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Exhibit 8: Growth in US Real GDP Across Post- WWII Expansions In this recovery, GDP has grown at half the average pace of prior expansions. Cumulative Growth (%) 605, -«=<=<=<- O21. Q3 1980 Q2 1958 04 1982 50 011961 ----- Q1 1991 04 1970 04 2001 Q1 1975 Q2 2009 ~ 40 4 30 20 0 4 8 12 16 20 24 28 32 36 40 Quarters After Trough Data as of 03 2016. Source: Investment Strategy Group, Datastream, National Bureau of Economic Research. Exhibit 9: Growth in US Real GDP per Person in the Labor Force Across Post-WWII Expansions But when adjusted for labor force trends, this recovery has actually been in line with the average of past expansions. Cumulative Growth (%) Cl ae 021954 -—-——-031980 Q2 1958 04 1982 50 -| 011961 ----- 011991 04 1970 04 2001 011975 022009 0 4 8 12 16 20 24 28 32 36 40 Quarters After Trough Data through 03 2016. Source: Investment Strategy Group, Datastream, National Bureau of Economic Research. old today, however, is much healthier and more vibrant than a 65-year-old in 1935 and has many more years of active life that can reduce the decline in the growth rate of the working-age population. Furthermore, this cohort is quite productive relative to new entrants into the labor force. Similarly, immigration reform can help offset the decline in working-age population growth. Both factors depend on policy changes, and we do not have any definitive reason to be either optimistic or pessimistic at this time. The second component of the unfavorable demographics perspective has been the drop in labor force participation, particularly among males. Exhibit 10 shows the rapid growth in labor force participation that occurred as the baby boom generation reached working age and as women joined the labor force in growing numbers after 1950. The labor force participation rate, however, peaked in 2000 and declined by 0.3% a year until it troughed at 62.4% in September 2015. Most of the drop was driven by three factors: significant decline in male labor force participation, retirement of baby boomers and the cyclical decline in demand for labor as a result of the global financial crisis. Some of the cyclical decline reversed as the economic recovery entered its eighth year: the participation rate has risen to 62.7% as of November 2016. The male labor force participation, however, has been declining, coincidentally also by 0.3% Exhibit 10: US Labor Force Participation Rate Both cyclical and structural factors have contributed to a decline in the participation rate from the 2000 peak. % 70 68 + 67.3 66 64 4 52 62.7 60 4 58 56 4 54 52 4 50 + 1950 1956 1962 1968 1974 1980 1986 1992 1998 2004 2010 2016 Data through November 2016. Source: Investment Strategy Group, Datastream. per year—but since 1952. The trend has occurred across all age cohorts. An important driver of this decline has been reduced demand for lower-skilled and less-educated males. The US ranks 32 out of 34 OECD countries in participation of prime-age (between the ages of 24 and 54) males in the labor force, ahead of only Italy and Israel.18 A Council of Economic Advisers report in June 2016 attributed that low ranking to the fact that the US spends less than other OECD countries on job search Outlook | Investment Strategy Group 11 HOUSE_OVERSIGHT_014544