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Economic Outlook October 5, 2009 Table of Contents I. National Economic Overview II. Residential Real Estate Summary III. South Carolina Appendix | Government Finance Officers Association of South Carolina 2 National Economic Overview | Government Finance Officers Association of South Carolina 3 U.S. Economic Overview The Recession Appears to Have Ended This Summer, but the Recovery Will be Slow and Agonizing Highlights Nonfarm Employment Change Real GDP We believe the recession may have ended in June. The downturn turned into the longest of the post-war period at 19 months, but some signs of stabilization are appearing. We are beginning to see some small positives in many key indicators mixed in with smaller declines. The labor market remains the primary concern as job losses have reached 7.2 million on their way to more than 8.0 million before the end of the cycle. This will easily exceed every downturn since the aftermath of World War II. The unemployment rate should exceed 10 percent later this year. Bars = CAGR 10.0% Line = Yr/Yr Percent Change Change in Employment, In Thousands 10.0% 600 GDPR - Yr/Yr Percent Change: Q2 @ -3.8% 8.0% 8.0% 6.0% 400 400 200 200 6.0% Forecast 4.0% 4.0% 2.0% 2.0% 0.0% 0.0% -2.0% -2.0% -4.0% -4.0% -6.0% -6.0% 0 0 -200 -200 -400 -400 -600 -8.0% -8.0% 2000 2002 2004 2006 2008 2010 -600 Nonfarm Employment Change: Sep @ -263,000 -800 2000 -800 2001 Wells Fargo U.S. Economic Forecast Level One Level Two Real Gross Domestic Level Three Product 1 Personal Consumption Level Four Business Fixed Investment Equipment and Software Consumer Price Index2 Corporate Profits Before Taxes 2 10-Year Treasury Note Actual 2006 600 GDPR - CAGR: Q2 @ -0.7% 2007 2009 2003 2004 2005 2006 2007 2008 2009 Employment Change in Recessions Percentage Change Peak-to-Trough 0% Forecast 2008 2002 2010 2011 -1% 2.7 2.9 7.9 7.4 3.2 2.1 2.7 6.2 2.6 2.9 0.4 -0.2 1.6 -2.6 3.8 -2.5 -0.9 -18.4 -18.7 -0.6 2.1 0.7 -1.6 2.6 1.3 2.5 1.5 4.5 6.5 2.0 -2% 10.5 4.71 -4.1 4.04 -11.8 2.25 -10.1 3.60 7.8 4.00 9.8 5.00 -6% Forecast as of: September 9, 2009 1C ompound Annual Growth Rate 2Year-over-Year Percent C hange 0% -1% -1.3% -1.5% -1.5% -2% -2.0% -2.3% -3% -3% -2.8% -3.1% -3.4% -4% -4% -4.4% -5% -5% -5.2% -5.2% -5.8% -6% -7% -7% 19481949 Cycle 19531954 Cycle 19571958 Cycle 19601961 Cycle 19691970 Cycle 19731975 Cycle 1980 Cycle 19811982 Cycle 19891991 Cycle 2001 Cycle 2007ToDate Forec ast Source: Federal Reserve Board, U.S. Department of Commerce, U.S. Department of Labor and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 4 U.S. Economic Overview The Domestic Economy Has Been Extremely Weak but Is on Track for a Modest Recovery Highlights Real "core" GDP, or private Real "Core" GDP Bars = CAGR 10.0% domestic final sales, lines up well with the persistent weakness in the domestic economy more clearly than GDP. The measure has been negative in the past six quarters, and we expect it to turn positive for the second half of this year. International trade collapsed last year. Imports have fallen dramatically this year, while exports have fallen less. Businesses have struggled to bring inventories in line with demand. Massive liquidations occurred in the first and second quarters. We expect the drawdown process to proceed, albeit more slowly, for several more quarters. Nominal GDP, a measure of revenue growth for the economy, has already seen the steepest