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Economic Outlook September 12, 2008 Table of Contents I. National Economic Overview II. Residential Real Estate Summary III. The Carolinas Appendix Wachovia Economics Group 2 National Economic Overview Wachovia Economics Group 3 U.S. Economic Overview National Economic Overview Real GDP May Not Be Negative Going Forward, But We Still Expect the Weakest Consumer Cycle Since the 1981-82 Recession Highlights Real GDP Tax rebate payments boosted consumption in the second quarter and may provide some limited help in the second half of the year, but we still expect the weakest consumer environment since the early 1980s. Labor markets continue to struggle as job losses stretch into their eighth straight month in August. The unemployment rate has surged to over six percent. The major positive contributions to GDP in the second half will be from fewer inventory liquidations and continued improvement in the nation’s trade balance. 8.0% Bars = Compound Annual Growth Rate Nonfarm Employment Change Line = Yr/ Yr Percent Change Change in Employment in Thousands 8.0% 500 7.0% 7.0% 400 400 6.0% 6.0% 300 300 200 200 100 100 Forecast 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 0 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% GDPR - CAGR: Q2 @3.3% GDPR - Yr/ Yr Percent Change: Q2 @2.2% -1.0% -2.0% 1998 2000 2002 2004 2006 0 -100 -100 -200 -200 -1.0% -300 -2.0% -400 -300 Nonfarm Employment Change: Aug @-84,000 2008 -400 2000 2001 2002 Wachovia U.S. Economic Forecast Actual Real Gross Domestic Product Personal Consumption Business Fixed Investment Equipment and Software 2 3 Consumer Price Index Corporate Profits Before Taxes 10-Year Treasury Note 1 3 2006 2003 2004 2005 2006 2007 Bars = Compound Annual Growth Rate Line = Yr/ Yr Percent Change Forecast 2007 2008 Core PCE Deflator 3.5% 2005 500 2008 2009 3.5% Forecast 3.0% 3.0% 2.5% 2.5% 2.0% 2.0% 1.5% 1.5% 1.0% 1.0% 2010 2.9 3.0 7.2 9.3 3.4 2.8 3.0 7.5 7.2 3.2 2.0 2.8 4.9 1.7 2.9 1.8 1.0 3.0 0.1 4.2 1.8 0.9 -1.6 -0.2 2.0 2.2 2.1 -1.1 2.0 1.9 11.9 4.39 16.0 4.71 -0.6 4.04 -5.7 3.80 6.4 4.10 10.7 4.30 0.5% 0.5% "Core" PCE Deflator - CAGR: Q2 @2.1% "Core" PCE Deflator - Yr/ Yr Percent Change: Q2 @2.2% 0.0% 1998 0.0% 2000 2002 2004 2006 2008 Forecast as of: September 10, 2008 2Compound Annual Growth Rate 3 Year-over-Year Percent Change Source: Federal Reserve Board, U.S. Department of Commerce, U.S. Department of Labor and Wachovia Wachovia Economics Group 4 U.S. Economic Overview National Economic Overview The Economy Feels Weaker on Main Street Than the Real GDP Data Would Indicate Highlights The real trade balance has been Trade Balance in Goods $0 3-Month Moving Average, Billions of Dollars -$10 improving in recent months. -$20 Exports are being fueled by a weak dollar and strong foreign demand. -$30 The nominal deficit has remained -$40 wider on energy price changes. -$50 Weak personal consumption will -$60 restrain import growth even further -$70 Nominal Trade Balance: Jun @-$71.7 Billion in coming quarters, leading to Real Trade Balance: Jun @-$43.2 Billion additional reductions in the trade -$80 97 98 99 00 01 02 03 04 05 06 07 08 gap. Real Core GDP, private domestic final sales, has been negative in two of the last three quarters, and Change in Real Inventories we estimate it will stay negative into Billions of Dollars, Annual Rate $125 next year. This measure lines up $100 better with what consumers and Forecast $75 businesses are feeling on Main $50 Street than headline GDP. $25 