Presentation given by guest speaker Jim Rounds of Elliott Pollack & Co. at the City of Maricopa's 2011 5th Annual Economic Outlook Forum event.

1. A Precise and Absolutely Error Free Forecast of Future Conditions To: City of Maricopa 5 th Annual Economic Development Event December 8, 2011 By: Jim Rounds Senior V.P., Elliott D. Pollack & Company

2. Going from Economic to Psychological? “Tell me about your mother”

3. Going from Economic to Political?

4. Going from Forecasting to Guessing? Many are not looking at the right numbers. Ben Bernanke – Fall 2011

5. U.S. Conditions

6. ?

8. Real Gross Domestic Product Percent Change Quarter Ago, Annualized 1971 – 2011 * Source: Bureau of Economic Analysis * Data through 3rd quarter 2011 No Recession Periods

9. Real Disposable Personal Income Percent Change Year Ago 1971 – 2011 * Source: Bureau of Economic Analysis * Data through second quarter 2011 No Recession Periods

10. US New Job Data Change from Prior Month (S/A) June 2010 – November 2011 Source: Bureau Labor of Statistics (000’s) No

11. Industrial Production Percent Change Year Ago 1973 – 2011* Source: The Conference Board *Data through July 2011 No Recession Periods

12. Real Retail Sales U.S. Percent Change Year Ago 1973 – 2011* Source: Federal Reserve *Data through August 2011 **Three-month moving average No Recession Periods

14. OR SAFE ?

15. Other Measures…

16. Hours Worked Percent Change from Year Ago 1976 – 2011* Source: Bureau of Labor Statistics *Data through second quarter 2011 Recession Periods

17. Capacity Utilization Rate 1970 – 2011* Source: The Conference Board *Data through August 2011 Recession Periods

18. Corporate Profit (Billions of Dollars, SA) 1975-2011* Source: BEA * Data through second quarter 2011 But… Recession Periods

19. Corporate Profit By Industry ($Billions) 2011 q2 Source: BEA ?

25. What not to look at just yet…

26. Consumer Confidence 1978 – 2011* Source: The Dismal Scientist *Data through September 2011 1985 Benchmark = 100 Recession Periods

27. U.S. Unemployment Rate 1980 – 2011* Source: Bureau of Labor Statistics *Data through Sep 2011 Recession Periods

28. Current State and Local Basics

29. There is some good news…

30. … And some bad news.

31. 9 4 1 5 2 10 3 7 Job Growth 2006 11 15 6 22 8 Source: US BLS 13 Jobs growing Jobs declining Top 10 Hawaii Alaska

32. 5 49 23 35 45 4 32 8 24 47 50 44 1 16 3 Alaska 2 13 18 30 Job Growth 2009 Source: US BLS 46 Jobs growing Jobs declining Top 10 Hawaii

33. 11 8 October YTD 2011 vs October YTD 2010 30 4 13 32 2 45 9 Job Growth Update: Arizona Ranked 30 th 47 28 1 3 34 Alaska 7 49 21 26 36 14 10 18 6 20 5 17 Jobs growing Jobs declining Top 10 Hawaii

35. What to focus on during the coming years…

37. AZ New Job Data Change from Prior Month (S/A) May 2010 – October 2011 Source: Bureau Labor of Statistics (000’s) ?

38. Greater Phoenix Employment* Annual Percent Change 1975–2012** Source: Department of Commerce, Research Administration *Non-agricultural wage & salary employment. Changed from SIC to NAICS reporting in 1990. ** 2011& 2012 forecast is from Elliott D. Pollack & Co. YTD Phx = 1.0%; AZ = 0.7% Y/Y Phx = 2.3%; AZ = 2.2% Recession Periods

39. Greater Phoenix Population Annual Percent Change 1976–2012* Source: Arizona State University & Department of Commerce, Research Administration 2008 and 2009 are estimates put out by ADES and may be subject to substantial revision. * 2011 & 2012 forecast is from Elliott D. Pollack & Co. *2000-2010 estimates based on 2010 Census release ? Recession Periods

40. U.S. Single-Family Starts 1978–2011 1/ Source: Census Bureau (Millions) 1/ Through June 2011 Over- supply Under- supply LTA: 1.2 Recession Periods

41. Single-Family Permits vs. Population Demand Greater Phoenix 1975–2015 Source: PMHS / RL Brown # Permits * 2011 - 2015 forecast is from Elliott D. Pollack & Co. ? Recession Periods

42. Home Prices Indices 2000 – 2011 (July) Source: Macro Markets, LLC; AMLS Weak Pop/Emp Investors ? Recession Periods

43. Negative Equity in Homes Affects Ability to Sell or Buy Source: First American Core Logic 50% of homes with mortgages in Arizona have negative equity.