decline since 1958 and will likely turn positive in the second half of this year. Trade Balance in Goods Line = Yr/Yr Percent Change 10.0% 7.5% 7.5% Forecast 5.0% 5.0% 2.5% 2.5% 0.0% 0.0% -2.5% -2.5% -5.0% -5.0% -7.5% -7.5% -10.0% "Core" GDP - CAGR: Q2 @ -2.8% "Core" GDP - Yr/Yr Percent Change: Q2 @ -5.2% -12.5% 2000 2002 2004 2006 2008 3-Month Moving Average, Billions of Dollars $0 -$10 -$20 -$30 -$30 -$40 -$40 -$50 -$50 -$60 -$60 -10.0% -$70 -$70 -12.5% -$80 2010 -$80 97 98 99 00 02 03 04 05 06 07 08 09 $125 Compound Annual Growth Rate 12.0% 12.0% $100 $75 Forecast $75 $50 $50 $25 $25 $0 9.0% Forecast 9.0% 6.0% 6.0% 3.0% 3.0% 0.0% 0.0% -3.0% -3.0% $0 -$25 -$25 -$50 -$50 -$75 -$75 -$100 -$100 -$125 -$125 -$150 -$200 2000 01 Nominal GDP Billions of Dollars, Annual Rate $100 -$175 -$10 -$20 Change in Real Inventories $125 $0 Nominal Trade Balance: Jul @ -$39.4 Billion Real Trade Balance: Jul @ -$36.9 Billion -$150 -$200 2002 2004 2006 2008 -6.0% Nominal GDP - CAGR: Q2 @ -0.8% Nominal GDP - Yr/Yr Percent Change: Q2 @ -2.4% -$175 Change in Private Inventories: Q2 @ -$160.2B 2010 -9.0% -6.0% -9.0% 2000 2002 2004 2006 2008 2010 Source: U.S. Department of Commerce and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 5 Consumer Overview Consumer Spending Plunged in the Late 2008 and Early 2009, but the Declines Moderated This Spring Discretionary Spending Spending Discretionary Consumer May-2009 Other Discretionary 20% Housing Away from Home 1% Alcohol & Tobacco 3% Clothing & Shoes 4% Recreation 4% Furniture & HHEquip 4% Motor Vehicles 3% Food Away from Home 5% Negative Non-Discretionary 56% Positive Retail Sales Ex. Auto & Gas Stations vs. Income 3-Month Moving Average Collapsing Labor Market The torrent of layoffs and job losses is unlikely to abate until next year. Housing & Home Equity Housing prices and home equity are still likely headed lower, weighing further on consumer spending and sentiment. 15% 15% Stock Market Bubble 12% Tax Cut 2 Housing Refi Boom Tax Rebates Tax Cut 1 12% 9% 9% 6% 6% 3% 3% 0% 0% -3% -3% -6% -6% -9% -9% Disposable Personal Income, Yr/Yr % Change: Aug @ -0.2% 3-Month Annual Rate: Aug @ -1.0% -12% -12% 96 97 98 99 00 01 02 03 04 05 06 07 08 09 Fiscal Stimulus A reduction in payroll withholdings provided a lift to take-home pay in the middle of this year. Consumer Confidence While confidence is still low, consumer expectations for the future have rebounded off of their lows. Source: U.S. Department of Commerce and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 6 Credit Spreads & The Yield Curve Fed and Treasury Actions Have Helped Narrow Credit Spreads Highlights Conventional Mortgage to 10-Year Treasury Spread TED Spread Credit markets began a steady thaw late last year, and progress has continued in recent weeks. The TED spread has moved to its lowest level since the credit crunch began and is now at a more normal level. Corporate borrowing has improved as credit spreads have narrowed. Credit is still relatively expensive and difficult to qualify for for small businesses and consumers. Mortgage rates were pushed sharply lower by the Fed’s intervention in the MBS market, reaching historically low levels in April. Thirty-year fixed mortgage rates have remained around five percent since then. 450 400 350 350 300 300 250 250 200 200 150 150 100 100 50 0 2004 2005 2006 2007 2008 275 275 250 250 225 225 200 200 175 175 150 150 50 125 125 0 100 2004 2009 700 