Economic OUTPUT AND EMPLOYMENT 27 28 29 21 211 212 213 214 215 United States Real GDP $ billions (fourth quarter) $14,996 $14,575 $14,54 $14,942 $15,242 $15,54 $15,942 $16,51 $17,12 % change over the four quarters 1.9% -2.8% -.2% 2.8% 2.% 2.% 2.6% 3.5% 3.8% Nonfarm employment Job count (fourth quarter) 138,246, 135,493,667 129,877,667 13,652, 132,642,667 134,853,667 137,247,667 139,694,848 141,679,46 % change over the four quarters.9% -2.% -4.1%.6% 1.5% 1.7% 1.8% 1.8% 1.4% Average monthly change 11,667-229,361-468, 64,528 165,889 184,25 184,25 184,25 184,25 Real GDP $ billions (fourth quarter) $715 $674 $649 $653 $662 $681 $77 $737 $768 % change over the four quarters -.8% -4.4% -3.6%.5% 1.5% 2.8% 3.8% 4.2% 4.2% Nonfarm employment Job count (fourth quarter) 7,94,3 7,533,867 7,141,3 7,197,967 7,292,3 7,462,367 7,666,33 7,857,378 8,1,449 % change over the four quarters -1.% -5.1% -5.2%.8% 1.3% 2.3% 2.7% 2.5% 1.8% Average monthly change -6,981-33,869-32,714 4,722 7,861 14,172 16,972 15,945 12,6 WHAT THE TABLE SHOWS: s GDP forecast is derived from the national forecast by allocating output to each of the 5 states based on employment shares. So, forecast misses reflect surprises in the aggregate forecast as well as unexpected shifts in a state s GDP share. s economy has been recovering remarkably well considering the severity of its real estate problems. Although the cleanup from the real estate debacle has held the Sunshine State s recovery, the local economy is poised to speed up in 214 and 215. Note: GDP figures are based on quarterly values that are interpolated from annual GDP estimates using quarterly employment changes. Unbolded figures are reported actual values and bold figures represent forecasts. Sources: US Department of Commerce; US Department of Labor. Regional Perspectives: Economic Outlook Commercial Banking 2
Agriculture Mining Utilities Construction Durable manufacturing Nondudrable manufacturing Wholesale trade Retail trade Transportation Information Finance and insurance Real estate Professional and technical services Management of companies Administrative and waste management services Educational services Health care and social assistance Arts, entertainment, and recreation Hotel and food service Other services Government June 2, 214 The Economy s Structure PERCENT OF TOTAL GDP DERIVED FROM SELECTED INDUSTRIES The figure compares the relative importance 18 16 14 12 1 8 6 4 2 US industry mix 's industry mix of selected industries to the state s economy with the national footprint of each industry (state and national figures reflect the value added of each industry as a percent of aggregate state or US nominal GDP, respectively). s economy has a much higher concentration of real estate businesses than the national norm. The home building recession was particularly harsh on s economy, given the outsized footprint of the real estate industry. Source: US Department of Commerce. Updated through 211. Regional Perspectives: Economic Outlook Commercial Banking 3
Bankruptcies RATIO OF BANKRUPTCY FILINGS TO THE 27 Q4 NUMBER The figure illustrates trends in bankruptcy 5 5 filings by businesses and persons relative to the number of filings in 27 Q4, prior to the 4 Business bankruptcy filings Nonbusiness bankruptcy filings 4 recession. Bankruptcy filings surged in the recession, but are coming down quickly. 3 All US bankruptcy filings (shaded area) 3 Indicators of financial stress are a telling coincident indication of the intensity of 2 2 economic stresses. s troubled real estate industry has 1 1 taken a toll on local businesses but pressures are beginning to ease. 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 Source: Administrative Office of the U.S. Courts; Updated through March 214. Regional Perspectives: Economic Outlook Commercial Banking 4
Oil & Gas Activity NUMBER OF DRILLING RIGS ON LAND, INLAND WATERS, AND OFFSHORE 3, 15 The figure illustrates recent trends in the rig count for petroleum drilling operations. Activity in s small oil and gas sector 2,5 2, United States (left scale) (right scale) 12 9 is picking up somewhat. New energy activity is bringing welcome help to the local economy. 1,5 Source: Baker Hughes rig count. Updated through 214 Q1. 1, 6 5 3 1983 1985 1987 1989 1991 1993 1995 1997 1999 21 23 25 27 29 211 213 Regional Perspectives: Economic Outlook Commercial Banking 5
