Wells Fargo Economics

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Wells Fargo Economics Eugenio J. Alemán
Ph.D. Senior Economist Midwest Relocation
Council June 3rd, 2008 Schaumburg, IL
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Economic Growth
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Imbalances remain and inflation could accelerate
further
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Unemployment and Inflation A very difficult
equilibrium for the Fed!
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The Labor Market Unemployment is currently at
5.0, well within the range of what is called
full employment (4-6)
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Inflation is showing its ugly face once again
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The state of the economy
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The Consumer
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The Financial Market
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The Credit Crisis
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• According to the Federal Reserve, the
  securitization process generated a huge
  multiplier effect
• 20 billion would generate 800 billion in loans
  before August of last year
• Today, securitization is almost negligible
• This creates a serious issue for mortgage
  liquidity
• But the problem is not constrained to the
  mortgage market

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Summary Conclusions

• The housing market recession continues
• But it is the credit crisis whose effects we are
  feeling
• The U.S. economy is very close to a recession
• Inflation remains a medium and long-term concern
• The Fed is probably done with cutting interest
  rates for now
• The U.S. dollar weakness is not good for
  inflation
• but is good for U.S. exports

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Thanks! Wells Fargo Economics Eugenio J.
Alemán, Senior Economist VP June
2008 http//www.wellsfargo.com/com/research/econom
ics