Basis Points 300 300 250 250 500 500 200 200 400 400 150 150 300 300 100 100 200 200 50 100 2008 2009 0 2005 50 0 2006 2007 2008 2009 1,600 5-Year AAA CMBS: Sep @ 400 bps 600 2007 2006 Basis Points 1,600 CDX: Sep @ 104 bps 600 2006 100 2005 5-Year and 10-Year AAA CMBS Spreads CDX IG Index Basis Points 2005 300 Mortgages: Sep @ 161 bps 400 Baa Corporates: Sep @ 284 bps 100 2004 300 TED: Sep @ 17 bps Baa Corporate Spread 700 Basis Points Basis Points 450 2007 2008 2009 1,400 10-Year AAA CMBS: Sep @ 550 bps 1,400 1,200 1,200 1,000 1,000 800 800 600 600 400 400 200 200 0 2005 0 2006 2007 2008 2009 Source: British Bankers’ Association, Federal Reserve Board, Freddie Mac and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 7 Global Growth & The Dollar The Global Recession Drags On Highlights Real Global GDP Growth After declining in 2009, global economic growth is poised to rebound in 2010. European economies have contracted more than the U.S. economy, but there are tentative signs that European recessions are coming to an end. The dollar should continue to grind higher against most major currencies over the next few quarters as U.S. growth prospects continue to improve. Central Bank Policy Rates Year-over-Year Percent Change 7.5% 7.5% 9.0% 8.0% 6.0% 6.0% Period Average 7.0% 4.5% 4.5% 3.0% 3.0% 1.5% 1.5% 0.0% 0.0% -1.5% -1.5% 1970 1975 1980 1985 1990 1995 2000 2005 2010 9.0% US Federal Reserve: Oct @ 0.25% Bank of England: Oct @ 0.50% ECB: Oct @ 1.00% Reserve Bank of Australia: Oct @ 3.25% 6.0% 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 2000 0.0% 2001 2002 (End of Quarter Rates) Euro ($/€) U.K. ($/£) Japan (¥/$) Canada (C$/US$) Switzerland (CHF/$) China (CNY/$) Mexico ($/MXN) 1.45 1.62 92 1.11 1.04 6.82 13.25 1.42 1.58 94 1.15 1.06 6.81 13.00 Q2 1.37 1.54 98 1.15 1.11 6.80 12.75 2004 2005 2006 2007 2008 2009 Major Curency Index, 1973 = 100 115 110 2010 Q1 2003 Trade Weighted Dollar 115 Q4 7.0% 6.0% Wells Fargo Bank Currency Strategy Group Forecast 2009 8.0% 110 105 Q3 1.32 1.52 102 1.12 1.16 6.79 12.50 Q4 1.28 1.50 106 1.10 1.20 6.78 12.25 105 Forecast 100 100 95 95 90 90 85 85 80 80 75 75 70 70 Trade Weighted Dollar: Q3 @ 74.7 65 65 2000 2002 2004 2006 2008 2010 Forecast as of: September 16, 2009 Source: Bloomberg LP, Federal Reserve Board, International Monetary Fund and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 8 Unemployment by County Large Portions of the United States Face Serious Unemployment Issues Unemployment Rate Unemployment Rate August 2009 Greater than 12.5% 6.0% to 8.0% 10.0% to 12.5% Less than 6.0% 8.0% to 10.0% Source: US Department of Labor and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 9 Residential Real Estate Summary | Government Finance Officers Association of South Carolina 10 Homebuilding Construction May Have Bottomed, but This Will Likely Not Be the End of the Problems for Housing Highlights Housing Starts Millions of Units 2.4 We estimate an overbuild of roughly 2.0 million units occurred at the cycle peak, and, unfortunately, little progress was made in reducing inventories in 2008 despite the collapse in new home construction. Inventory levels have improved this year but still remain elevated. This will continue to pressure new construction activity and prices. Housing starts remain at low levels, although they have inched up recently. Starts probably bottomed during the first half of this year, but we are at least two years away from seeing starts move back above 1 million units. Excess supply from builders and the rising tide of foreclosed properties have driven prices sharply lower. Price declines have moderated in recent months. Progress will likely remain uneven, and we do not expect to see house prices trough until 2010. 