source: U.S. Department of Labor and Wells Fargo Securities, LLC

31 The unemployment rate may have peaked
Charlotte CSA The unemployment rate may have peaked Source: U.S. Department of Labor and Wells Fargo Securities, LLC

32 Robust population growth provides a sizable labor force
Charlotte CSA Robust population growth provides a sizable labor force Source: U.S. Department of Labor and Wells Fargo Securities, LLC

33 Appendix

34 Wells Fargo Economics Group Publications
A Sampling of Our Recent Special, Regional & Industry Commentary To join any of our research distribution lists please visit our website: Recent Special Commentary

35 Wells Fargo Securities, LLC Economics Group
Diane Schumaker-Krieg Global Head of Research & Economics John E. Silvia, Ph.D. Chief Economist Mark Vitner Senior Economist Jay H. Bryson, Ph.D. Global Economist Scott Anderson, Ph.D. Senior Economist Eugenio Aleman, Ph.D. Senior Economist U.S. Macro Economy Real Estate Global Economies U.S. Macro Economy U.S. Macro Economy Sam Bullard Economist Anika Khan Economist Azhar Iqbal Econometrician Adam G. York Economist U.S. Macro Economy Financial Services Real Estate Retail & Automotive Quantitative Macro-Economic Modeling U.S. Consumer Real Estate Ed Kashmarek Economist Tim Quinlan Economic Analyst Kim Whelan Economic Analyst Yasmine Kamaruddin Economic Analyst U.S. Macro Economy Global Economies Business Investment U.S. Macro Economy Business Investment U.S. Macro Economy 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, Wachovia Bank N.A., Wells Fargo Bank N.A, Wells Fargo Advisors, LLC, and Wells Fargo Securities International Limited. The information and opinions herein are for general information use only. Wells Fargo Securities, LLC does not guarantee their accuracy or completeness, nor does Wells Fargo Securities, LLC assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. Wells Fargo Securities, LLC is a separate legal entity and distinct from affiliated banks and is a wholly owned subsidiary of Wells Fargo & Company © 2010 Wells Fargo Securities, LLC. SECURITIES: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE

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