1. TIAA-CREF North Carolina Economic Forecast March 11, 2008

2. FORECAST HIGHLIGHTS For 2007, NORTH CAROLINA real GSP is forecast to increase by 2.6 percent over the 2006 level. Nine of the state’s eleven economic sectors are forecast to experience growth during 2007. The sectors with the strongest expected growth forecasts are mining with a projected real growth rate of 7.2 percent, government with a projected real growth rate of 5.9 percent, and services with a projected real growth rate of 5.4 percent. For 2007 NORTH CAROLINA establishments added 68,200 net jobs, and increase of 1.7 percent over the 2006 level. Six of the state's ten nonagricultural sectors of the economy experienced positive employment growth during 2007. The NORTH CAROLINA unemployment rate was at 5.0 percent in December of 2007, the same as the U.S. rate. For 2008, NORTH CAROLINA real GSP is forecast to increase by 2.5 percent over the 2007 level. Eight of the state’s eleven economic sectors are forecast to experience growth during 2008. The sectors with the strongest expected growth forecasts are services with a projected real growth rate of 5.6 percent, retail trade with a projected real growth rate of 4.4 percent, and wholesale trade with a projected real growth rate of 3.9 percent; For 2008 NORTH CAROLINA establishments are forecast to add 49,600 net jobs, and increase of 1.2 percent over the 2007 level. Annual Growth Rates In Real GSP 6 5 2 1 4 2004 20062007 f 2008 f 3 3.5 4.3 2.6 GSP/Gross State Product is a yardstick that measures the total output of a state’s economy during a given year period. It is analogous to the U.S. Gross Domestic Product (GDP). Year-End Seasonally Adjusted North Carolina Unemployment Rates 6 5 2 1 4 2004 20052006 20072008 f 3 4.9 5.0 2005 5.3 7 2.5 4.9 5.4

3. QUARTERLY GROWTH RATES IN REAL GSP 2007 I 2007 II2007 III 2004 IV f 6 5 2 1 4 3 2.8 2007 Highlights Current Dollars Total Gross Product Constant (2000 Dollars) Total Gross Product Farm Agricultural Services Mining Construction Manufacturing Durable Goods Nondurable Goods TWUI Wholesale Trade Retail Trade FIRE Services Government 395,501.9 334,716.9 2,581.8 843.0 285.5 13,147.2 71,455.5 30,949.8 40,505.7 27,590.8 18,850.4 23,907.2 66,515.4 71,067.1 38,473.1 2007 * Percent Change 5.6 2.6 -3.7 26.3 7.2 1.7 -0.5 0.0 0.8 4.7 1.9 5.4 5.9 * millions of dollars 2007 GSP Gross State Product (GSP) is expected to reach a level of 395,501.9 million in 2007. Real (inflation adjusted) GSP is expected to increase by 2.6 percent over the 2006 level. The GSP growth expected in 2007 is weaker than the growth rate of 4.3 percent experienced during 2006. Overall, the North Carolina economy is expected to grow during all four quarters of 2007. During the first quarter GSP increased by an annualized real growth rate of 2.3 percent. During the second quarter, GSP growth slowed down to an annualized real growth rate of 1.0 percent. In the third quarter GSP growth increased to an annualized rate of 2.0 percent. In the fourth quarter, North Carolina GSP growth is expected to continue to increase recording an annualized real growth rate of 2.8 percent. The roller coaster performance experienced during the year is a result of a couple of dramatic events. First, during the summer, rising gasoline prices took a bite out of consumer incomes. Second, by late summer into early fall the sub-prime credit problem began to surface. Both of these issues have affected consumer behavior. Rising gasoline prices are taking income out of consumer’s pockets and slowing purchases in other sectors and the sub-prime credit scare are negatively affecting consumer’s confidence to purchase big-ticket items. The Consumer Confidence Index has been in steady decline since July of 2007. The February number stands at 75.0 down over 35 points since July. These two factors together have slowed the North Carolina economy during 2007 and are likely to continue slowing the economy into 2008. 2.0 2007 IV f 2.3 1.0