Nominal GDP, a measure of $0 revenue growth for the economy, -$25 continues to grow at a below-trend -$50 pace; this means corporate revenue growth will remain sluggish -$75 Change in Private Inventories: Q2 @-$49.4B in coming quarters. -$100 1998 2000 2002 2004 2006 2008 Inventory growth has been weak for some time, which will limit the downside risk to the economy inSource: U.S. Department of Commerce and Wachovia this cycle. Real "Core" GDP $0 Bars = Compound Annual Growth Rate 8.0% Line = Yr/ Yr Percent Change 8.0% -$10 6.0% 6.0% -$20 Forecast 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% -$30 -$40 -$50 -$60 -2.0% -2.0% -$70 -$80 "Core" GDP - CAGR: Q2 @1.1% "Core" GDP - Yr/ Yr Percent Change: Q2 @0.7% -4.0% -4.0% 1998 2000 2002 2004 2006 2008 Nominal GDP $125 Compound Annual Growth Rate 10.0% 10.0% $100 $75 Forecast 8.0% 8.0% $50 6.0% 6.0% 4.0% 4.0% $25 $0 -$25 -$50 2.0% -$75 -$100 2.0% Nominal GDP - CAGR: Q2 @4.6% Nominal GDP - Yr/ Yr Percent Change: Q2 @4.2% 0.0% 1998 0.0% 2000 2002 2004 2006 2008 Wachovia Economics Group 5 Consumer Overview National Economic Overview Consumers Are Getting Squeezed on Many Fronts, But Rebates Gave Temporary Relief This Summer Discretionary Consumer Discretionary Spending Spending July-2008 Other Discretionary 19% Housing Away from Home 1% Alcohol & Tobacco 3% Clothing & Shoes 4% Non-Discretionary 56% Recreation 4% Furniture & HHEquip 4% Motor Vehicles 4% Negative Food & Energy Costs Food and energy continue to eat a larger share of consumer income. Housing & Home Equity Housing prices and home equity are now falling, weighing on consumer spending and sentiment. Weakening Labor Market The labor market is expected to continue its weakening trend for at least the rest of the year. Food Away from Home 5% Positive Retail Sales Ex. Auto and Gas vs. Income Growth 3-Month Moving Averages 15.0% 15.0% Tax Cut 2 12.5% 12.5% Housing Refi Boom Stock Market Bubble Tax 10.0% Rebates 10.0% Tax Cut 1 7.5% 7.5% 5.0% 5.0% 2.5% 2.5% 0.0% 0.0% -2.5% -2.5% Disposable Personal Income Yr/ Yr % Change: Jul @7.8% 3-Month Annual Rate: Jul @8.6% -5.0% -5.0% 96 97 98 99 00 01 02 03 Source: U.S. Department of Commerce and Wachovia 04 05 06 07 08 Tax Rebates The tax rebate checks have landed in and left the pockets of most Americans. This positive will begin to fade in coming months. Declining Energy Prices While energy prices remain well above year ago levels, the recent declines are a small but welcome respite for consumers. Wachovia Economics Group 6 Credit Spreads & The Yield Curve National Economic Overview We Are Not Out of the Woods Yet Highlights 200 275 275 250 250 225 225 200 200 175 175 150 150 TED: Aug @106 bps 150 150 100 100 50 50 125 125 Mortgages: Aug @251 bps 0 0 1996 1998 2000 Baa Corporate Spread 2002 2004 2006 2008 100 1996 100 1998 CDX IG Index Basis Points 400 Basis Points Basis Points 200 The TED spread had again shown improvement in late spring, only to blowout anew in July. Mortgages are more expensive than they have been historically. Restrictive lending standards have also made them more difficult to obtain. Fannie Mae & Freddie Mac’s conservatorship, however, has already begun to help, quickly pushing in mortgage spreads. Corporate credit is also more costly but businesses are tapping the market anyway to build a capital cushion. Conventional Mortgage to 10-Year Treasury Spread Ted Spread 400 175 350 300 300 250 250 200 200 150 150 2004 2006 2008 Basis Points 300 CDX - IG 3-10: Aug @143 bps 350 2002 Yield Curve Spread Basis Points 175 2000 300 