Economic Outlook 2014 Robert Carreira, Ph.D.

Real GDP Growth (%)

United StatesArizonaCochise County Pre-Recession High mil (Jan 08) 2.69 mil (Oct 07) 39,650 (Jun 08) Recessionary Low mil (Feb 10) 2.37 mil (Sep 10) 33,825 (Oct 14) Recessionary Job Losses -8.7 mil -6.3% -312, % -5, % Current (Oct 2014) mil2.59 mil33,825 From High +1.3 million 1.0% -96, % -5, % From Low mil 7.7% +216, % 0 0.0% Jobs Needed for 5% Unemployment 1.2 mil 0.8% 54, % 1, % Jobs

Peak Current (Oct 2014) Change from Peak Change from Peak (%) Construction (incl. mining) 2,900 (Jun 2006) 1,175 -1, % Manufacturing 925 (Oct 2005) % Trade, Transportation, and Utilities 7,075 (Dec 2006) 5,825 -1, % Information 675 (Aug 2009) % Financial Activities 1,150 (Jul 2007) 1, % Professional and Business Services 6,100 (Dec 2009) 4,000 -2, % Educational and Health Services 5,025 (Mar 2012) 4, % Leisure and Hospitality 4,325 (Apr 2008) 3, % Other Services 1,100 (Mar 2004) % Federal Government 5,975 (Jun 2006) 5, % State and Local Government 7,700 (Jun 2008) 6,525 -1, % Cochise County Jobs by Industry

Pre- Recession Low Recessionary High One Year Ago (Oct 2013) Current (Oct 2014) United States 4.4% (May 2007) 10.0% (Oct 2009) 7.2%5.8% Arizona 3.5% (Jul 2007) 10.8% (Jan 2010) 7.8%6.8% Cochise County 3.4% (May 2007) 9.4% (Oct 2013) 9.4%7.9% Bisbee 6.1% (May 2007) 10.2% (Oct 2013) 10.5%9.0% Unemployment

Upside State/national economy improvement = tourism Emerging threats in Middle East = defense spending Downside Fort Huachuca Government (federal, state & local) Population declines Overall Not looking good Bisbee benefits from state/national recovery Local Labor Market Outlook

Retail Sales BisbeeCochise CountyArizona 2014 (Jan-Sep)-5.5% -5.3%3.0% % 1.5%7.3% % 4.5% 2.5% % -1.2% 7.1% % -4.8% -3.1% % -4.2% -10.7% % -6.5% -13.1% % -1.3% 4.3% Inflation-adjusted to CPI-U

Restaurant & Bar BisbeeCochise CountyArizona 2014 (Jan-Sep)3.3% 2.0%6.2% % -0.5%2.2% % -4.4% 5.0% % -0.2% 2.1% % 0.0% 1.8% % 0.3% -5.4% % 0.2% -6.2% % 0.1% -0.2% Inflation-adjusted to CPI-U

Accommodation BisbeeCochise CountyArizona 2014 (Jan-Sep)14.9% 0.9%9.9% % -12.2%0.4% % -17.2% 1.7% % -13.1% 2.0% % 8.3% 0.8% % -9.0% -16.5% % 1.0% -8.4% % 19.7% 1.4% Inflation-adjusted to CPI-U

Retail Struggling in Bisbee & countywide Bisbee: Visitors not spending as much / ALCO closure Countywide: Fort Huachuca declining activity & uncertainty Restaurant & Bar Bisbee: Tourism Countywide: Fort Huachuca Accommodation Bisbee: Strong overnight tourism Countywide: Construction projects, Fort Huachuca Sales Outlook

Home Sales (Single-family) Jan-Sep 2014 Cochise County: 1,085 (+4.0%) Bisbee: 67 (-15.6%)

Median Home Price * Jan-Sep

Foreclosures (% of sales)

New Home Construction (Cochise County)

Foreclosures Upward pressure on sales Downward pressure on prices Dampened demand for new construction Population declines = downward pressure on new construction Real Estate & Construction Outlook

Recession Kept out of recession by Fort Huachuca Cochise County recession began in 2011 Upside Improving state and national economies will help tourism Downside Defense/Fort Huachuca Population declines Foreclosures Conclusion