2.1 2.1 1.8 1.8 1.5 1.5 1.2 1.2 0.9 0.9 0.6 0.6 0.3 0.3 0.0 0.0 80 82 84 86 Wells Fargo Housing Outlook Home Construction Total Housing Starts, in thousands Single-Family Starts, in thousands Multi-Family Starts, in thousands 1,811.9 1,473.6 338.3 Home Sales New Home Sales, Single-Family, in thousands Total Existing Home Sales, in thousands 1,049.3 6,482.9 Actual 2007 1,341.8 1,035.8 306.1 768.7 5,652.8 2008 900.3 615.8 284.5 481.3 4,913.0 Case-Shiller C-10 Home Price Index, % Change 7.5 7.4 2.2 -4.4 -2.5 -16.7 90 92 94 96 98 00 02 04 06 08 10 Home Prices 2009 580.0 440.0 140.0 390.0 4,800.0 Forecast 2010 790.0 590.0 200.0 550.0 5,200.0 2011 990.0 770.0 220.0 750.0 5,300.0 -4.6 -15.4 -0.6 -3.0 0.5 0.0 24% 20% 20% 16% 16% 12% 12% 8% 8% 4% 4% 0% 0% -4% -4% -8% -8% -12% -12% Median Sale Price: Aug @ $177,500 Median Sales Price 3-M Mov. Avg.: Aug @ -13.3% FHFA (OFHEO) Purchase Only Index: Jul @ -4.2% S&P Case-Shiller Composite 10: Jul @ -12.8% -16% Home Prices FHFA (OFHEO) Home Price Index, % Change 88 Year-over-Year Percentage Change 24% 2006 2.4 Dashed Line is Underlying Demographic Trend -20% -16% -20% -24% -24% 97 99 01 03 05 07 09 Forecast as of: September 25, 2009 Source: Federal Housing Finance Agency, National Association of Realtors, S&P Corp, U.S. Department of Commerce and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 11 Residential Real Estate While Construction May Have Seen a Trough, We Expect Prices to Continue Declining for Some Time Highlights S&P Case-Shiller Home Prices Existing & New Single Family Home Sales New home sales have improved markedly in recent months. Sales fell sharply last autumn despite lower mortgage rates and increased incentives from builders. Existing sales have held up better and have also increased recently. A large portion, however, is foreclosure and distressed sales. The first-time homebuyers’ tax credit is likely providing a lift to home sales. The tax credit, however, is due to expire at the end of the year. The near-term relevance of the housing affordability measure has diminished, because prices have been pushed down by foreclosure activity and fewer people can qualify for conventional mortgages. Credit standards loosened somewhat in the third quarter but still remain tight. Continued caution is understandable given the rise in delinquency rates and foreclosures. Seasonally Adjusted Annual Rate - In Millions 1.6 Percent Decline from Local Market Peak 7.0 6.5 1.4 6.0 1.2 5.5 1.0 5.0 0.8 4.5 0.6 4.0 0.4 Dallas Denver Charlotte Cleveland Boston Atlanta New York Portland Seattle Chicago Washington Minneapolis San Diego Tampa Los Angeles San Francisco Detroit Miami Phoenix Las Vegas 3.5 New Home Sales: Aug @ 429 Thousand (Left Axis) 29.8% 30.6% 39.7% 40.0% 40.2% 41.0% 44.7% 47.6% 53.1% 54.8% C-10 C-20 Existing Home Sales: Aug @ 4.5 Million (Right Axis) 0.2 2002 4.2% 8.2% 10.8% 12.6% 15.3% 19.4% 19.5% 19.5% 22.3% 23.9% 31.1% 30.2% 3.0 2003 2004 2005 2006 2007 2008 2009 0% Base = 100 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% Net Percent of Banks Tightening Standards Housing Affordability, NAR-Home Sales 180 5% Mortgages for Individuals 