1. Economic Outlook GFOA AZ Alan E. Maguire February 20, 2013

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 US Financial Crisis Has Been Contained Some Nagging Issues to Clean-up – Fannie, Freddie, FHA So, ………….

7. US Economic Outlook The Current Context Stagnant 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 - 2012 Recessions * GDP

9. US Economic Outlook US GDP Quarterly Change 1970 - 2012 Recoveries * GDP

10. US Economic Outlook US GDP Quarterly Change 1970 - 2012 * GDP

11. US Economic Outlook US GDP Quarterly Change 2009 - 2012 GDP *

12. US Economic Outlook US GDP Quarterly Change 2009 - 2012 GDP *

13. US Economic Outlook US GDP Quarterly Change 2009 - 2012 GDP *

14. US Economic Outlook US Employment % Change from Prior Year 1970 - 2011 Recoveries * Employment

15. US Economic Outlook US Employment % Change from Prior Year 1990 - 2010 Total Employment Employment Growth

16. US Economic Outlook The Outlook – Near Term Low, Slow, but Steady Growth: 1.5% to 2.5% Substantial Deterrents to Growth & Investment International Issues – Especially Europe Collapsing EU Fiscal Systems Weak Demand – Scared Consumers & CEOs Continuing Uncertainty! Expectations of Rising US Taxes- “Fiscal Cliff”

17. US Economic Outlook

20. Longer Term Trends Worldwide Demand Issues Europe’s Issues – Currently In Recession! Japan’s Issues High Debt and Pending Liquidation Now – Easy Money Asia’s Cultural / Governmental Challenges Stupid Government Risk!!

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

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

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

24. AZ Economic Outlook AZ Employment 2001 – 2012 (000’s) All Industries *

25. AZ Economic Outlook AZ Employment 2001 – 2012 (000’s) All Industries Manufacturing Construction *

26. AZ Economic Outlook AZ Employment 2001 – 2012 (000’s) All Industries Manufacturing Construction *

27. AZ Economic Outlook AZ Employment 2001 – 2012 (000’s) All Industries *

28. AZ Economic Outlook AZ Employment 2001 – 2012 (000’s) *

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31. 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

32. AZ Economic Outlook The Current AZ Context Returning to Government Fiscal Balance Above National Average Job Growth Rates Benefit of Building from a “Low Base” Beware of the “Illusion of Recovery”

33. AZ Economic Outlook The Good AZ News Top 10 in Job Growth – From 49 th ! 100,000 + 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

34. The Good AZ News Blue Chip Economic Forecast Calendar 2012 over 2011 % Growth PIRetailEmployPopHousing 5.8 6.3 2.41.3 26.1 Calendar 2013 over 2012 % Growth PIRetailEmployPopHousing 6.4 5.6 2.81.4 30.3 AZ Economic Outlook

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

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 We Are Not 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 - Skills Issues 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 4 years 31.5 % of working age population not employed

41. Pertinent Observations Global Economic Challenges Asian Challenges Chinese Totalitarianism Lightening Transition to Modern Economy Intellectual Intergity Indian Democracy Urbanization and Infrastructure Needs “The British Raj”

42. 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 “American Competitiveness”

43. US Economic Challenges Troubling Trends Slower Income Growth Longer Periods of Unemployment Smaller Proportion of “Employed” to “Not Employed” Growing Culture of “Entitlement” -- Dependency Pertinent Observations

44. 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

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 Energy!

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 Energy!

48. Pertinent Observations Economic Drivers Job Creation Lures Population Growth Population Growth Drives Production and Demand Demand Drives Further Expansion and Employment Employment Lures Population Growth Arizona’s Story

49. 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) *

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

51. Pertinent Observations US Economic Solutions 1.Rediscover Free Enterprise 2.Reinvigorate American Competitiveness 3.Reinvigorate Individual Responsibility 4.Drastically Reduce Federal Spending Energy! Natural Gas

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 Endangered!!

53. 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

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