10Y - 2Y: Aug @147 bps 150 150 250 250 125 125 200 200 100 100 150 150 75 75 100 100 50 50 50 50 25 25 0 0 Corporates: Aug @326 bps 100 1996 100 1998 2000 2002 2004 2006 2008 0 0 2005 2006 2007 2008 -50 1996 -50 1998 2000 2002 2004 2006 2008 Source: Bloomberg LP, Federal Reserve Board, Freddie Mac, Wachovia Securities and Wachovia Wachovia Economics Group 7 Global Growth & The Dollar National Economic Overview Global Growth Remains Steady But Weaker—The Dollar Is Poised For a Turnaround in the Second Half Highlights Real Global GDP Growth Real Global GDP Growth Year-over-Year Percent Change 7.5% Global growth had its best four year run since the 1970s, but we expect growth will moderate abroad this year and next. Weakness in Europe has become apparent, notably in the U.K., which may be slipping into its first recession in 18 years. The dollar should grind higher against most major currencies over the next year, not-withstanding the recent strength in high-yielding currencies. 7.5% 6.0% Year-over-Year Percent Change, 1st Quarter 2008 12.0% 10.0% 10.0% 8.0% 8.0% 6.0% 6.0% 4.0% 4.0% 1.5% 2.0% 2.0% 0.0% 0.0% 6.0% Period Average 4.5% 4.5% 3.0% 3.0% 1.5% 0.0% 1970 1975 1980 1985 1990 1995 2000 0.0% China 2005 India Wachovia Major Currency Forecast Major Currencies Euro ($/ €) U.K. ($/ £) U.K. (£/ €) Japan (¥/ $) Other Industrialized Canada (C$/ US$) Switzerland (CHF/ $) Norway (NOK/ $) Sweden (SEK/ $) Australia (US$/ A$) 1 1.56 1.96 0.80 108 1.04 1.04 5.10 6.00 0.92 2009 Q4 Q1 1.54 1.94 0.79 110 1.06 1.06 5.20 6.10 0.90 1.50 1.90 0.79 114 1.10 1.08 5.30 6.20 0.88 Q2 1.45 1.85 0.78 116 1.14 1.12 5.40 6.40 0.84 2010 Q3 1.40 1.80 0.78 118 1.16 1.15 5.60 6.60 0.80 Brazil UK Japan Major Curency Index, 1973 = 100 115.0 2008 Russia Trade Weighted Dollar (End of Quarter Rates) Q3 12.0% Q4 1.35 1.75 0.77 120 1.18 1.18 5.80 6.80 0.76 Q1 1.30 1.72 0.76 122 1.20 1.23 5.90 7.00 0.72 Q2 1.26 1.70 0.74 125 1.22 1.26 6.10 7.20 0.70 115.0 110.0 110.0 105.0 105.0 100.0 100.0 95.0 95.0 90.0 90.0 Forecast 85.0 85.0 80.0 80.0 75.0 75.0 70.0 70.0 Trade Weighted Dollar : Q2 @70.96 65.0 65.0 1998 2000 2002 2004 2006 2008 Data as of: August 6, 2008 Source: Bloomberg LP, Federal Reserve Board, International Monetary Fund and Wachovia Wachovia Economics Group 8 Residential Real Estate Summary Wachovia Economics Group 9 Homebuilding Residential Real Estate Summary Five Years of Overbuilding Has Pushed Inventories of Unsold Homes up by Around 1.225M Units Highlights Housing Starts Millions of Units We calculated that we need to build about 1.575 million homes a year to meet 2.2 underlying demographic demand. Just under 1.2 million for population growth and about 380K units for obsolescence, and a few for second homes at this point. Home sales peaked more than two years ago and we believe we are two-thirds of the way through this housing correction. New home sales will likely bottom in the second half of the year. Since the demand for housing is derived from the underlying growth in the economy, the economy will have to return before demand picks up in any meaningful way. Our estimated overbuild of 1.225M units compares favorably with the rise in the number of vacant homes for sale or rent. 2.0 2.0 1.8 1.8 1.6 1.6 1.4 1.4 1.2 1.2 1.0 1.0 Single-Family Housing Starts Housing Vacancies Millions of Units Millions of Units, Percentage of Owner Occupied Homes 2.0 1.8 2.0 Single family: Jul @0.64M Linear Trend: Jul @1.49M 2.5 3.0% 0.8 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 Millions of Units 4.5 4.0 4.5 New Homes: Jun @0.43M Existing Homes: Jul @3.90M 4.0 2.5% 2.0 1.6 0.8 Single-Family Home Inventory Vacant for Sale: Q2 @2.2M (Left Axis) Vacancy Rate: Q2 @2.9% (Right Axis) 1.8 2.2 Dashed Line is Underlying Demographic Trend 3.5 3.5 3.0 3.0 2.5 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 1.6 2.0% 1.4 1.4 1.5 1.5% 1.2 1.2 1.0 1.0 1.0 1.0% 0.5 0.8 0.8 0.6 0.6 1985 1988 1991 1994 1997 2000 2003 2006 0.5% 0.0 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 0.0 1992 0.0 1994 1996 1998 2000 2002 2004 2006 2008 Source: NAR, U.S. Department of Commerce and Wachovia Wachovia Economics Group 10 Home Price Declines From Peak Residential Real Estate Summary Very Few Markets Are Immune to the Housing Downturn, But the Worst Problems are Concentrated OFHEO Home Price Index OFHEO: Q2-2008 Percent Change from Peak Value No Change -1 .0 % t o 0.0 % -4 .0 % t o -1 .0 % -4 0.6 % t o -4 .0 % Source: OFHEO and Wachovia Corp. Wachovia Economics Group 11 Investor & Second-Home Mortgages Residential Real Estate Summary Investors Were Responsible for More Than Half of the Purchases in Some Markets in 2006 Non-Owner Occupied Purchase Loans: 2006 Non-Owner Occupied Purchase Loans Percent of Total Value of Purchase Loans Greater than 25% 15.0% to 25.0% 10.0% to 15.0% 7.5% to 10.0% Less than 7.5% Source: HMDA and Wachovia Wachovia Economics Group 12 Home Prices Outlook Residential Real Estate Summary How Far Will Housing Prices Fall and When Will They Bottom-Out? Highlights Home Prices S&P Case-Shiller Home Prices Year-over-Year Percentage Change Our best estimates lead us to believe the S&P/Case-Shiller 10city composite index will fall 28.6 percent on a peak-to-trough basis. We estimate that the OFHEO Purchase Only index will decline around 22 percent. Our forecast for the NAR Median Price series calls for a peak-totrough drop of around 17 percent. 24% 24% 20% 20% 16% 16% 12% 12% 8% 8% 4% 4% 0% 0% -4% -4% -8% -8% Median Sale Price: Jul @$210,900 Median Sales Price 3-Month Mov. Avg.: Jul @-7.2 % OFHEO Purchase Only Index: Jun @-4.8 % S&P Case-Shiller Composite 10: Jun @-17.0 % -12% -16% -12% Percent Decline From Local Market Peak Charlotte Dallas Denver Portland Seattle Atlanta New York Chicago Boston Cleveland Minneapolis Washington Tampa San Detroit Los Angeles San Diego Miami Los Vegas Phoenix -16% -20% 99 01 03 05 07 Peak-to-Current Percent Change Per Capita Income Projected Decline Trough 17.3% 21.4% 26.5% 26.8% 27.1% 28.5% 29.9% 32.4% 32.5% 32.6% 20.3% 18.8% 0% Home Price Decline Projections Home Price to 6.2% 6.2% 7.3% 8.3% 10.0% 10.9% 11.0% 11.2% C-10 C-20 -20% 97 1.6% 3.2% 5% 10% 15% 20% 25% 30% 35% 40% Median Home Price Relative to Owner's Rent Home Price to Owners' Equivalent Rent Projected Decline Trough NAR Median Sale Price -11.2% -17.2% Q2 - 2009 -20.3% Q4 - 2009 OFEHO All-Transactions OFEHO Purchase-Only -0.3% -3.6% -3.7% Q4 - 2011 -12.7% Q3 - 2009 -20.1% Q4 - 2011 -21.2% Q3 - 2010 S&P/ Case Shiller National HPI S&P/ Case Shiller 10-City Comp. S&P/ Case Shiller 20-City Comp. -16.2% -19.0% -17.5% -28.3% Q3 - 2009 -36.0% Q2 - 2009 -35.1% Q2 - 2009 -31.9% Q1 - 2010 -42.2% Q1 - 2010 -39.7% Q1 - 2010 All-in Average -11.3% -22.2% -29.2% Index 1983=100, Seasonally Adjusted 1.5 1.5 Median Home Sales "P/ E Ratio": May @1.2 Average 1983-1998 = 1 1.4 1.4 1.3 1.3 1.2 1.2 1.1 1.1 1.0 1.0 0.9 0.9 83 85 87 89 91 93 95 97 99 01 03 05 07 Source: Bloomberg LP, Federal Reserve Board, International Monetary Fund and Wachovia Wachovia Economics Group 13 The Carolinas Wachovia Economics Group 14 North Carolina The