4. Wholesale Trade 5.0 The chart to the left presents the contributions of each major economic sector to North Carolina’s Gross State Product (GSP). The real (inflation adjusted) growth rate for 2007 is forecast to be 2.6 percent. Projected real growth rates for each sector (displayed in black type) are plotted on the horizontal axis. Projected percentages of GSP contributed by each sector (displayed in green type) are plotted on the vertical axis. The resulting rectangles show the expected weighted importance of each sectors' growth during 2007. All of the sector information presented in the table to the left is based on the new North American Industry Classification System (NAICS) definitions. Nine of the state’s eleven economic sectors are forecast to experience growth during 2007. The sectors with the strongest expected growth forecasts are mining with a projected real growth rate of 7.2 percent, government with a projected real growth rate of 5.9 percent; services with a projected real growth rate of 5.4 percent, and wholesale trade with a projected real growth rate of 4.7 percent. Five other sectors are expected to experience growth during 2007 but at rates less that the overall state growth rate of 2.6 percent. These sectors are agriculture with a projected real growth rate of 2.3 percent; finance, insurance, and real estate (FIRE) with a projected real growth rate of 1.9 percent; retail trade with a projected real growth rate of 1.9 percent; construction with a projected real growth rate of 1.7 percent; and transportation, warehousing, utilities, and information (TWUI) with a projected real growth rate of 0.8 percent. Nondurable goods manufacturing is projected to be flat while durable goods output is expected to decline by 1.0 percent 2007 GSP Sector Analysis Percent of Total Real GSP Percent of Real Sector Growth 1.0 0.1 3.9 12.2 8.2 9.3 5.6 7.1 19.9 21.2 11.5 Nondurables 0.0 FIRE 1.9 2007 Total Real GSP 2.6% Agriculture 2.3 Services 5.4 Retail Trade 1.9 Construction 1.7 Wholesale Trade 4.7 Durables -1.0 TWUI 0.8 Mining 7.2 Government 5.9

5. 2008 Highlights Current Dollars Total Gross Product Constant (2000 Dollars) Total Gross Product Farm Agricultural Services Mining Construction Manufacturing Durable Goods Nondurable Goods TWUI Wholesale Trade Retail Trade FIRE Services Government 415,092.2 342,926.0 2,636.3 872.8 293.8 13,120.5 70,851.3 30,421.8 40,429.5 28,532.8 19,594.8 24,969.2 67,985.1 75,056.6 39,012.9 2008 * Percent Change 5.0 2.5 2.1 3.5 2.9 -0.2 -0.8 -1.7 -0.2 3.4 3.9 4.4 2.2 5.6 1.4 * millions of dollars 2008 GSP Gross State Product (GSP) is expected to reach a level of 415,092.2 million in 2008. Real (inflation adjusted) GSP is expected to increase by 2.5 percent over the 2007 level. The growth rate for 2008 is expected to be slightly weaker than the growth rate of 2.6 percent experienced during 2007. For 2008, first quarter GSP is expected to increase by an annualized real growth rate of 2.3 percent. During the second quarter, GSP is expected to increase by an annualized real rate of 3.0 percent. In the third quarter, GSP growth is expected to drop off and record an annualized real growth rate of 2.5 percent. In the fourth quarter of 2008, GSP growth is expected to pick-up, and reach an annualized real rate of 2.8 percent. This expansion, which began in November of 2001, is now 75 months long. The average of the 10 post World War Two expansions has been 57 months. Only 3 have been longer than the current expansion. The longest expansion was during the 1990’s when the economy grew for 120 months. Today the economy is in a position to go either way. Rising energy prices and the sub-prime related credit crunch have consumers on the rocks. Consumer spending represents 70 percent of U.S. GDP, so if consumers are nervous the economy is in trouble. Since July of 2007, consumer confidence has fallen dramatically. The February number is 75.0. Many economists believe this is the recipe for a recession. However, it is still too early to call. If the “Fed” is successful in alleviating the credit problem it is possible for the economy to rebound from its sluggish performance during late 2007. QUARTERLY GROWTH RATES IN FORECASTED REAL GSP 2008 I 2008 II 2008 III2008 IV 3.0 2.8 2.5 2.3 6 5 2 1 4 3

6. 2008 GSP Sector Analysis 2008 Total Real GSP Growth 2.5 % Percent of Total Real GSP Percent of Real Sector Growth 1.0 0.1 3.8 11.8 8.3 8.9 5.7 7.3 19.8 21.9 11.4 Mining 2.9 Durables -1.7 Nondurables -0.2 FIRE 2.2 Wholesale Trade 3.9 TWUI 3.4 Construction -0.2 Services 5.6 Agriculture 2.5 Government 1.4 The chart to the left presents the projected contributions of each major economic sector to North Carolina’s Gross State Product (GSP). The real (inflation adjusted) growth rate for 2008 is forecast to be 2.5 percent. Projected real growth rates for each sector (displayed in black type) are plotted on the horizontal axis. Projected percentages of GSP contributed by each sector (displayed in green type) are plotted on the vertical axis. The resulting rectangles show the expected weighted importance of each sectors' growth during 2007. All of the sector information presented in the table to the left is based on the new North American Industry Classification System (NAICS) definitions. Eight of the state’s eleven economic sectors are forecast to experience growth during 2008. The sectors with the strongest expected growth forecasts are services with a projected real growth rate of 5.6 percent; retail trade with a projected real growth rate of 4.4 percent; wholesale trade with a projected real growth rate of 3.9 percent; transportation, warehousing, utilities, and information (TWUI) with a projected real growth rate of 3.4 percent; mining with a projected real growth rate of 2.9 percent; and agriculture with a projected real growth rate of 2.5 percent. Two other sectors are expected to experience growth but at rates less than the overall growth rate of 2.5 percent. These sectors are finance, insurance, and real estate (FIRE) with a projected real growth rate of 2.2 percent; and government with a projected real growth rate of 1.4 percent. Three sectors, durable goods manufacturing, nondurable goods manufacturing, and construction are expected to experience an output decline during 2008 Retail Trade 4.4

