Genworth's economist, Nathan Struemph, discusses informative economic updates and forecasts. You get a 360 degree view on economic trends, including a deeper dive into the U.S. housing market and will walk away with the critical information you need to introduce stronger more definitive strategies at your credit union. Recording available at http://www.nafcu.org/genworth.

1. Making Sense of the U.S. Economy
and Housing Market
August 2012
‫‏‬
©2012 Genworth Financial, Inc. All rights reserved.

2. Legal Disclaimer
“The materials presented in this webinar are intended solely for informational and illustrative
purposes to provoke thought and discussion among the participants. Webinar participants
should not rely on any of the information presented but should independently conduct their own
research and analysis before making any business decisions. Genworth makes no
representations or warranties as to the accuracy or suitability of any of the information contained
herein.”
1

3. Contents
Section Page
U.S. Economy 03
Labor Market 08
Housing 12
Hot Topics 23
2

4. U.S. Economy
Drought Conditions Will Pressure Food Prices
Source: NDMC; NOAA
3

5. Recovery Has Been Weak
Recovery From Trough: Real GDP Perspective On The Employment Picture
1.20 100%
Percentage Of Peak Employment Prior To Recession
99%
1.15
Index, End of Recession =100
98%
1.10
97%
96%
1.05
95%
1.00
94%
0.95 93%
10
12
11
0
1
2
3
4
5
6
7
8
9
-6
-5
-4
-3
-2
-1
12
18
21
24
27
30
33
36
42
45
48
51
57
60
15
39
54
3
6
9
0
Quarters from Trough
1970 1975 1982 1991 2001 2009 Months Since Peak Employment
1957 1960 1970 1974 1980
1981 1990 2001 2008
Balance Sheet Recession = Weak Recovery
Employment Following Path Of Prior “Jobless” Recoveries
Source: BEA, BLS via IHS Global Insights
4

6. Drivers of Growth
Consumption & Business Investment Lead the Recovery
7
GDP Growth During Recovery
6 60% 60%
50% 50%
5 Contribution to Growth Share of Economy 2Q2012
Inventories 40% 40%
4 Consumption 30% 30%
Contribution to Growth (PP)
Equip & Software 20% 20%
3
State & Loval Govt 10% 10%
2 Federal Govt
0% 0%
1 Net Trade
-10% -10%
Residential
-20% -20%
0
NonRes Struct
-30% -30%
Inventories
Government
Non-Residential Struct
Residential Struct
Durable Goods
Services & Non-Durables
Biz Equip & Software
Trade
-1 Change in Real GDP
Change in Final Sales
-2
-3
3Q2009
4Q2009
1Q2010
2Q2010
3Q2010
4Q2010
1Q2012
2Q2012
1Q2011
2Q2011
3Q2011
4Q2011
Consumption And Business Investment Have Driven Growth
Both Will Be Challenges in 2H2012
Source: BEA via IHS Global Insight
5

7. Orders for Durable Goods Slow
Diffusion Indices Of Business Conditions Uncertainty Saps Business Investment
70 100 15%
90 10%
Diffusion Index (50= No Net Change in Conditions)
60
(Positive Response + .5*No Change)
80 5%
Quarterly Change
Diffusion Index
70 0%
50
60 -5%
40 50 -10%
40 -15%
30
30 -20%
20 20 -25%
Jan-90
Jan-92
Jan-94
Jan-96
Jan-98
Jan-00
Jan-02
Jan-04
Jan-06
Jan-08
Jan-10
Jan-12
May-05
May-06
May-07
May-08
May-09
May-10
May-12
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-12
May-11
Jan-11
Sep-05
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Diffusion Index of Current Diffusion Index of Expectations
ISM Production (L) ISM New Orders (L)
New Orders Durable Goods (R) New Orders Non-Defense exAir Capital (R)
With Uncertainty in the U.S. and Chaos in Europe
Businesses are Understandably Hesitant to Make Investments
Source: Conference Board, ISM, BEA via IHS Global Insight
6