180 100% 100% All Mortgages (Through Q1-2007) 170 170 160 160 150 150 140 140 130 130 120 120 Prime Mortgages: Q3 @ 21.6% 80% 110 Nontraditional Mortgages: Q3 @ 45.8% 80% 60% 60% 40% 40% 20% 20% 110 0% 100 90 90 92 94 96 98 00 02 0% 100 Housing Affordability Index: Aug @ 159.1 6-Month Moving Average: Aug @ 165.7 04 06 08 -20% 1990 -20% 1992 1994 1996 1998 2000 2002 2004 2006 2008 Source: Federal Reserve Board, National Association of Realtors, S&P Corp, U.S. Department of Commerce and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 12 Home Price Declines from Peak Home Price Declines Will Likely Continue into 2010 FHFA (OFHEO) Home Price Index FHFA: Q1-2009 Percent Decline from Peak Value No C hange 3% to 9% 0% to 1% More than 9% 1% to 3% Source: FHFA and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 13 South Carolina | Government Finance Officers Association of South Carolina 14 South Carolina South Carolina’s Persistently High Unemployment Rate Remains Troublesome Highlights South Carolina Nonfarm Employment South Carolina’s unemployment rate is the sixth highest in the nation. In July, the unemployment rate hit the highest level since the series began. Manufacturing layoffs are a major drag on the state, particularly in rural areas. Employment growth collapsed earlier but has slowly edged up, although the trend remains down. Layoffs have risen quickly throughout the state. Population growth remained strong, though slightly off the record-setting highs of 2007. The state’s relatively affordable housing continues to attract new residents, but recently the strongest gains have been in the Upstate and Charlotte’s South Carolina suburbs. Housing construction activity has slowed more than 70 percent from its cycle peak in mid-2005, with much of the deceleration occurring along the coast. Investor activity drove up property values along the coast, and natural disasters increased insurance premiums. These factors combined to hurt affordability in Myrtle Beach, Charleston and Hilton Head. South Carolina Relative Employment 3-Month Moving Averages 8% 8% 6% 6% 4% 4% 2% 2% 0% 0% -2% -2% -4% -4% -6% -6% January 2000 = 100 124 124 South Carolina: Aug @ 99.9 Myrtle Beach: Aug @ 111.5 Greenville: Aug @ 110.2 Columbia: Aug @ 106.4 Charleston: Aug @ 102.6 120 116 120 116 112 112 108 108 104 104 100 100 3-Month Annual Rate: Aug @ -0.3% Year-over-Year Percent Change: Aug @ -4.3% -8% -8% 96 -10% 92 96 Household: Year/Year Percent Change: Aug @ -3.9% -10% 90 92 94 96 98 00 02 04 06 08 92 00 01 South Carolina Unemployment Rate 03 04 05 06 07 08 09 South Carolina Housing Permits Seasonally Adjusted 14% 02 14% Thousands of Permits, Seasonally Adjusted Annual Rate 60 60 Single-Family: Aug @ 15,144 Single-Family, 12-Month Moving Avg.: Aug @ 13,287 Multi-Family, 12-Month Moving Avg.: Aug @ 2,623 Unemployment Rate: Aug @ 11.5% 12-Month Moving Average: Aug @ 10.1% 12% 12% 50 10% 10% 40 40 8% 8% 30 30 6% 6% 20 20 4% 4% 10 10 2% 0 2% 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 50 0 90 92 94 96 98 00 02 04 06 08 Source: U.S. Department of Commerce, U.S. Department of Labor and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 15 Columbia The Pace of Declines Is Slowing in the State Capital Highlights Columbia MSA Nonfarm Employment Employment growth has turned positive after dropping sharply at the end of last year. The growth can largely be attributed to employment gains in the education and