Economic Indicators

Both weekly and monthly leading indicators remain in uptrends which did restart in the
latter part of Aug. The linearity between most of these series and eventual economic
performance has declined primarily reflecting the increased volatility of sensitive materials
prices. In sum, though, a re-acceleration of both US and global economic recovery is
indicated.

Weekly and monthly coincident indicators have also turned up since Oct. following an
extended flat period running back to Jul.

The slowdown of economic growth experienced over the late spring and summer of this
year lead initially to a flattening of total US civilian employment followed by weakness
in both Oct. and Nov. As a consequence, the unemployment rate has moved back up to the
9.8% level. The combination of nominal real wage growth and a weaker employment
picture over the past six months has substantially undercut the visibility for continued
economic recovery in the US. The recent decision by the Fed to accelerate the growth of
monetary liquidity and fresh life to the leading economic indicators are welcome
developments as is the faster growth of retail sales in recent months. However, if business
remains reluctant to hire and continues content simply to reap gains from a lower cost
structure, the odds that the economy will eventually sputter and cease recovering will
inevitably rise significantly as 2011 wears on. Ditto the banks, which are experiencing
a rising trend of earnings from a drop off in loan loss reserving as opposed to profits
gained from an expanding loan book.