Arizona's economy is faring well compared with the rest of the country, local economists said, but it’s not even close to achieving the stunning growth surge of the 1990s.
The Arizona Blue Chip Economic Forecast, a consensus of 19 of the state’s top economists published by Arizona State University, predicts stronger growth for the second half of the year but no noticeable recovery until 2004.
That’s still worrisome for local business leaders.
“We’re used to a fast level of growth, and when we don’t get it we get a little cranky,” said Tracy Clark, editor of the report. “Eat some chocolate, count your blessings, and hope there are no more big political stories for the rest of the year.”
Arizona added more jobs each month this year compared with the same period in 2002, but the rate of job growth has been slowing, the Blue Chip reported.
The war in Iraq and the period of political uncertainty leading up to the conflict set recovery back at least three to four months, the report said.
And the hoped-for “postwar bounce” didn’t happen, deferring an upturn to later in the year, Blue Chip contributing editor Lee McPheters said.
The local economists said so far the year has brought good news and bad news, depending on the sector.
Local job growth, a key factor in economic recovery, is good in the service industries, Clark said. That includes such businesses as hotels, restaurants, supermarkets, dry cleaners and lawyers.
“In most people-related business we’re seeing reasonable advancement,” Clark said. “Even hotels are doing relatively well given the problems of business travel.”
However, manufacturing is still a drag on the local economy, he said.
“A lot of our manufacturing is high-tech, and when business spending decreased, and the stock market went into a tailspin, tech manufacturing took a heavy hit,” Clark said.
Businesses will continue to be cautious about investing or hiring until they are more confident that the economic turnaround has taken hold and the political situation has stabilized, Clark said.
Deflation — falling prices — has already reared its dreaded head. “You can buy a DVD player for $20 less than you could a month earlier,” Clark said.
Deflation is a big roadblock to recovery in manufacturing, he said, because no company wants to spend money to make more goods or improve efficiency while prices for the products are declining.
But because the housing market never slumped, and consumer confidence is rising, Clark said he is upbeat that Arizona’s economic recovery is on target.
“But it probably will take most of the rest of the year to sort itself out,” he added.