In This Report - Banco Mercantil

Bureau of Labor Statistics, the unemployment rate at the close of the year rose to 9.4 percent,
slightly above the 9.3 percent registered in December 2009. The average duration of
unemployment also rose slightly to 34.2 weeks, but remained below its highest point in June
of 34.8. Of those unemployed, 44.3 percent were out of work for 27 weeks or longer. The
struggling job market caused the labor force participation rate to drop to 64.3 percent, the
lowest since 1984. At the current pace of job creation, total employment would be back to its
December 2007 peak by late 2018 and, even then, the unemployment rate would be higher
than it was in December 2007 due to growth in the labor force. Perhaps the positive note in
the labor market during 2010 was the increasing gains in the generation of jobs seen in the
fourth quarter and the lower level of unemployment insurance claims. Indeed, non-farm
payrolls rose to 384,000 during the fourth quarter and the initial jobless claims fell to 391,000
for the week of December 25 (compared to a peak during the week ended March 28, 2009 of
651,000).
Business Spending
Business spending was stimulated by the improved economic climate, as firms faced higher
demand for their products, moderate cost of capital, and better (though not extraordinary)
access to credit. The December Composite Index for the service and construction sectors,
published by the Institute for Supply Management, rose to 57.1 from 55.0 in November. This
was the highest level since May 2006 and was up from a low of 37.2 late in 2008. Year-overyear,
U.S. industrial production growth was up to 5.9 percent, compared to the plunge of 9.3
percent in 2009. Thus, the rebound in industrial production growth traced out a clear "V"
shaped recovery. Capacity utilization improved throughout the year reaching 76.0 percent in
December, the highest level since August 2008.
The U.S. Real Estate Market
The pace of deterioration in the U.S. real estate market has slowed sufficiently to entice
investors and lenders to complete transactions. However, supply and demand dynamics
remained far from healthy, particularly in South Florida where a large volume of distressed
properties continued to place a heavy drag on price performance.
In early 2010, home prices began to stabilize as efforts to revive the housing market through
temporary home buyer tax incentives brought a significant amount of future demand to the
present. After the tax incentives expired, price declines resumed although at significantly
reduced levels compared to 2009. At the end of the year, home prices in 16 of the 20 major
metropolitan markets, measured by the S&P/Case-Shiller Home Price Index, closed lower
15
Mercantil Commercebank