healthcare sectors. While a high level of public employment, notably at the state capital and the University of South Carolina, normally would provide some insulation to job losses, the state’s budget shortfall and poor tax collections will be damaging. The unemployment rate moved steadily higher over the past year but has recently edged down. State government and the university provide a great deal of stability. Population growth recorded another nearrecord year in 2008 as the area remained relatively affordable compared to other Sunbelt states. Building activity is well off its cycle highs, but the boom in Columbia was not nearly as large as along the coast. Recent data show improvement in single-family residential construction. 3-Month Moving Averages 10% 3-Month Annual Rate: Aug @ 2.5% Year-over-Year Percent Change: Aug @ -1.5% Household: Yr/Yr Percent Change: Aug @ -1.6% 8% Columbia MSA Housing Permits 10% 6% 4% 4% 2% 2% 0% 0% -2% -2% -4% -4% -6% -6% -8% -8% 92 94 96 98 00 02 04 06 8 8 6 6 4 4 2 2 0 08 0 90 92 Columbia MSA Unemployment Rate 94 96 98 00 02 04 06 08 Columbia MSA Population Growth Seasonally Adjusted 10% 10 Single-Family, 12-Month Mov. Avg.: Aug @ 2,527 Multi-Family, 12-Month Mov. Avg.: Aug @ 703 Single-Family: Aug @ 2,784 8% 6% 90 Seasonally Adjusted Annual Rate 10 10% In Thousands 15 15 Unemployment Rate: Aug @ 8.9% 12-Month Moving Average: Aug @ 8.1% 8% 8% 10 6% 6% 4% 4% 10 5 2% 2% 90 92 94 96 98 00 02 04 06 08 5 0 0 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 Source: U.S. Department of Commerce, U.S. Department of Labor and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 16 Charleston Charleston Has Slowed Along with the Nation Highlights Charleston MSA Nonfarm Employment After several exceptionally strong years of growth, Charleston’s economy has cooled off considerably. Nonfarm employment has declined 2.6 percent since the recession began, but recent data show a slight reversal of the downward trend. The unemployment rate has shot up considerably. Manufacturing employment has declined sharply, down 7.5 percent year over year. The economy is largely dependent on consumer-driven industries, such as leisure and hospitality and retail trade. The projected slow growth in consumer spending will dampen the coastal destination’s recovery. In addition to tight credit, higher insurance costs and a weak second-home market are combining to restrain demand. The underlying trend in residential construction remains down, but the singlefamily sector has shown recent improvements. Population growth for the past few years have been robust. The economic downturn, however, has caused a lack of household formation and mobility, thus population growth for 2009 should slow. 3-Month Moving Averages 16% Charleston MSA Housing Permits 16% 12% 12% 8% 8% 4% 4% 0% 0% -4% -4% 3-Month Annual Rate: Aug @ -0.2% Year-over-Year Percent Change: Aug @ -2.9% Household: Yr/Yr Percent Change: Aug @ -3.0% -8% -8% -12% -12% 90 92 94 96 98 00 02 04 06 08 Seasonally Adjusted Annual Rate 12 Single-Family: Aug @ 3,084 10 Seasonally Adjusted 10 8 8 6 6 4 4 2 2 0 0 90 92 Charleston MSA Unemployment Rate 11% 12 Single-Family, 12-Month Mov. Avg.: Aug @ 2,631 Multi-Family, 12-Month Mov. Avg.: Aug @ 527 94 96 98 00 02 04 06 08 Charleston MSA Population Growth 11% In Thousands 20 20 Unemployment Rate: Aug @ 9.2% 12-Month Moving Average: Aug @ 8.2% 10% 10% 9% 9% 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 