1. Economic Outlook Government Finance Officers Arizona Alan E. Maguire August 2014

2. Economic Outlook “Where are we going?” US Economy in the Global Economy Arizona Economy in the US Economy Pertinent Observations

3. Economic Outlook “Where are we going?” US Economy in the Global Economy Arizona Economy in the US Economy Pertinent Observations

4. US Economic Outlook US Economy in the Global Economy The Current Context The Outlook Long-Term Trends

5. US Economic Outlook The Current Context Current Conditions Gross Domestic Product Trends Employment Trends Current Challenges

6. US Economic Outlook The Current Context Cyclical Recession Over Since Mid 2009 Relatively Short Recession in GDP Terms, but Deep Financial Crisis Over Regulatory Crisis Ongoing Five years since Recession Ended!

7. US Economic Outlook The Current Context Very Slow Growth for “Recovery” period Historical Recovery Drivers Missing Remnants of Double Whammy – Housing & Banking Consumer Mortgage Debt / Other Debt Overhanging Housing Supply Battered Consumer Confidence International Issues

8. US Economic Outlook US GDP Quarterly Change 1970 - 2014 Recessions * GDP

9. US Economic Outlook US GDP Quarterly Change 1970 - 2014 Recessions * GDP

10. US Economic Outlook US GDP Quarterly Change 1970 - 2014 * GDP

11. * US Economic Outlook US GDP Quarterly Change 2009 - 2014

12. US Economic Outlook US Employment % Change from Prior Year 1970 - 2014 Recoveries * Employment

13. Total Employment Employment Growth US Economic Outlook US Employment % Change from Prior Year 1990 - 2014 *

14. Total Employment Employment Growth Reagan Recovery / Obama Recovery

15. US Economic Outlook The Outlook – Near Term Low, Slow, but Steady Growth: 2.0% to 2.75% Substantial Deterrents to Growth & Investment International Issues – Especially Europe Collapsing EU Fiscal Systems Weak Demand – Wary Consumers Continuing Uncertainty! Expectations of Rising US Taxes- “Fiscal Cliff”

16. US Economic Outlook US Economic Outlook U Michigan Consumer Sentiment *

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19. US Economic Outlook Longer Term Trends Worldwide Demand Issues Europe’s Issues – Teetering on Recession! (perpetually) Japan’s Issues High Debt and Pending Liquidation Now – Easy Money Asia’s Cultural / Governmental Challenges Stupid Government Risk!!

20. Economic Outlook “Where are we going?” US Economy in the Global Economy Arizona Economy in the US Economy Pertinent Observations

21. AZ Economic Outlook AZ Economy in the US Economy The Current Context The Outlook Long-Term Trends

22. AZ Economic Outlook The Current Context Recent AZ Employment Trends Current Challenges

23. AZ Economic Outlook AZ Employment 2001 – 2014 (000’s) All Industries *

24. AZ Economic Outlook AZ Employment 2001 – 2014 (000’s) All Industries Manufacturing Construction *

25. AZ Economic Outlook AZ Employment 2001 – 2014 (000’s) All Industries Manufacturing Construction *

26. AZ Economic Outlook AZ Employment 2001 – 2014 (000’s) All Industries * 300,000 jobs

27. AZ Economic Outlook AZ Employment 2001 – 2014 (000’s) All Industries * 150,000 bubble jobs 150,000 other jobs

28. AZ Economic Outlook AZ Employment 2001 – 2014 (000’s) All Industries * 136,000 recovered jobs 150,000 other jobs 182,000 private jobs

29. AZ Economic Outlook AZ Employment 2001 – 2014 (000’s) All Industries 136,000 recovered jobs 150,000 other jobs 182,000 private jobs AZ Labor Force Down ~100 K

30. AZ Economic Outlook The Current AZ Context Still Challenging US Conditions Low, Slow, but Steady Growth: 1.5% to 2.5% But, …. Continuing Uncertainty – Nationally / Globally Positive AZ Trends

31. AZ Economic Outlook The Current AZ Context Returning to Government Fiscal Balance Above National Average Job Growth Rates But “NOT LIKE THE OLD DAYS!!” Benefit of Building from a “Low Base”

32. AZ Economic Outlook The Good AZ News Top 15 in Job Growth – From 49 th ! 136,000 + jobs added since 2010 Retail Spending Rising (Autos, Durables) AZ Retail Sales Up – Slow & Steady Outlook Hopeful, but Concerned Arizona Gradual Recovery Underway *

33. AZ Economic Outlook The Good AZ News Top 15 in Job Growth – From 49 th ! 136,000 + jobs added since 2010 Retail Spending Rising (Autos, Durables) AZ Retail Sales Up – Slow & Steady Outlook Hopeful, but Concerned Arizona Gradual Recovery Underway # 3 in 2012 #14 in 2013 #21 @ June

34. AZ Economic Outlook The AZ Outlook Substantial Drags and Risks Still Exist Historic Drivers Are Weak Future Not Like Historical Patterns

35. AZ Economic Outlook The AZ Outlook Expect Slow, but Positive Growth Existing Capacity Available for Growth -- Without Capital Spending -- With Little New Hiring Still Strong Fundamentals in Arizona Positive Business and Social Climates But Fundamentals at Risk! *

36. AZ Economic Outlook The AZ Outlook Expect Slow, but Positive Growth Existing Capacity Available for Growth -- Without Capital Spending -- With Little New Hiring Still Strong Fundamentals in Arizona Positive Business and Social Climates But Fundamentals at Risk! Don’t Be California!!!

