John Silvia – Chief EconomistSeptember 21, 2004

Presentation to:

Global Issues

ForumEmployment Growth, Offshore

Outsourcing and Secular Change in the Charlotte Labor Market.

Our Challenge is Our Opportunity.

U.S. Outlook

200420032002200120001999

8%

6%

4%

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-2%

8%

6%

4%

2%

0%

-2%Quarter/Quarter Percent Change, Seasonally Adusted Annual Rate

SUSTAINED GROWTH: ABOVE TREND BIASReal GDP

2nd Quarter 2004@ 2.8%

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FEWER CLAIMS SIGNAL RECOVERYInitial Jobless Claims, In Thousands

Blue Line = 4-Week Moving Average @ 338.00

September 11

Green Line = Weekly Figure @ 333.00

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MANUFACTURING RECOVERYISM COMPOSITE INDEX

August @ 59.0Diffusion Index

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SERVICE SECTOR GAINS CONTINUEISM NON-MANUFACTURING INDEXBUSINESS ACTIVITY INDEX

August@ 58.2

Seasonally Adjusted

Consumer Fundamentals:• Income

• Sentiment

• Credit

• Outlook – Better

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POSITIVE INCOME & SPENDING GROWTHYear to Year Percent Change, 12 Month Moving Average

Real Spending (Green Line) @ 3.8%Real, Disposable Income (Blue Line) @ 3.6%

July

Investment Spending:

• Orders

• Capacity Utilization

• Financial Depth

• Outlook - Improving

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STRENGTH IN EQUIPMENT & SOFTWARE SPENDINGSeasonally Adusted Annual Rate

2nd Quarter 2004@ 13.7%

Housing:• Household Income

• Employment

• Credit

• Outlook - Positive

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1.6

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12%

11%

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9%

8%

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SINGLE FAMILY HOUSING STARTSSeasonally Adjusted Annual Rate - in Millions

Mortgage Rate @ 6.06%

(Right Scale)

(Left Scale)

Green Line

Single-Family Starts @ 1.65Blue Line

July

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Shaded Areas Denote Recession Periods

CHARLOTTE MSA HOUSING PERMITSSeasonally Adjusted Annual Rate

Single-Family @ 18,411-Units, up 6.5% -- Blue Line

Multi-Family @ 2,805-Unit Pace, down 25.7% -- Green Line

June 2004

Inflation:• Commodity Prices

• Dollar

• Energy

• Productivity

• Outlook - Creeping Up

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-4%

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INFLATION: SERVICES VS "CORE" COMMODITIESYear to Year Percent Change

August@ 3.0%Line is Services

Bars are Commodities, ex. Food & Energy @ - 1.1%

Public Policy:• Monetary Policy

• Fiscal Policy

• Regulation

• Trade

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ACCOMODATIVE FED POLICY CONTINUESREAL FEDERAL FUNDS RATE VS. M2 MONEY GROWTH

Green Line = Real Fed Funds Rate*,

Blue Line = M2 Growth, Yr/Yr % Change, August @ 3.1%

* Fed Funds Rate minus "Core" Consumer Price Index

August @ - 0.3%

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FEDERAL BUDGET IMBALANCESpending & Revenue As Percent of GDP

August '04

15.7%

SPENDING

REVENUE

19.2%

Latest 12 months:

Spending $ 2,275 TrillionRevenue $ 1,864 Trillion

(Blue Line)

(Green Line)

Change in the

Charlotte Labor Market

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0Charlotte MSA Includes Mecklenburg, Cabarrus, York, Union, Gaston & Anson Counties

CHARLOTTE & RICHMOND MSA POPULATION GROWTHIn Thousands

Blue Bars = Charlotte MSAGreen Bars = Richmond MSA

Population Growth10-Year Average

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

Georgia Virginia North Carolina Michigan

Comparative EmploymentPercent of Total Employment, 2003

U.S. North Carolina Charlotte

Construction 5.2 5.6 6.1

Manufacturing 11.2 15.9 12.9

Trade 15.8 15.7 16.5

Finance 6.1 5.1 8.4

Leisure 9.3 8.8 8.6

Government 16.6 17.0 12.7

Education & Health 12.8 11.3 8.3

Prof. & Business Services

12.3 11.1 14.4

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4%

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TRADITIONAL INDUSTRIES SHARE OF N.C. EMPLOYMENTTraditional Industries: Agriculture, Tobacco, Furniture, Textiles & Apparel

Charlotte EmploymentPercent of Total Employment, 1983

Manufacturing30%

Services16%

Retail Trade16%

Transportation & Public Utilities

9%

Wholesale Trade7%

Construction5%

Finance, Insurance, & Real Estate

6%

Government11%

Services23%

Manufacturing13%

Government13%

Leisure & Hospitality8%

Construction6%

Education &Health Services

7%

Finance, Insurance,& Real Estate

8%

Wholesale & Retail Trade

16%

Transportation& Utilities

4%

Charlotte EmploymentPercent of Total Employment, 2003

(+)

• Major Financial Center

• Growing headquarters center.

• Above average industrial diversity.

• Well-educated workforce.

Charlotte

Secular Changes

In the Charlotte

Labor Market

GastonLincolnMecklenbergUnion

5%

4%

3%

2%

1%

0%

CHARLOTTE MSA POPULATION: SUBURBANIZATIONPercent Change

CabarrusYork, SC Rowan

Blue Bar = Percent Change in 2003Green Bar = Average Annual Growth, 1997-2003

OUTSOURCINGMacro Story

• Global Allocation of Resources

Net vs. Gross Job Gains/Losses

• EfficiencyProfits, Disposable Income

• PricesGoods, Services

• Shareholder ValueObjectives of Management?

OUTSOURCINGMicro Story

• Workers, SuppliesJob Creation/Destruction

• IndustriesManufacturing, 1979

• CommunitiesTrade Adjustment

OUTSOURCINGCost of Inflexibility

• Work Follows SalesEmigration

• Long Term ChangeEducation

• ProductivityDominate Job Creation Trends

Charlotte(-)

• Declining Textiles

• Airlines

• Professional Schools/Tech

• High Taxes

• Unfinished Highway

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