90 92 94 96 98 00 02 04 06 08 15 15 10 10 5 5 0 0 -5 -5 -10 -10 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 Source: U.S. Department of Commerce, U.S. Department of Labor and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 17 Greenville Employment Problems Dominate the Landscape Highlights Greenville MSA Nonfarm Employment After losing 7,900 jobs over the past year, job losses appear to be moderating. Job losses have been broad-based with construction, manufacturing and trade recording the largest declines. Auto-related manufacturers are quite concentrated in Greenville and have been struggling. The unemployment rate has spiked over the past year, largely due to record population growth in the region as well as the severely weakened national economy. Housing construction activity has slowed significantly, with the 12-month moving average now down nearly 70 percent over the past two years. Slowing construction activity should give existing inventories of new homes time to work through the system. The lack of a housing boom has allowed Greenville to largely avoid the requisite bust. A successful diversification into the service sector should help support Greenville’s economy in the long run as old line manufacturing declines. This will be aided by strong population growth and increases in R&D spending. Greenville MSA Housing Permits 3-Month Moving Averages 15% 15% 3-Month Annual Rate: Aug @ -0.1% Year-over-Year Percent Change: Aug @ -2.8% Household: Yr/Yr Percent Change: Aug @ -2.9% 12% 12% 9% 9% 6% 6% 3% 3% 0% 0% -3% -3% -6% -6% -9% -12% 91 93 95 97 99 01 03 05 07 Thousands of Permits, Seasonally Adjusted Annual Rate 8.0 7.0 6.0 5.0 5.0 4.0 4.0 3.0 3.0 2.0 2.0 -9% 1.0 1.0 -12% 0.0 09 0.0 90 92 11% Unemployment Rate: Aug @ 10.1% 12-Month Moving Average: Aug @ 8.8% 9% 8% 8% 7% 7% 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 92 94 96 98 00 02 96 98 00 02 04 06 08 In Thousands 15 15 10% 9% 90 94 Greenville MSA Population Growth Seasonally Adjusted 10% 7.0 6.0 Greenville MSA Unemployment Rate 11% 8.0 Single-Family: Aug @ 1,872 Single-Family, 12-Month Mov. Avg.: Aug @ 1,506 Multi-Family, 12-Month Mov. Avg.: Aug @ 45 04 06 08 12 12 9 9 6 6 3 3 0 0 82 84 86 88 90 92 94 96 98 00 02 04 06 08 Source: U.S. Department of Commerce, U.S. Department of Labor and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 18 Myrtle Beach A Weak Consumer Hampers on This Beach Destination Highlights Myrtle Beach MSA Nonfarm Employment With tourism being the big driver and consumers cutting back on vacations, Myrtle Beach has taken a significant hit on the employment front. The unemployment rate surged to a record high of 12.7 percent in February, but has come down since. Homebuilding surged in 2005, with both single-family and condominium developments soaring to unprecedented heights. Myrtle Beach is clearly the most overbuilt market in South Carolina and one of the most overbuilt markets in the nation. Population growth was robust for the past four years, although it slowed in 2008. The recession has limited the mobility of retirees to relocate to the area. 3-Month Moving Averages 16% Myrtle Beach MSA Housing Permits 16% Thousands of Permits, Seasonally Adjusted Annual Rate 10 10 Single-Family: Aug @ 1,620 12% 12% 8% 8% 4% 4% 0% 0% -4% -4% -8% -8% -12% Single-Family, 12-Month Mov. Avg.: Aug @ 1,285 Multi-Family, 12-Month Mov. Avg.: Aug @ 244 8 8 6 6 4 4 2 2 -12% -16% -16% 3-Month