1. Connecticut Edward J. Deak, Ph.D. Professor of Economics Fairfield University

2. CT Current Economic Conditions: The Bane of Harry Truman On the One Hand y CT Econ Recovery: Best pace to date –Job creation = +17,600 in 2006; +3,200 jobs in 4/07 –Job comparison year ago = +20,300 vs. April 2006 –Unemploy rate = 4.2% vs. 4.0% in 4/06 vs. 4.5% U.S. –ME.com: CT to recover all lost jobs by 2007:Q4 –Real GSP = +3.6% in 2006 vs. 3.3% for U.S. –No sign of CT or U.S. recession through 2011 –Vast array of proposed commercial real estate projects –Bull market on Wall Street – Multiple sources of lift for CT High concentration of wealth + wealth holders High # Wall Street traders + Local financial managers High # hedge funds, private equity, venture cap firms

3. CT Economic Warning Signs: The Bane of Harry Truman On the Other Hand yTriple Economic Whammy –Slumping CT housing market – U.S. housing recession – CT energy costs – Elec, gasoline, HHO = $9,800 per yr. –Rising U.S food prices – Corn diversion to ethanol yCT housing data –Home permits = -22.2% (DECD) =2006, -34.2% thru 3/07 –CT home sales (NAR) =  -11.9% 2006, -5.1% 07:Q1 (saar) –Median sale price 1-Fam home (Warren Group) 2006 = +0.7%07:Q1 vs 06:Q1 = -0.7% –Inventory – Higher Time on market – Longer –Buyers – Fewer Delinquencies – Rising yFear: Housing slump spreads to CT economy

4. Why CT Housing Slump is Likely to Slow the Gains in CT Economy ySupply Conditions – Depress price + sales –OFHEO: Prices are high, decreasing affordability –Past home price peak  Less cash out w/HELOC’s or refi’s –Home permits + sales    # jobs: const, RE, Retail, Fin –Higher #’s for non-prime loans in CT –Rising share of CT sub-prime + sub-prime delinquencies –Rate reset = Foreclosures + distressed sales  inventory yDemand Conditions – Depress price + sales –Tighter lending standards –Buyer reluctance: Fear “catching a falling knife” –Minimal demand from investor/speculators

5. NEEP vs. ME.com CT Housing Forecasts Item2006 % 2007 % 2008 % Permits9,640 -18.9 8,836 -8.3 9,284 +5.1 ME.com9,640 -18.9 9,760 +1.2 11,495 +17.8 Sales Exist53.0k -8.8 48.7k -8.2 49.2k +1.0 ME.com53.0k -8.8 52.7k -0.6 52.2k -0.9 Med Price$ 311.8k +1.8 290.3k -6.9 286.0k -1.5 ME.com311.8k +1.8 290.9k -6.7 296.2k +1.8 Result – NEEP decline steeper + longer duration than ME.com

6. CT+ U.S. Housing Slump: Reduces NEEP Job Growth %  % Change

7. CT Posted Job Adds & Cuts NEEP Semiannual Totals # Jobs

8. CT Job Changes by Employment Sector y Posted Job Changes: 10:06 - 4:07 - Cuts: 37 firms – 4,298 jobsAdds: 25 firms +4,658 jobs y NEEP Job Change Projections by Sector (000’s jobs) 2006 2007 2008 2009 2010 2011 yMfg -1.6 -1.6 -1.0 -0.4 -0.5 -0.7 yConst 1.0 -1.4 -2.1 -0.2 -0.4 -2.1 yTrade 0.3 0.0 -0.3 0.2 1.4 1.1 yLeis/Hosp 2.7 2.7 1.4 2.2 2.4 2.2 yEd/Hlth 6.6 7.8 6.7 6.6 6.9 6.6 yFin Serv 1.9 2.9 0.8 1.0 1.3 1.3 yBus serv 4.5 2.2 3.9 4.3 4.5 4.0 yGovt 1.9 1.1 1.8 1.6 1.2 0.9

9. CT + U.S. Housing Slump: Raise NEEP CT UE Rate UE Rate %

10. New Home Permits 2005-11 % Change % Change

11. Sales Existing Homes 2005-11 % Change % Change

12. Median 1-Fam Home Price 2005-11 % Change % Change