FRB Atlanta Business Survey REAL GDP (% CHANGE 12 MONTHS EARLIER) DIFFUSION INDEXES ( = NO CHANGE) 6 5 4 3 2 1-1 -2-3 -4-5 FRB Atlanta D6 Factor, columns (right) real GDP, line (left) -6 1999 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 4 3 2 1-1 -2-3 -4-5 -6-7 -8 The figure compares an index of business activity produced by the Federal Reserve Bank of Atlanta (referred to as the D6 Factor) with s real GDP growth. The index is an estimate of the trend common to 25 distinct monthly series of economic data for the six states in the Bank s region. The D6 Factor filters out idiosyncratic shocks that disproportionately affect individual states. A value for the index appears to match trend-like growth for the national economy. The FRB Atlanta index stands at a level consistent with moderate growth. The Southeast region of the country is recovering but at a slow pace. Sources: Federal Reserve Bank of Atlanta; US Department of Commerce. Updated through December 213 (surveys) and 214 Q1 (GDP). Note: diffusion indexes represent the percentage of respondents seeing an increase in activity plus one half of the percentage reporting no change in activity. Regional Perspectives: Economic Outlook Commercial Banking 6
Initial Jobless Claims RATIO OF INITIAL CLAIMS FOR UNEMPLOYMENT INSURANCE TO THE 27 Q4 LEVEL The figure tracks layoffs in and the 2.25 2.25 national level of claims. Weekly layoffs, both the state and national 2. US (solid area) 2. tallies, are illustrated in the figure as a ratio to the level of layoffs in the fourth quarter of 27, prior to the recession. 1.75 1.75 Layoffs are for the most part back to normal levels. 1.5.75 27 28 29 21 211 212 213 214 1.5.75 Weekly jobless claims figures are reported on a timely basis and offer a comprehensive view of the state s labor market conditions. They are a credible leading indicator of business activity. The low level of applications for unemployment benefits implies that the recovery is getting traction. Source: US Department of Labor. Updated through May 17, 214 (state) and May 24, 214 (US). Regional Perspectives: Economic Outlook Commercial Banking 7
Economic Growth REAL GDP GROWTH (PERCENT CHANGE FROM FOUR QUARTERS EARLIER) 9 8 7 6 5 4 3 2 1-1 -2-3 -4-5 -6 US 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15 9 8 7 6 5 4 3 2 1-1 -2-3 -4-5 -6 Real GDP growth in (the line in the figure) is superimposed on top of US real GDP growth (bars in the figure). s real GDP growth is surpassing the national recovery pace. s home building business collapsed under the weight of highly inflated real estate markets and the credit market freeze but the drag from the housing recession appears to be gradually waning. Source: US Department of Commerce. Updated through 212 (state) and 214 Q1 (US). Quarterly estimates for states after 212 are interpolated from employment figures (through April 214), based on the historical correlation of state and national employment changes. Regional Perspectives: Economic Outlook Commercial Banking 8
Economic Output REAL GDP LEVEL (RATIO TO 2 Q4) The figure illustrates the evolution of real 1.4 1.4 GDP of the state and the overall US economy since the fourth quarter of 2, 1.35 1.3 1.35 1.3 the peak of the previous business cycle that is, at any point in time the lines trace the ratio of real GDP to its level in 2 Q4. 1.2 1.2 s real GDP has recovered all of the ground lost during the recession. s economy appears to be getting back on its feet. US Source: US Department of Commerce. Updated through 212 (state) and 214 Q1 (US). Quarterly estimates for states after 212 are interpolated from employment figures (through April 214), based on the historical correlation of state and national employment changes. 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 Regional Perspectives: Economic Outlook Commercial Banking 9
Employment Growth NONFARM PAYROLL EMPLOYMENT (PERCENT CHANGE FROM 12 MONTHS EARLIER) s job growth relative to the national 6 6 picture. 5 4 3 5 4 3 Employment has been accelerating over the past year or two, increasing more rapidly than the national trends. 2 1-1 -2-3 US 2 1-1 -2-3 Employment is forecast to continue to expand in 214. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US). -4-4 -5-5 -6-6 -7-7 -8 9 91 92 93 94 95 96 97 98 99 1 2 3 4 5 6 7 8 9 1 11 12 13 14 15-8 Regional Perspectives: Economic Outlook Commercial Banking 1
Employment NONFARM PAYROLL EMPLOYMENT (RATIO TO THE 2 Q4 LEVEL) The figure illustrates the evolution of employment in the state compared with the nation since 2 Q4, the peak of the previous business cycle. The lines trace out the ratio of employment at the time to employment in 2 Q4. Employment expanded about 13 percent over the course of the past expansion, far more than the national average, but the recession reversed all of the 2s gain. has recovered or replaced almost two-thirds of the jobs lost during the recession. US 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 The job market is forecast to continue to expand in the coming year. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US). Regional Perspectives: Economic Outlook Commercial Banking 11