Carolinas Unemployment and Housing Cool the Economy Highlights North Carolina’s unemployment rate North Carolina MSA Unemployment Rate 8% Seasonally Adjusted North Carolina Housing Permits 8% 120 Thousands of Permits, Seasonally Adjusted Annual Rate 120 Single-Family: Jun @45,120 Single-Family, 12-Month Moving Avg.: Jun @52,369 Multi-Family, 12-Month Moving Avg.: Jun @15,108 7% 7% 100 has spiked significantly higher in recent months and now stands 6% 6% 80 almost a point higher than the 5% 5% 60 national rate. Most of the recent rise has come from labor force growth, 4% 4% 40 not layoffs. 3% 3% 20 Unemployment Rate: Jul @6.6% Industrial development remains 12-Month Moving Average: Jul @5.2% 2% 2% 0 stable in most major metropolitan 90 92 94 96 98 00 02 04 06 08 90 92 94 96 98 00 02 04 areas, particularly in technology and energy related ventures. North Carolina has seen record North Carolina Population Growth population gains with the Charlotte North Carolina Home Prices In Thousands OFHEO Home Price Index 225 225 12% and Raleigh-Durham regions leading Quarterly Change, Annual Rate: Q1 @3.4% 200 200 Year-over-Year Percent Change: Q1 @4.0% the way. 10% 175 175 With the exception of some coastal 8% 150 150 areas, the state did not experience 6% 125 125 the same rapid price appreciation 100 100 4% during the housing boom as was 75 75 2% seen in other parts of the country. 50 50 Still, home price increases have 0% 25 25 declined and we expect a flattening 0 0 -2% 80 83 86 89 92 95 98 01 04 07 going forward. 90 92 94 96 98 00 02 04 New single-family activity has declined considerably from cycle highs as national builders have Source: Office of Federal Housing Enterprise Oversight, U.S. Department of Commerce, U.S. Department of Labor and Wachovia scaled back to bolster their balance sheets and reduce inventories. 100 80 60 40 20 0 06 08 12% 10% 8% 6% 4% 2% 0% -2% 06 Wachovia Economics Group 08 15 Charlotte-Residential The Carolinas Charlotte Saw Record Employment & Population Gains this Past Year, Despite the Credit Crunch Highlights Charlotte MSA Unemployment Rate Charlotte has seen strong job growth across a broad assortment of industries, including the higher paying investment banking, legal services, engineering and corporate headquarters fields. Strong job growth has encourage a wave of in-migration from young, collegeeducated professionals. Population growth in 2007 totaled 68,000 in the MSA and close to 80,000 in the broader CMSA, which includes emerging suburbs and employment markets in Mooresville, Denver, and Lancaster County. The unemployment rate has risen recently, probably reflecting a slight increase in layoffs, reduced hiring and continued strong labor force growth. Charlotte’s housing market saw strong growth but was not a bubble market. Nevertheless, excesses occurred at both the lower and upper ends of the market. Single-family construction has pulled back more than 60 percent from its peak, reflecting pull backs by national builders and the effects of tighter credit. Home price growth slowed late last year and we expect prices changes will be roughly flat in 2008. Charlotte MSA Housing Permits Seasonally Adjusted 8% 8% Thousands of Permits, Seasonally Adjusted Annual Rate 25 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 90 92 94 96 98 00 02 04 06 08 20 20 15 15 10 10 5 5 0 0 90 92 Charlotte MSA Population Growth 80 70 70 60 60 50 50 40 40 30 30 20 20 10 10 0 0 80 82 84 86 88 90 92 94 96 98 00 02 94 96 98 00 02 04 06 08 Charlotte MSA Home Prices In Thousands 80 25 