45. We are who we are… …for now

46. 9 4 1 5 2 10 3 7 Job Growth 2006 2014/2015? 11 15 6 22 8 Source: US BLS 13 Jobs growing Jobs declining Top 10 Hawaii Alaska

47. But, can we also grow in terms of quality ?

48. Positives?

49. This is NOT a multi decade recovery… Think 2015 for full recovery for most, but growth before then.

50. Greater Phoenix Employment* Source: Bureau of Labor Statistics *September 2011/September 2010 Sectors in Decline Net Change Other Services -300 Federal Government -400 Prof. & Bus. Services -4,100 Sectors Improving Net Change Education & Health Services 16,400 Transp, Trade, & Utilities 7,700 Leisure & Hospitality 6,700 Construction 4,900 Local Government 2,700 Financial Activities 2,600 Manufacturing 1,900 State Government 600 Mining 0 Information 0

51. Phoenix-Mesa Employment Growth (Ranking among all metro areas greater than 1,000,000; 2011 October/October) Source: Arizona State University, U.S. Bureau of Labor Statistics YEAR RANK # of MSAs 1991 4 20 1992 5 20 1993 2 20 1994 1 20 1995 1 21 1996 1 23 1997 2 23 1998 1 24 1999 3 26 2000 8 26 2001 6 28 2002 5 28 2003 3 29 2004 4 29 2005 1 30 2006 1 31 2007 10 32 2008 29 32 2009 31 32 2010 31 32 2011 9 32

54. Properties in the Foreclosure Process Maricopa County 2002 – 2011* Source: The Information Market *Data through August 2011. Recession Periods

55. Housing Opportunity Index* Greater Phoenix vs. US 1992-2011** Source: NAHB *Data through Q2 2011. ** Years 2002 & 2003 only have one data figure

56. One survey shows that over 80% of current single family RENTERS would like to soon own. Some of these homes are thus permanently absorbed.

57. Benefiting from basic demographic changes…

58. 5 9 10 Benefits of the “SUNBELT” Alaska Hawaii Industrial Northwest

59. Negative Equity in Homes Affects Ability to Sell or Buy Source: First American Core Logic 50% of homes with mortgages in Arizona have negative equity. (National average about 25%)

60. Retirement Home Buying Cycle Net Change in Maricopa County Population Ages 55 to 69 1991-2030 Source: U.S. Bureau of the Census, Arizona Department of Economic Security

61. Trade-Up Home Buying Cycle Net Change in Maricopa County Population Ages 34 to 44 1991-2030 Source: U.S. Bureau of the Census, Arizona Department of Economic Security

62. Starter Home Buying Cycle Net Change in Maricopa County Population Ages 25 to 34 1991-2030 Source: U.S. Bureau of the Census, Arizona Department of Economic Security

64. Tax Revenues?

65. STILL APPLIES State forecast revisions in our future?

66. Economic Competitiveness

67. Figure out who we are… Then try to improve the situation.

68. Old Competitiveness Map – AZ will be Moving Up(???)

69. What about the bad national press? Yes, SB1070

71. Related worker shortages won’t hit us until 2014/2015 or so.

73. Something still needs to be done about statewide tourism promotion.

75. Future Conditions Summary

76. Performance Measures? Falling far results in: - Strong rates of growth that seemingly don’t match the reported “levels” of activity. - Strong rankings that seemingly don’t match what we read in the paper. - Panic and opinions that the world is 100% different than before. Not necessarily true, we need to maintain some perspective.

77. “ A Lost Decade,” but what does this tell us about the future?

78. a) Underlying fundamentals remain, we will grow, but we will need to try harder. b) Break in underlying fundamentals, flat decade means no future. Basic Question: