1. CT Economic Outlook 2008:Q3 to 2012:Q4 Edward J. Deak, Ph.D. Professor of Economics Fairfield University Connecticut Model Manager The New England Economic Partnership

2. U.S. Financial Crisis/Recession: CT Delayed Entry (08:Q4 v. 08:Q1) y Backlog financial bonuses paid 2008 - Current accrual of deferred income? yRelatively limited housing bubble yWeak $ - Supported mfg jobs/income yDefense spending – Supported mfg yRelatively weaker housing bubble – Restrained new home construction – Restrained subprime/gimmic lending

3. U.S. Financial Crisis/Recession: CT Delayed Exit (09:Q3 v. 10:Q2) yRestructuring of Financial Industry –Wall ST, Commercial/Investment Banks yWeakened Hedge Fund + Insurance Sectors yLoss of Financial Service Jobs –Jobs/Taxes in NYC, but unemployment/income in CT yStronger $ +  Defense Spending Limit Mfg yState + Local Budget Deficits yDiminished Capital Gains/Bonus Income ySlow Growth & Aging Pop/Labor Force

4. CT Economy in Recession: Current Status 10/08 yJobs: Peak 12/07, Jan-Sept 08 = -4.1k – yag : Trade, Bus Ser, Mfg, Const, Financial – yag : Health/Ed, Gov, Leisure+Hospitality yUE Rate %: 4.4=1-6/07, 9/08 = 6.1 US=6.1 yGov Budgets: State deficit -$300m current –Local $ cuts + layoffs, CT 2010 = $2.6B yCasino Revenues: Both 8.9%+ 09:Q1 FY yNew UE Claims: 55% 9/08 v. 9/07 = 6,209

5. CT Housing Market in Recession: Current Status 10/08 y Permits: 07=16.1%=7,746, 08Q1-3=28% –Peak: 05=11,885, 07 lowest # since 1991 ySales Existing: 07=12%, 08Q1-3=24.5% –Peak: 05=58.1k, 07=45.6k lowest since ‘96 yMedian Prices: 07=2%=$320.6k peak CR – 08Q1-3 8.3%=$275k, Sept’08=7.5% yag = $260k yForeclosure Filings: Oct 08 +136% most US ySubprime Del: 08Q3=27.1%, US=26.8

6. Annual Job Change %: CT vs. U.S 2006-2012 % Change

7. Peak-Trough Recession Job Chg: 1989-93, 2000-03, 2007-10? y1989-93: 89:Q1=1.678k 93:Q3=1,527k – Loss = -151k % Change = -9.0% Length = 14 quarters y2000-03: 00:Q3=1,698k 03:Q3=1,640k – Loss = -58k % Change = -3.4% Length = 12 quarters y2007-10? 07:Q4=1,704 10:Q2=1,642k – Loss = -62k % Change = -3.6% Length = 10 quarters Last Forecast Quarter 2012:Q4 = 1,712k

8. Annual Unemployment Rate %: CT vs. U.S 2004-2012

9. Peak-Trough Recession UE Rate: 1989-93, 2000-03, 2007-10? y1989-93: 88:Q1=2.77% 92:Q2=7.47% – Gain=470bp % Change = +270% Length = 17 quarters y2000-03: 00:Q4=2.13% 03:Q2=5.53% – Gain=340bp % Change =+260% Length = 10 quarters y2007-10? 06:Q2=4.2% 10:Q2=8.49% – Gain =429bp % Change =+202% Length = 16 quarters Last Forecast Quarter 2012:Q4 CT = 6.35% U.S. = 5.3%

10. Nominal Income Per Capita: % Change CT vs. U.S 2004-2012 % Change Nominal Personal Income

11. Peak-Trough Recession Nominal Per Income Per Capita: 1989-93, 2000-03, 2007-10? (saar) y1989-93: 89:Q1=$25.3k 93:Q4=$29.5k – Gain=$4.2k % Change = +17% Length = 19 quarters y2000-03: 00:Q1=$40.7k 03:Q4=$43.6k – Gain=$2.6k % Change =+6.4% Length = 15 quarters y2007-10? 07:Q1=$54.2k 10:Q4=$59.6k – Gain =$5.4k % Change =+10% Length = 15 quarters Last Forecast Quarter 2012:Q4 (saar) CT: 3.9%=$63,892 U.S.: 4.2%=$45,279

12. CT v. U.S Home Permits: % Change 2004-2012

13. Peak-Trough Recession Permit %: 1989-93, 2000-03, 2007-10? (saar) y1989-93: 89:Q1=14,658 92:Q3=7,384k – Loss = -7,274 % Change = -50% Length = 14 quarters y2000-03: 98:Q1=12,488 01:Q2=8,216 – Loss = -4,272 % Change = -34% Length = 13 quarters y2007-10?: 05:Q4=12,155 09:Q4=4,365 – Loss = -7,790 % Change = -64% Length = 16 quarters Last Forecast Quarter 2012:Q4 = 8,644

14. Median Sale Price Existing Home: CT vs. U.S. 2004-2012 000’s Current $

15. Peak-Trough Recession Home Price: 1989-93, 2000-03, 2007-10? y1989-93: 88:Q2=$218.5k 96:Q4=$175.2k – Loss= -$43.3k % Change= -19.8% Length= 30 quarters y2000-03: 00:Q2=$198.3k 00:Q3=$195.8k – Loss = -$2.5k % Change= -1.3% Length= 1 quarter y2007-10?: 07:Q2=$326.8k 10:Q2=$232.2k – Loss= -$96.6k % Change= -29.6% Length= 12 quarters Last Forecast Quarter 2012:Q4 CT = $258.6k U.S. = $187.6k

16. Mortgage Delinquency Rate %: CT vs. U.S 2004 - 2012 % Mortgages Delinquent

17. Peak-Trough Recession Mortgage Delinquency Rate %: 1989-93, 2000-03, 2007-10? y1989-93: 88:Q1=2.92% 92:Q1= 4.24% – Gain= 132bp % Change= 45% Length = 16 quarters y2000-03: 00:Q1=2.94% 02:Q4= 4.11% – Gain= 117bp % Change= 40% Length = 11 quarters y2007-10?: 07:Q1=3.97% 09:Q1= 5.54% – Gain= 157bp % Change= 40% Length = 8 quarters Last Forecast Quarter 2012:Q4 CT = 4.04% U.S. = 4.51%

18. Bankruptcies % Change: CT vs. U.S. 2004-2012 % Change

19. Peak-Trough Recession Bankruptcies: 1989-93, 2000-03, 2007-10? (saar) y1989-93: 88:Q4=2.33k 93:Q1=9.14k – Gain= +6.81k % Change= 392% Length= 17 quarters y2000-03: 00:Q4=10.5k 03:Q3=12.1k – Gain = 1.6k % Change= 15% Length= 11 quarters y2007-10?: 07:Q2=5.0k 12:Q2=19.8k – Gain= 14.8k % Change= 396% Length= 20 quarters Last Forecast Quarter 2012:Q4 CT = 19,334 (saar)

20. CT Outlook Conclusions y CT late into recession: US 08:Q1 v. CT 08:Q4 y Late out of recession: US 09:Q3 v. CT 10:Q2 y Job loss less than 89-93, greater 00-03 y UE rate higher than 89-93 or 00-03 y Nominal income growth constrained y New home permit decline greater + longer y Home price decline greater + shorter 89-93 y Higher delinquency and bankruptcy rates