Single-Family: Jun @7,200 Single-Family, 12-Month Mov. Avg.: Jun @10,617 Multi-Family, 12-Month Mov. Avg.: Jun @5,499 Unemployment Rate: Jun @6.0% 12-Month Moving Average: Jun @5.1% 04 06 OFHEO Home Price Index 15% 15% 10% 10% 5% 5% 0% 0% Quarterly Change, Annual Rate: Q1 @5.0% Year-over-Year Percent Change: Q1 @6.2% -5% -5% 90 92 94 96 98 00 02 04 06 08 Source: OFHEO, U.S. Department of Commerce, U.S. Department of Labor and Wachovia Wachovia Economics Group 16 Charlotte-Commercial The Carolinas Strong Job Growth in Professional Services Has Kept Office Vacancy Rates Extremely Low Highlights Charlotte added 35,000 net new jobs in 2007 but will add less than half that in 2008. Downtown Charlotte has one of the lowest office vacancy rates ever recorded in North America. Current construction should keep the market well supplied, however, and we expect few new projects to be added. Suburban office markets continue to enjoy strong demand but are seeing little to no new construction. The northeast market, which includes the University Area and Concord, stands to benefit from the opening of the new biotech park in Kannapolis. Charlotte’s industrial market has seen strong gains in recent years but will likely slow somewhat in 2008 as companies work to reduce inventories and logistics costs. Growth is shifting to the south along I-77 in York County and I-85 around the airport. The biggest opportunities in Charlotte are the continued expansion of the airport, with a third parallel runway nearing completion and plans in place for a new international concourse, and new parking facilities. In addition, the North Carolina Research Park, which opened in March, and the continued growth of NASCAR, will add to growth. The biggest threat to Charlotte is the unfolding credit crunch, which is leading to cutbacks in financial and legal services. Charlotte MSA Nonfarm Employment Charlotte MSA Office Vacancies 3-Month Moving Averages 10% 10% 8% 8% 6% 6% 4% 4% 2% 2% 0% 0% -2% -2% -4% -4% Percent Vacant 30% 25% 3-Month Annual Rate: Jul @4.2% Year-over-Year Percent Change: Jul @2.2% Household: Year-over-Year Percent Change: Jun @0.1% -6% -8% 92 94 96 98 00 02 04 25% 20% 20% 15% 15% 10% 10% 5% 5% -6% -8% 90 30% Metropolitan Office Vacancy Rate: Q2 @12.1% Downtown Office Vacancy Rate: Q2 @1.1% Suburban Office Vacancy Rate: Q2 @18.7% 06 08 0% 0% 85 87 89 91 93 95 97 99 01 03 05 07 Charlotte MSA Industrial Vacancies Percent Vacant 20% 20% Industrial Vacancy Rate: Q2 @9.9% 16% 16% 12% 12% 8% 8% 4% 4% 0% 0% 84 86 88 90 92 94 96 98 00 02 04 06 08 Source: CB Richard Ellis, Colliers, Cushman & Wakefield, U.S. Department of Labor and Wachovia Wachovia Economics Group 17 Charlotte CMSA The Carolinas Charlotte CMSA Population Growth Charlotte CMSA Employment Growth Thousands of Persons 90 Greater Charlotte: 2007 @11.9 Charlotte MSA: 2007 @66.7 Charlotte CMSA: 2007 @78.6 80 80 40 40 30 30 20 20 10 10 0 0 70 60 60 50 50 40 40 30 30 20 20 0 Outlying areas add significantly to Charlotte’s growth 50 70 10 80 82 84 86 88 90 92 94 96 98 00 02 04 Annual Growth, Thousands of Jobs 90 -10 10 -20 0 -30 06 -10 Charlotte CMSA: 2007 @33.2 Greater Charlotte: 2007 @1.7 Charlotte MSA: 2007 @31.5 8% 6% 4% 4% 2% 2% 0% 0% -2% -2% -4% -4% -6% -6% 1993 1995 1997 1999 2001 2003 1994 1996 1998 2000 2002 2004 2006 Charlotte CMSA Unemployment Rate Year-over-Year Percent Change 6% 1991 -20 -30 1992 Charlotte CMSA Job Growth 8% 50 2005 2007 Percent of Labor Force 8.0% 8.0% 7.0% 7.0% 6.0% 6.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 2.0% 1990 2.0% 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: U.S. Department of Commerce, U.S. Department of Labor and Wachovia Wachovia Economics Group 18 York County The Carolinas York County, SC Housing Permits York County, SC Unemployment Rate Seasonally Adjusted Annual Rate 3000 3000 2500 Seasonally Adjusted 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 2500 2000 2000 1500 1500 1000 1000 1% 500 500 95 97 99 01 03 05 1% Unemployment Rate: Jul @6.5% 12-Month Moving Average: Jul @5.9% Single-Family: Jul @2,225 0% 07 0% 90 92 York County, SC Employment 94 96 98 00 02 04 06 08 York County, SC Population Growth Year-over-Year Percent Change, Seasonally Adjusted Thousands of Persons 8% 8% 12 6% 6% 10 10 4% 4% 8 8 2% 2% 6 6 0% 0% 4 4 -2% -2% 2 2 -4% -4% 12-Month Moving Average: Dec @3.2% 3-Month Moving Average: Dec @2.0% -6% -6% 90 92 94 96 98 00 02 04 06 12 0 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 Source: U.S. Department of Commerce, U.S. Department of Labor and Wachovia Wachovia Economics Group 19 Chester County The Carolinas Chester County, SC Housing Permits Chester County, SC Unemployment Rate Seasonally Adjusted Annual Rate 500 500 400 400 300 300 200 200 100 100 Seasonally Adjusted 18% 15% 15% 12% 12% 9% 9% 6% 6% 3% 3% Unemployment Rate: Jul @11.5% 12-Month Moving Average: Jul @11.4% Single-Family: Jul @218 0 0 95 97 99 01 03 05 0% 07 0% 90 92 Chester County, SC Employment 94 96 98 00 02 04 06 Chester County, SC Population Growth Year-over-Year Percent Change, Seasonally Adjusted 10% 18% Persons 10% 750 5% 5% 500 500 0% 0% 250 250 -5% -5% 0 -10% -10% -250 -15% -500 750 0 -250 12-Month Moving Average: Dec @-11.9% 3-Month Moving Average: Dec @-14.3% -15% 90 92 94 96 98 00 02 04 06 -500 80 82 84 86 88 90 92 94 96 98 00 02 04 06 Source: U.S. Department of Commerce, U.S. Department of Labor and Wachovia Wachovia Economics Group 20 Lancaster County The Carolinas Lancaster County, SC Housing Permits Seasonally Adjusted Annual Rate 500 Lancaster County, SC Unemployment Rate 500 400 Seasonally Adjusted 12% 12% 10% 10% 8% 8% 6% 6% 4% 4% 400 300 300 200 200 2% 2% Unemployment Rate: Jul @10.4% 12-Month Moving Average: Jul @10.3% Single-Family: Jul @218 100 100 95 97 99 01 03 05 07 0% 0% 90 Lancaster County, SC Employment 92 94 96 98 00 02 04 06 Lancaster County, SC Population Growth Year-over-Year Percent Change, Seasonally Adjusted 6% 6% 4% 4% 2% 2% 0% 0% -2% -2% -4% -4% -6% -6% Persons 2000 2000 1500 1500 1000 1000 500 500 0 -8% -10% -10% 90 92 94 96 98 00 02 0 -8% 12-Month Moving Average: Dec @-6.7% Year-Over-Year Percent Change: Dec @-8.5% 04 06 -500 -500 80 82 84 86 88 90 92 94 96 98 00 02 04 06 Source: U.S. Department of Commerce, U.S. Department of Labor and Wachovia Wachovia Economics Group 21 Appendix Wachovia Economics Group 22 Economics Group Publications Appendix A Sampling of Our Recent Special, Regional & Industry Commentary Distribution Lists Monthly Economic Outlook Weekly Economic & Financial Commentary Special Reports Economic Indicators Global Economic Commentary Federal Reserve Commentary Real Estate & Housing Consumer & Retail Chief Economist List To join any of our research distribution lists please visit our website: http://www.wachovia.com/economi csemail Recent Special Commentary Date August-29 August-28 August-19 August-19 August-15 August-14 August-07 Title California is Still Managing to Eke Out Modest Gains Housing Chartbook - August 2008 “ Older and More Diverse Nation by Midcentury” Commercial Real Estate Quarterly: Second Quarter Consumers Feeling A Little Blue This Year The Outlook for U.S. Export Growth Revisited Global Chartbook - August 2008 Authors Vitner & York Vitner & York Vitner & York Vitner & Khan Vitner & York Bryson Bryson July-31 July-24 July-14 July-13 July-09 July-02 Florida’ s Economy Sinks To Unfamiliar Territory By Land and Sea: Autos, Boats, and RV Chartbook How Far Will Housing Prices Fall Fannie Mae & Freddie Mac Developments Global Chartbook - July 2008 No Bright Light Marking the End of Sub-Par Growth in the U.S. Vitner & York Vitner & Khan Vitner & York Vitner Bryson Silvia June-26 June-24 June-12 June-12 June-12 June-04 Surging Gas Prices Are Putting the Brakes on Auto Sales Despite Challenges, Charlotte Still Finds a Way to Grow Discretionary Spending Share Held Near All-Time Low Housing Chartbook - June 2008 Global Chartbook - June 2008 Commercial Real Estate Chartbook Vitner & Vitner Vitner & Vitner & Bryson Vitner & May-29 May-21 May-07 May-02 May-01 Some Thoughts on Oil Prices and Global Inflation Credit Shocks: Follow-up to the NABE Conference Call Global Chartbook - May 2007 Commodity Prices in Historical Perspective The Shrinking Discretionary Dollar Bryson Silvia Bryson Bryson Vitner & York April-29 April-25 April-16 A Modern Policy for a Dynamic Labor Market Recent Trends in U.S. Exports Does Chinese Inflation Mean Higher U.S. Inflation? Silvia Bryson Bryson Khan York York Khan Wachovia Economics Group 23 Economics Group U.S. Macro Economy Appendix Comprehensive Coverage of the U.S. Economy Monthly Economic Forecast Weekly Analysis & Outlook Timely Commentary on Daily Economic Data Economics Group Coverage Releases Global Economies U.S. Regional Economics Macro Level Coverage of Major Foreign Economies Macro Forecasts of 11 Economies Monthly Forecasts of 19 Dollar Exchange Rates Weekly Analysis & Outlook Regional and MSA Level Expertise Extensive Coverage Across the Wachovia Footprint Ground level Analysis & Commentary of Local Markets Coverage Across CIB Industry Groups Regular Commentary on Economic Developments by Industry Consumer & Healthcare Real Estate Tech, Media & Telecom Industries Industrial Growth Energy & Power Financial Institution s Wachovia Economics Group 24 Economics Group Appendix John E. Silvia, Ph.D. Mark Vitner Jay H. Bryson, Ph.D. Chief Economist Senior Economist Global Economist [email protected] U.S. Macro Economy Interest Rates Monetary Policy [email protected] U.S. Macro Economy Real Estate Regional Economics [email protected] Global Economies Foreign Exchange Sam Bullard Anika Khan Azhar Iqbal Adam G. York Economist Economist Econometrician Economic Analyst [email protected] Desk Operations Financial Services [email protected] U.S. Macro Economy Real Estate Retail & Automotive [email protected] Quantitative MacroEconomic Modeling [email protected] U.S. Macro Economy U.S. Consumer Real Estate Tim Quinlan Kim Whelan Yasmine Kamaruddin Deborah Donaldson Economic Analyst Economic Analyst Economic Analyst Economic Analyst [email protected] U.S. Macro Economy Business Investment [email protected] U.S. Macro Economy [email protected] U.S. Macro Economy [email protected] U.S. Macro Economy Wachovia Corporation Economics Group publications are distributed by Wachovia Corporation directly and through subsidiaries including, but not limited to, Wachovia Capital Markets, LLC, Wachovia Securities, LLC and Wachovia Securities International Limited. The information and opinions herein are for general information use only. 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