LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Election-Year Economics A Look at the Pocketbook Issues of 2004 C. Tannenbaum Chief Economist

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO “It’s the economy, stupid!” -- Bill Clinton, 1992

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Trends in U.S. GDP Quarterly Change, Annualized “Potential”

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Year over Year Change in Retail Sales Excluding Food and Autos

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Index of Industrial Production

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Key Concerns The Employment Puzzle The Employment Puzzle

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Non-Farm Payrolls Year-Over-Year Change Source: BLS

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Unemployment and Labor Force Participation Percent Rate

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Consumer Confidence

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Why hasn’t hiring picked up? The $100 Million Question:

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Cost of Health Care Benefits As a Percent of Total Hourly Compensation Source: BLS

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Hourly Wages for Selected Occupations, U.S. vs. India Source: Bardhan and Kroll, Fisher Center for Real Estate and Urban Economics, UC Berkeley

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Productivity Source: BEA

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Initial Jobless Claims Source: BLS

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Key Concerns The Employment Puzzle The Employment Puzzle Deepening Deficits Deepening Deficits

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Deficit and Surpluses as Percent of GDP Source: OMB

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO The Boom is Coming Source: Social Security Trustees Report The Future of Social Security

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Federal Government: Outlays

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Yield Curve U.S. Treasury Securities Rates are at risk if the deficit persists

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Housing: Still A Bright Spot — Sales and starts are holding up — Mortgage rates are still reasonable — Carry over spending to come — Sales and starts are holding up — Mortgage rates are still reasonable — Carry over spending to come U.S. Home Sales Millions of Units

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO S&P 500

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Sustaining Investment  Diversification is Essential  Reinforcing the Public Trust  Maintaining a Balanced Tax Posture

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Key Concerns The Employment Puzzle The Employment Puzzle Deepening Deficits Deepening Deficits How Free is Free Trade? How Free is Free Trade?

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Our Trade Balance

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Brother, Can You Spare the Dollar? A weaker currency makes it easier to export A weaker currency makes it easier to export One notable exception: China One notable exception: China How long can this last? How long can this last? Dollars per Euro

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Thoughts on Trade Weak foreign economies limit demand for U.S. products Weak foreign economies limit demand for U.S. products Protectionist measures will lead to retaliation Protectionist measures will lead to retaliation Who’s responsible for the shift of production and jobs? We are! Who’s responsible for the shift of production and jobs? We are!

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO The Scorecard

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Closing Thoughts The remainder of the year should see good economic performance The remainder of the year should see good economic performance The risk of underachievement is rising The risk of underachievement is rising The election looks like a real horse race! The election looks like a real horse race!

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO “If the economy doesn’t improve, you’re fired!” -- Carl Tannenbaum’s boss, 2004

LaSalle Bank ABN AMRO LaSalle Bank ABN AMRO Election-Year Economics A Look at the Pocketbook Issues of 2004 C. Tannenbaum Chief Economist