Intrastate Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2 Q4 LEVEL) 1.55 1.5 1.45 1.4 1.35 1.3 1.2 US forecast US Palm Coast Cape Coral Naples Port St. Lucie Daytona Panama City Orlando Punta Gorda Sebastian-Vero Beach Lakeland Fort Lauderdale Fort Walton Beach Ocala Pensacola Gainesville Jacksonville West Palm Beach Miami-Ft. Lauderdale Palm Bay Miami-Miami Beach-Kendall Tampa forecast.9 21 23 25 27 29 211 213 215 1.55 1.5 1.45 1.4 1.35 1.3 1.2.9 Job trends in selected communities across. Employment is expanding in most communities. The real estate problems are quickly passing. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US). Regional Perspectives: Economic Outlook Commercial Banking 12
Miami Area Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2 Q4) The figure focuses on trends in the Miami 1.4 1.35 US forecast US Port St. Lucie 1.4 1.35 area. Employment is expanding in southern. 1.3 1.2 Fort Lauderdale West Palm Beach Miami-Ft. Lauderdale Miami-Miami Beach- Kendall forecast 1.3 1.2 The Miami area appears to be working through most of the excesses from the real estate boom of the last decade. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US). 21 23 25 27 29 211 213 215 Regional Perspectives: Economic Outlook Commercial Banking 13
Orlando Area Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2 Q4) The figure focuses on trends in the Orlando 1.3 1.2 US forecast US Daytona Orlando Lakeland Ocala Gainesville forecast 1.3 1.2 area. Employment is expanding in most communities in central. Economic conditions are improving in the Orlando area. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US)..9 21 23 25 27 29 211 213 215.9 Regional Perspectives: Economic Outlook Commercial Banking 14
Tampa Bay Area Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2 Q4) 1.5 1.45 1.4 1.35 1.3 US forecast US Naples Tampa Cape Coral forecast 1.2.9 21 23 25 27 29 211 213 215 1.5 1.45 1.4 1.35 1.3 1.2.9 The figure focuses on trends in the Tampa Bay area. Employment is expanding on s west coast. Southwest saw mixed economic conditions, with the booming Tampa area contrasting with a struggling Naples. The Tampa area economy appears to be working through most of the excesses from the real estate boom of the last decade. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US). Regional Perspectives: Economic Outlook Commercial Banking 15
Panhandle Area Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2 Q4) The figure focuses on trends in the 1.2 US forecast US Panama City 1.2 Panhandle Employment is generally expanding in the Pahhandle. Fort Walton Beach Pensacola forecast Economic conditions are forecast to continue to improve across the state. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US)..9 21 23 25 27 29 211 213 215.9 Regional Perspectives: Economic Outlook Commercial Banking 16
Jacksonville Area Employment NONFARM PAYROLL EMPLOYMENT IN SELECTED COMMUNITIES (RATIO TO 2 Q4) The figure focuses on trends in the US forecast US Jacksonville Jacksonville area, where the economy appears to be on a steady recovery course. The Jacksonville area is well on the road to forecast recovery. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US)..9 21 23 25 27 29 211 213 215.9 Regional Perspectives: Economic Outlook Commercial Banking 17
Unemployment UNEMPLOYMENT (PERCENT OF THE LABOR FORCE) 13 12 11 1 9 8 US (shaded) 7 6 5 4 3 2 1 1976 1979 1982 1985 1988 1991 1994 1997 2 23 26 29 212 215 218 13 12 11 1 9 8 7 6 5 4 3 2 1 Unemployment rate trends in, compared with the national average. The Sunshine State s unemployment rate has been coming down steadily and has dropped to almost 6 percent most recently. The unemployment rate is the single best indicator of the relative economic performance of a region. appears to be turning the corner for the better, notwithstanding the damages caused by the real estate debacle, judging by the recent turnaround in the unemployment rate. Source: US Department of Labor. Updated through April 214 (state) and April 214 (US). Regional Perspectives: Economic Outlook Commercial Banking 18
Relative House Prices RATIO OF THE STATE S HOUSE PRICES TO THE NATIONAL AVERAGE (1995 Q2 = 1.) 1.4 1.3 1.2.9 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 1.4 1.3 1.2.9 The figure tracks the relative price of houses in the state versus the nation that is, it reflects the ratio of the state price index to the national house price index, with that ratio set to unity in the summer of 1995. A drop in the line means that house prices in the state lag the national trend. States that did not suffer from speculative conditions saw a decline in the relative price of houses in this last decade. In the last decade, house prices rose 5 percent more in than the national average. Inflated values have vanished and houses are now more affordable than ever. As a result, prices have rebounded moderately. House prices would be expected to rise gradually in coming years from current low levels. Source: FHFA. Updated through 213 Q4. Regional Perspectives: Economic Outlook Commercial Banking 19
Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 23 AVERAGE) 27 Peak 211 Bottom Now (213 Q4) US 1.3 1.3 1.17 1.66.89 Crestview-Fort Walton Beach 1.82 1.24 Pensacola-Ferry Pass-Brent 1.56 1.11 Panama City-Lynn Haven 1.72 1.7 1.13 Tallahassee 1.54 1.9 1.13 Gainesville 1.63 1.9 1.11 Tampa-St. Petersburg-Clearwater 1.69.97 1.11 Jacksonville 1.6 Naples-Marco Island 1.91.88 1.7 Orlando-Kissimmee 1.79.93 1.7 Lakeland-Winter Haven 1.74.94 1.4 Bradenton-Sarasota-Venice 1.76.87 1.4 Cape Coral-Fort Meyers 1.83.81 1.1 Ocala 1.75.92 Punta Gorda 1.71.83 Port St. Lucie-Fort Pierce 1.75.8 The table offers a snapshot of real estate trends across the state at selected points in time, including the 27 peak in house prices, the 211 bottom, and the current market, compared with real estate values in 23. National house prices are 15 percent above 23 levels and average prices in are only 7 percent higher. Prices in some markets are still well below 23 levels. KEY MESSAGE: Speculative conditions have been corrected across the state. Sources: FHFA; Standard & Poor s. Updated through 213 Q4. Regional Perspectives: Economic Outlook Commercial Banking 2
Real Estate Markets HOUSE PRICES IN SELECTED COMMUNITIES (RATIO TO THE 1995 Q2 LEVEL) 3.75 3.5 3.25 3. 2.75 2.5 2.25 2. 1.75 1.5 US Lakeland Port St. Lucie Jacksonville Fort Meyers Fort Walton Gainesville Ft. Lauderdale Miami Naples-Marco Island Ocala Orlando Panama City Pensacola Punta Gorda Sarasota Talahasee Tampa West Palm Beach Miami (Case-Shiller) Tampa (Case-Shiller).75 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 3.75 3.5 3.25 3. 2.75 2.5 2.25 2. 1.75 1.5.75 The figure tracks the cumulative percentage deviation in house prices since 1995 in selected local markets and compares those with the national average. House prices are turning up slightly. KEY MESSAGE: Real estate values likely will rise gradually in coming years, in line with income trends. Sources: FHFA; Standard & Poor s. Updated through 213 Q4. Regional Perspectives: Economic Outlook Commercial Banking 21
New Home Building HOUSING STARTS (RATIO TO THE JULY 199 LEVEL) The figure compares new home building in 2.25 2. 2.25 2. with the national average. Trends are shown as a ratio to the level of activity in July 199. 1.75 1.5 US 1.75 1.5 New home building is expanding gradually in, paralleling the national trend. s housing market is likely to continue to recover gradually..75.75 Source: Census Department. Updated through March 214 (state) and April 214 (US)..5.5.25.25. 2 23 26 29 212 215. Regional Perspectives: Economic Outlook Commercial Banking 22
Office Markets PERCENT OF OFFICE SPACE THAT IS VACANT Office vacancy rates in, compared 35 3 25 2 Fort Lauderdale Jacksonville Miami West Palm Beach Tampa Orlando 35 3 25 2 with the national office vacancy rate. Vacancy rates in some of s commercial property markets are falling. Commercial real estate markets are forecast to continue to improve this year and the next. 15 15 Source: CB Richard Ellis (formerly CB Commercial Property Information Systems), Office Vacancy Index of the United States. Updated through 214 Q1. 1 1 5 All metropolitan areas (shaded area) 5 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 Regional Perspectives: Economic Outlook Commercial Banking 23
CONTACT: James E. Glassman Telephone: (212) 27-778 jglassman@jpmorgan.com 214 JPMorgan Chase & Co. All rights reserved. Chase, JPMorgan and JPMorgan Chase are marketing names for certain businesses of JPMorgan Chase & Co. and its subsidiaries worldwide (collectively, JPMC ). The material contained herein is intended as a general market commentary. To the extent indices have been used in this commentary, please note that it is not possible to invest directly in an index. Opinions expressed herein are those of James Glassman and may differ from those of other J.P. Morgan employees and affiliates. This information in no way constitutes J.P. Morgan research and should not be treated as such. Further, the views expressed herein may differ from that contained in J.P. Morgan research reports. The above summary/prices/quotes/statistics have been obtained from sources deemed to be reliable, but we do not guarantee their accuracy or completeness.