37. AZ Economic Outlook AZ Long Term Trends More Integrated Economically Not just the “Five C’s” anymore More Integrated (Dependent) on US / Global Economy Same Core Challenges as US Labor Force Issues National and Global Demand Constraints

38. Economic Outlook “Where are we going?” US Economy in the Global Economy Arizona Economy in the US Economy Pertinent Observations

39. Global Economic Challenges US Economic Challenges The Real “Prime Directive” Economic Drivers US Economic Solutions

40. Pertinent Observations Global Economic Challenges Probability of European Decline European Employment Crisis Employment is 3.5 million lower than 2008 Current trend 4.5 mm more lost next few years 30+ % of working age population not employed *

41. Pertinent Observations Global Economic Challenges Probability of European Decline European Employment Crisis Employment is 3.5 million lower than 2008 Current trend 4.5 mm more lost next few years 30+ % of working age population not employed Don’t Be Europe Either!!!

42. Pertinent Observations Global Economic Challenges Asian Challenges Chinese Totalitarianism Lightening Transition to Modern Economy Income Disparity – Urban / Rural Divergence Indian Democracy Urbanization and Infrastructure Needs “The British Raj”

43. Pertinent Observations US Economic Challenges America’s Challenges Demographic Trends Loss of Mid-skill Employment / Labor Force Skills Gap Massive and Growing Federal Fiscal Crisis Failed Federal Tax Policies Risks to “American Competitiveness”

44. US Economic Challenges Troubling Trends Slower Income Growth Longer Periods of Unemployment Smaller Proportion of “Employed” to “Not Employed” Pertinent Observations

45. The Real “Prime Directive” Increasing Household Incomes Investment Increases Productivity Higher Productivity Increases Incomes Rising Incomes and Standards of Living Rising Incomes Drive Consumer Spending Consumer Spending Drives Economic Growth Pertinent Observations

46. The Real “Prime Directive” Increasing “The Pie” Customers Drive Consumer Spending Consumer Spending Drives Job Creation Job Creation Drives Economic Growth & Investment Investment Increases Productivity Pertinent Observations

47. Economic Drivers Business Investment Greater Human Productivity Higher Disposable Incomes and Consumer Spending Population Growth *

48. Pertinent Observations Economic Drivers Business Investment Greater Human Productivity = ENERGY!! Higher Disposable Incomes and Consumer Spending Population Growth

49. Pertinent Observations AZ Economic Drivers Job Creation Lures Population Growth Population Growth Drives Production and Demand Demand Drives Further Expansion and Employment Employment Lures Population Growth

50. Pertinent Observations US Economic Solutions America’s Strengths Strong, Agile Markets Tradition of Productivity AND Economic Focus Fully Developed Infrastructure (But Aging) Finest Higher Education System (Largely Misguided) Highest Caliber “Rule of Law” (May Be At Risk) *

51. Pertinent Observations US Economic Solutions 1.Rediscover Free Enterprise 2.Reinvigorate American Competitiveness 3.Reinvigorate Individual Responsibility 4.Drastically Reduce Federal Role

52. Closing Thoughts American “Exceptionalism” Existentially Committed Immigrants Economic Obsession – de Tocqueville American Economic Engine Transformed the World 3 Times Continues to Lead Worldwide Innovation Drives the Global Economy Pertinent Observations *

53. Closing Thoughts American “Exceptionalism” Existentially Committed Immigrants Economic Obsession – de Tocqueville Pertinent Observations * “America is Great because America is Good!”

54. Closing Thoughts American “Exceptionalism” Existentially Committed Immigrants Economic Obsession – de Tocqueville American Economic Engine Transformed the World 3 Times Continues to Lead Worldwide Innovation Drives the Global Economy Pertinent Observations

55. Closing Thoughts Arizona’s Prospects American “Exceptionalism” Squared Open, Upwardly Mobile Social Structure Strengthening Economic Foundation Tradition of Leadership And, “It Ain’t Broke” So “Stop Trying to Fix It!” Pertinent Observations

56. Economic Outlook Alan E. Maguire Questions?

57. Economic Outlook Alan E. Maguire Questions? February 21, 2013