7. 2007 Employment Highlights Total Establishment Employment Mining Construction Manufacturing Durable Goods Nondurable Goods TWUI Wholesale Trade Retail Trade FIRE Services Government 4,122.0 6.7 255.6 539.2 290.4 248.8 204.3 176.7 458.6 215.9 1,588.0 677.0 Year-End* Percent Change 1.7 -1.5 3.1 -2.0 -1.5 -2.6 -0.3 0.7 1.9 3.0 3.6 0.2 * thousands of persons The sector employment analysis presented on this page is based on the new North American Industrial Classification System (NAICS). Seasonally adjusted nonagricultural employment in North Carolina reached 4,122,000 persons by December 2007, an increase of 1.7 percent over the employment level in December 2006. The employment growth added 68,200 net jobs to the state's economy during the year. Six of the state's ten nonagricultural sectors of the economy experienced positive employment growth during 2007. The sectors that displayed the strongest employment growth rates in 2007 were services at 3.6 percent, construction at 3.1 percent, and FIRE at 3.0 percent. 2007 Employment Sector Analysis Percent of Total Employment Durables –1.5 Wholesale Trade 0.7 Retail Trade 1.9 2007 Year-End Employment Trends Percent Change Total Employment Increase 1.7 % 0.2 6.2 7.0 6.0 5.0 4.3 11.1 5.2 38.5 16.4 FIRE 3.0 Nondurables -2.6 TWUI -0.3 Government 0.2 Services 3.6 Construction 3.1 Mining -1.5

8. 2008 Employment Highlights Total Establishment Employment Mining Construction Manufacturing Durable Goods Nondurable Goods TWUI Wholesale Trade Retail Trade FIRE Services Government 4,171.6 6.1 256.3 521.6 285.2 236.4 204.9 180.1 467.3 221.6 1,641.3 676.5 Year-End* Percent Change 1.2 -9.0 0.3 -3.3 -1.8 -5.0 0.3 1.9 2.6 3.4 -0.1 * thousands of persons The sector employment analysis presented on this page are based on the new North American Industrial Classification System (NAICS). Seasonally adjusted nonagricultural employment in North Carolina is expected to reach 4,171,600 persons by December 2008, an increase of 1.2 percent over the employment level expected in December 2007. The employment growth during 2008 is expected to add 49,600 net jobs to the state's economy. Six of the state's ten nonagricultural sectors of the economy are expected to experience positive employment growth during 2008. The sectors that are expected to display the strongest employment growth rates in 2007 are services at 3.4 percent, FIRE at 2.6 percent, and wholesale and retail trade both at 1.9 percent. 2008 Employment Sector Analysis Percent of Total Employment Nondurables -5.0 Durables -1.8 TWUI 0.3 2008 Year-End Employment Trends Percent Change Total Employment Increase 1.2% Services 3.4 0.1 6.1 6.8 5.6 4.9 4.3 11.2 5.3 39.3 16.2 Construction 0.3 FIRE 2.6 Retail Trade 1.9 Wholesale Trade 1.9 Government -0.1 Mining -9.0

9. FORECAST reports historical seasonally adjusted monthly unemployment rates for North Carolina and the United States and forecasts the seasonally adjusted monthly unemployment rate for North Carolina. The seasonal adjustment accounts for variations in labor market conditions that cause regular fluctuations in the unemployment level each month. The graph at the top of this page provides a summary of the monthly unemployment rates for 2007. The solid green line represents the North Carolina seasonally adjusted historic unemployment rate. The seasonally adjusted unemployment rate for the United States is represented by the solid blue line. The seasonally adjusted rates for the United States and North Carolina can be directly compared and provide more reliable estimates than the unadjusted rates. The North Carolina seasonally adjusted unemployment rate began the year at 4.5 percent, the same as the United States rate. By July, the North Carolina rate had risen to 5.0, while the United States rate was still at 4.6 percent. During the fall the North Carolina unemployment rate decline 4.8 percent, 0.1 percent above the United States rate. The North Carolina unemployment rate closed the year at 5.0 percent the same as the U.S. rate. 2007 NORTH CAROLINA UNEMPLOYMENT RATES