Annual Rate: Aug @ 5.3% Year-over-Year Percent Change: Aug @ -6.7% -20% -20% Household: Year-over-Year Percent Change: Aug @ -6.5% -24% -24% 91 93 95 97 99 01 03 05 07 0 09 0 90 92 Myrtle Beach MSA Unemployment Rate Seasonally Adjusted 13% 12% 96 98 00 02 04 06 08 Myrtle Beach MSA Population Growth 13% Unemployment Rate: Aug @ 11.1% 94 In Thousands 12 12 12% 12-Month Moving Average: Aug @ 10.8% 11% 11% 10% 10% 10 10 8 8 6 6 4 4 2 2 0 0 -2 -2 9% 9% 8% 8% 7% 7% 6% 5% 6% 4% 5% 3% 4% 2% 3% 1% 2% 0% 90 92 94 96 98 00 02 04 06 08 -4 -4 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 Source: U.S. Department of Commerce, U.S. Department of Labor and Wells Fargo Securities, LLC | Government Finance Officers Association of South Carolina 19 Appendix | Government Finance Officers Association of South Carolina 20 Economics Group Publications A Sampling of Our Recent Special, Regional and Industry Commentary Distribution Lists Recent Special Commentary Monthly Economic Outlook Date Weekly Economic & Financial Commentary Economic Indicators Global Economic Commentary Federal Reserve Commentary Real Estate & Housing Consumer & Retail Chief Economist List distribution lists please visit our website: http://www.wachovia.com/economic Authors Bryson Vitner, Khan & Kamar. Vitner & Khan Benchmarking Recovery: Rhyming not Repeating Will Debt Restrain Euro-zone Consumer Spending? State & Local Financial Woes Still Building Wobbly Fundamentals for Business Spending Housing Chartbook: August 2009 Healthcare Employment Stays out of the Sick Ward Early Recoveries are Typically “Jobless” Silvia Bryson Vitner & Khan Silvia & Quinlan Vitner & York Silvia, York & Whelan Silvia & York July-29 July-21 July-16 July-08 July-01 Recession Probability Drops Again Decision-Makers’ Guide to Stimulus Part Deux Is China the Next Bubble? Macro Clouds, Micro Foundations Pass-Through Effect of Housing Weakness Silvia & Iqbal Silvia Bryson Silvia Vitner & Whelan June-30 June-30 June-29 June-25 June-19 June-18 June-11 June-11 June-11 June-10 June-04 June-04 June-01 New Jersey Outlook - June 2009 Cash-for-Clunkers Boost Likely Unsustainable Breakdown, Adjustment & Rebuilding in Finance Recession Probability Drops Again to 37 Percent Labor Market Evolution: Realities and Romantics What Drives Consumer Delinquency Rates? Florida Economic Outlook - June 2009 Global Chartbook - June 2009 Housing Chartbook - June 2009 Consumers Remain Thrifty Amid Economic Turmoil Past Recessions Suggest Sluggish Road Ahead Regional Commentary: Pennsylvania Employment - Have We Reached a Turning Point? Vitner, Khan & Kamar. Vitner & Khan Silvia Silvia & Iqbal Silvia, York & Whelan Vitner & Iqbal Vitner & Kamaruddin Bryson & Quinlan Vitner & York Vitner & York Vitner & Khan Bryson & Quinlan Silvia, York & Whelan August-31 August-26 August-24 August-18 August-14 August-14 August-13 Special Reports To join any of our research Title September-24 What's Wrong With the Dollar? September-03 Commercial Real Estate Chartbook: Second Quarter September-02 Clunkernomics: Auto Sales Set to Boost Real GDP semail | Government Finance Officers Association of South Carolina 21 Wells Fargo Securities, LLC Economics Group Diane Schumaker-Krieg Global Head of Research & Economics [email protected] Mark Vitner Jay H. Bryson, Ph.D. Senior Economist Global Economist [email protected] U.S. Macro Economy Real Estate John E. 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