Milwaukee's economic recovery will continue to gain ground,supported by a moderate and sustainable pace of hiring. Based onrecent trends, job creation will reach 3,800 new positions in 2010,an increase of 0.5% from 2009, matching the forecasted nationalgrowth rate. Though gains have been relatively modest, theresumption of employment growth this year remains a welcome changeafter losing a combined 65,000 jobs between 2008 and 2009. Themajority of employment sectors in the metro area have eitherstabilized or resumed growth as of the third quarter. Year-to-datein 2010, expansion has been most robust in the leisure andhospitality segments, and a recent decision by Harley-Davidson toremain in Milwaukee should preserve jobs over the extended outlook.Additionally, the impact of the housing market downturn on thelocal economy has been moderate when compared to other marketsaround the country. As of Q3, the median existing home price in themetro area was within 10% of peak levels, compared to a drop-off ofroughly 25% nationwide.

Commercial real estate fundamentals softened across propertysectors in recent years but appear close to stabilization. So farin this cycle, the volume of properties falling into distress hasbeen limited in the Milwaukee marketplace, a trend that shouldcontinue as capital markets ease further in 2011 and strengtheningjob growth ultimately gives way to recovery in operations. As oflate September, known distress in the local commercial real estatemarket totaled $354 million, ranking at the bottom when compared toother Midwest markets. For perspective, known distressed dollarvolume in the city falls behind Kansas City by more than 25%, St.Louis and Minneapolis by approximately 50% and 70%, respectively,and is 95% short of levels reported in Chicago.

A relatively small correction in home prices through thedownturn has kept homeownership out of reach of many localfamilies. This has limited the loss of renters to the for-salemarket and helped to keep apartment vacancy within a relativelytight band throughout the recession, which in turn has minimizeddistress. As of third-quarter 2010, apartment vacancy in theMilwaukee metro area stood at 4.8%. This figure is well below thenational vacancy rate of 7.2% and just 110 basis points above themost recent low point, the US vacancy rate remains 170 bps higherthan its last cyclical trough.