1. The Southeastern States: Recent Performance and Prospects for Recovery Phil Hopkins Principal, US Regional Services 610-490-2657 philip.hopkins@globalinsight.com

2. 2 Macro Effects on Regions & States Investment-Led Recession – Mfg. Decline Started in the Midwest, Spread to the Coasts High Tech Collapse Hit High-Growth States Hard World Economy is Slow – No Help from Abroad Jobless Recovery State Budgets in Deficit - $70 to $90 Billion – partially offset Federal Stimulus  43 States With Budget Deficits

3. 3 Macro Effects on Regions & States State Tax Revenues Still Stagnant Stock Market Crash – Wealth Effects Hit High-Growth States Hard – CA, VA, FL, CO, MA, IL, NV, NY Increase in Defense Spending Benefits Sun-Belt States – MS, GA, CA, TX, VA Excess Capacity Remains

4. 4 Mfg. % of Total Employ. ( SIC, 2002 )

5. 5 Historic Economic Trends

6. 6 Why Did the SE States Grow? Shift-Share: Decompose regional growth into 3 Effects:  National Growth; Growth in US Economy  Industry Mix - % Shares of high-growth and slow-growth sectors as defined at the US level  Competitive Effects: individual sectors in region grow faster than same sectors at US Level Results SE Region: 1990 to 2002 Employment Change  72% of Employment Growth 1990 to 2002 due to Growth in US economy  -5.8% due to Industry Mix (too many slow growth industries  33.2% due to Competitive Effect (SE sectors grew faster than same sectors as US level

7. 7 Personal Income Growth

8. 8 Per Capita Personal Income

9. 9 Real Wage Per Worker

10. 10 Manufacturing Employment

11. 11 Growth in Real GSP/GDP per Worker

12. 12 Growth in Housing Starts

13. 13 Services-Producing & Construction Employment Changes

14. 14 Employment Cycles- FL, GA, and US

15. 15 Recent Economic Performance

16. 16 % Change in Goods Providing Employment March 01 – February 03

17. 17 % Change in Service Providing Employment March 01 – February 03

18. 18 % Change in Total Employment – March 01 - February 03

19. 19 Employment Change in SE States March 2001 to February 2003

20. 20 February 2003 Conditions

21. 21 2002 Values for Selected SE MSAs

22. 22 2002 Values for Selected SE MSAs

23. 23 Housing Trends

24. 24 US +6.5% Median Housing Price Growth 1999-2002

25. 25 Median Price of Single Family Home Over Average Household Income – 2002q2

26. 26 Housing Starts/Population 2002

27. 27 % Change Year Ago Housing Starts by State – 2002q4

28. 28 Regional Housing Start Trends

29. 29 South Atlantic Housing Trends

30. 30 Housing Trends – Selected MSAs

31. 31 Housing Trends – Selected MSAs

32. 32 Travel and Tourism

33. 33 Reliance on Travel & Tourism % Employment in Travel & Tourism Industries in 2000

34. 34 Annual Growth in Travel & Tourism Employment 1995-2000

35. 35 Foreign Travel has Fallen % Change in Visitor Arrivals

36. 36 Global Insight’s Spring 2003 Forecast for the Southeastern States

37. 37 Total Employment Growth Rate 2002 to 2007

38. 38 Personal Income Growth Rate 2002 to 2007

39. 39 Housing Start Growth Rate 2002 to 2007

40. 40 Real GSP Growth Rate 2002 to 2007

41. 41 Competitive Advantages Remain and Will Re- Assert Themselves Identifying and Nurturing Industry Clusters Education Matters at All Levels Cost Advantages for All Types of Infrastructure and Utilities Access to Research and Capital a Key Quality of Life Key to Attracting Creative Workers and Companies Needing Them Steps To Economic Recovery

42. 42 When Will Employment and Investment Recover? Public/Private Ventures, Especially in University MSAs Keeping the Consumer Spending State Government Budgets In Balance Use of Selected, Prudent Economic Incentives Steps To Economic Recovery