8. Consumer Pressured
Household Asset Appreciation Important to Consumption Retail Sales vs Consumer Confidence
8% 3 6% 120
7% 3.5
4% 100
Ratio to Household Assets-to-GDP
Percentage Change 3m/3m
6% 4
2% 80
5% 4.5
Savings Rate
Index
4% 5 0% 60
3% 5.5
-2% 40
2% 6
-4% 20
1% 6.5
Savings Rate (L) Assets-to-GDP (R)
-6% 0
0% 7
Jan-07
Jan-08
Jan-09
Jan-10
Jan-12
Jan-11
Apr-07
Jul-07
Oct-07
Apr-08
Jul-08
Oct-08
Apr-09
Jul-09
Oct-09
Apr-10
Jul-10
Oct-10
Apr-12
Jul-12
Apr-11
Oct-11
Jul-11
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Retail Sales ExGas - VPQ Consumer Confidence - Expectations
Lack of Confidence Also Saps Consumption
Drop in Gas Prices Will Help Mitigate But Not Overcome Weak Jobs Growth
Source: Federal Reserve, Census, Conference Board via IHS Global Insight
7

9. Labor Market Comes Back to Earth
Payrolls & Unemployment
500 12% Initial Claims
700
Four Week Moving Average
250 10% 650
600
0 8% 550
500
-250 6% 450
400
-500 4% 350
300
-750 2% 250
200
2000
2001
2003
2004
2005
2006
2007
2008
2009
2010
2002
2012
2011
-1000 0%
May-07
Jan-06
May-06
May-08
May-09
May-10
May-12
Jan-07
Jan-08
Jan-09
Jan-10
Jan-12
May-11
Jan-11
Sep-06
Sep-07
Sep-08
Sep-09
Sep-10
Sep-11
Change in Payrolls, M (L) Unemployment Rate, (R)
Weakness No Longer Solely Attributable to Weather
Source: BLS via IHS Global Insight
8

10. Leading Indicators Of Labor Market Conditions
Job Openings Still Trending Up Survey Employment Indices Moderating
But Hiring Remains Weak 80 30
5.0%
Openings Hires Seperations Quits
4.5% 70 20
Diffusion Index (50 = No Change)
Net Percentage of Firms
4.0%
60 10
3.5%
50 0
3.0%
2.5% 40 -10
2.0%
30 -20
1.5%
20 -30
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-12
Jul-11
Jan-11
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-12
1.0%
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-12
Jan-11
ISM Manufacturing (L) ISM Non-Manufacturing (L)
Consumer Confidence Jobs (L) NFIB - Increase Employment (R)
While Job Openings Still Support Employment Growth,
Other Survey Measures Suggest Strong Growth Will Be Hard To Achieve
Source: BLS, Institute for Supply Management via IHS Global Insight
9

11. Labor Market Depends On GDP Growth
Long-term Unemployment Divergence Between Growth & Employment is Abnormal
8.5% -3.0%
50 50
7.5% -2.5%
45 45
6.5% GDP (L) Unemployment (R) -2.0%
40 40 5.5% -1.5%
YoY Percentage Change
4.5% -1.0%
35 Mean Unemployment Duration 35
3.5% -0.5%
% of Unemployed
% Unemployed 27 Weeks+
YoY Change
30 30 2.5% 0.0%
Weeks
25 25 1.5% 0.5%
0.5% 1.0%
20 20
-0.5% 1.5%
15 15 -1.5% 2.0%
-2.5% 2.5%
10 10
-3.5% 3.0%
5 5 -4.5% 3.5%
0 0 -5.5% 4.0%
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
Long-Term Unemployment Damages Workers’ Skills and Potential GDP
Weak Outlook for GDP Leads to Slow Growth in Jobs
Source: BLS via IHS Global Insight
10

12. Bifurcated Labor Market
Unemployed per Vacancy
8
7 Where are the Jobs? *
6 Total Change -77 85 1,815 -499 -378 -1,391 -1,765 -2,010 106 69 -84 -391 -128
2,500
5
4 2,000
Change During Recession Change During Recovery
3
Change In Employed (In Thousands)
2 1,500
1
0 1,000
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jan-11
Jul-11
Jan-12
Jul-09
Jan-10
Jul-10
500
June 2012 Breakdown 0
Information
Financial
Manufacturing
Federal Govt
Construction
Professional / Business Services
Other Services
Leisure & Hospitality
Local Govt
Mining & Logging
State Govt
Trade, Transportation, & Utilities
Education & Health
Trade -500
Construction -1,000
Manufacturing -1,500
Prof. & Biz Services
-2,000
Education & Health
-2,500
Leisure & Hospitality *Data Through July
0 5 10 15
Unemployed per Job Opening
Structural Unemployment Will Remain High If the Current Job Creation
Pattern Persists
Source: BLS via IHS Global Insight
11

13. Average FICO Score of Originations
760
740
720
Housing 700
680
660
640
2002
2003
2004
2005
2006
2007
2008
2009
2010
2012
2011
Total Purchase
Credit Conditions Continue to Tighten
Source: CoreLogic, Fair Issac
12