Arizona’s economy is on the cusp of a slow recovery after three years of decline, an Arizona State University economist said Wednesday.
Economist Lee McPheters told more than 1,000 attendees at the W.P. Carey School of Business/JPMorgan Chase 47th Annual Economic Forecast Luncheon that 2011 will be the best year Arizona has seen since before the recession. A full recovery will come in about three years.
“After three really weak years of economic performance, I think it’s pretty clear we’re on the threshold of recovery,” he told reporters before the luncheon. “Arizona is much stronger than it was a year ago.”
Recent data indicates that Arizona has become the No. 1 fastest-growing market for private sector jobs while it was among the weakest this time last year. Nationwide, it’s ranked 12th for job creation. The Phoenix metropolitan area shows the second highest job growth of large cities in the nation, trailing Washington, D.C.
Though it won’t be a vigorous recovery, the state has turned the corner as consumers slowly begin to regain confidence to spend, McPheters said.
Nationally, slow improvement is also the case.
Philadelphia economist Joel L. Naroff, president of Naroff Economic Advisors and recipient of several recent awards for economic-forecasting accuracy, said the nation’s cycle of weak job growth coupled with high unemployment has led to low job security, which directly affects consumer spending.
“I think this cycle is slowly beginning to break,” Naroff said, predicting that the negative cycle will turn positive by summertime.
Americans expected a swift, “V-shaped” recovery, he said, but that was never possible because of the housing market and financial sector collapses that led to the recession.
Instead it might be a slow, mostly jobless recovery — but that is normal.
Arizona’s unemployment
The state is expected to add about 48,000 jobs in 2011, but that still won’t bring the state to the pre-recession levels of 2007, McPheters said.
While the nation has seen 6 percent total job loss, Arizona saw 11 percent and the Phoenix metro area saw 12 percent, numbers that are difficult to recover from quickly.
In the coming months, Arizona’s unemployment rate will likely remain high, hovering around 9 percent through the end of 2011, he said.
Lagging housing market
The real estate market has shown almost no progress in the past year, said Elliott D. Pollack, CEO of Scottsdale economic and real estate consulting firm Elliott D. Pollack and Co. A full recovery isn’t predicted until 2014 or 2015.
In the Valley, one in five homes is a rental because families don’t have the money or the confidence to buy, he said. Tough mortgage standards mean more people are renting than ever before.
Though a recovery is eventually on the horizon, Pollack said he doesn’t yet believe prices have bottomed out. “The good news is that time will bail us out,” he said.
Road to recovery
James Glassman, managing director and senior economist for JPMorgan Chase & Co., told attendees that 2010’s growing corporate profits are a reason to have limited optimism.
Built-up demand from consumers who have been avoiding big purchases could lead to strong demand next year as businesses begin to rebound, he said.
“It’s not natural to stay in a deep hole,” Glassman said, but he predicted it might take a decade for the nation to get back to full employment.
Hints that Congress could extend tax cuts that were expected to expire this year could also boost recovery.
Brewer’s plans
The forecast comes a day after Gov. Jan Brewer revealed several economic development proposals to attract new businesses to the state and create jobs.
The plans include income tax cuts for businesses and other tax incentives. The proposal would create a $25 million state fund to provide grants to businesses thinking about Arizona for expansion, relax state regulations and semi-privatize the Commerce Department.
The package requires legislative approval.
Rich posted at 10:49 pm on Wed, Dec 1, 2010.
Arizona has been on the brink of recovery every few weeks for about five years now. The real estate market has been 'bottomed out' for at least that long. At this point the 'news' that we are, once again, poised on the threshold of recovery is sort of like saying the sun came up this morning. Wait until it happens then report it. , eventually, we assume it will. Until it does, put "Arizona poised on the brink of recovery" as the last line in your website and on your front page, it'll sort be a man bites dog story when it happens that way.
MyAIC posted at 5:19 pm on Fri, Dec 3, 2010.
On Wednesday I attended the 47th Annual Economic Forecast Luncheon presented by the Department of Economics at Arizona State University's W. P. Carey School of Business and JPMorgan Chase. Overall, I came away optimistic about next year. Not giddy, but optimistic.
Both economists who gave the national forecast were optimistic about growth next year (in the second half, at least): relatively slow 2-2.5 percent GDP growth through mid-2011then 3.5-5 percent GDP growth in the second half of 2011.
Professor Lee McPheters, who presented the forecast for the state economy, characterized his outlook as “slow growth ahead, but no double-dip recession.” Arizona is at the tail end of a long bottoming out, just set to embark on a recovery. Forecast is for the economy to add 47,800 new jobs next year and be back to pre-recession levels of employment by June 2013.
Local economist Elliott Pollack, ever the optimist (not really) characterized Arizona’s real estate outlook : “So many homes, so few new people…” He said, “We could face several more years of stress and there is no quick way out.” He predicts that the residential housing market will be back on solid footing (with supply equal to demand) in 2014. His forecast for commercial markets is similar: back to normal vacancy levels in 2014 or 2015 (perhaps a bit earlier for industrial buildings).
http://www.arizonaic.org/blog/315-arizona-economic-forecast-2011