State economists predict first job growth in 4 years soon - East Valley Tribune: Business

State economists predict first job growth in 4 years soon

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Posted: Thursday, April 28, 2011 3:00 pm | Updated: 3:18 pm, Thu Apr 28, 2011.

Arizona is expected to finally begin adding jobs this year for the first time in four years.

Economists from the state Department of Commerce predict that the number of people working in Arizona by the end of the year will be 17,300 more than in January. That’s a hike of 0.7 percent.

While that does not seem like much, it is a big improvement from last year when the state lost 51,900 jobs. And two years ago 190,300 people found themselves out of work.

Longer term, the situation does look brighter, with the Department of Commerce figuring the state will add another 34,600 jobs in 2012, a 1.4 percent jump.

But that still would bring total Arizona employment at the end of 2012 to 2.43 million, 284,000 below what it was at the peak in December 2007.

Aruna Murthy, the agency’s director of economic analysis, said Arizonans should not expect to hit that number again for quite some time.

``Most of the growth in Arizona came from the construction industry,’’ she said. ``And it came from people moving to Arizona.’’

What’s happened since then is home values nationwide have plummeted and many homeowners find themselves ``under water’’ on their mortgages, owing more than the houses are worth.

``They’re essentially not able to move,’’ she said. And that, said Murthy, brings migration to Arizona from other states to a virtual halt.

That is why Murthy is figuring that construction employment will drop another 3,300 this year, to just 107,800. That compares with 247,500 at its peak.

Other sectors of the economy that won’t add jobs this year include information services and professional and business services. Murthy also predicts that state and local governments also will continue to shed workers.

Still, Murthy said there are signs that things will improve.

``Right now we are observing a weaker dollar,’’ she said. ``This weak dollar is actually promoting international tourism in the state.’’

The result, said Murthy, is that over the next two years the leisure and hospitality industry statewide will add 17,400 jobs.

Similarly, she said the weaker dollar helps promote exports. That will increase not only manufacturing employment but also wholesale sales and even increase the need for workers in trucking and shipping.

One of the biggest areas of job gains for Arizona continues to be private education and health care, where Murthy predicts the state will add another 22,300 jobs in the next two years.

This sector includes not only doctors, nurses and health care workers but also those employed at private colleges and universities. It also has been the part of the Arizona economy that has proved most stable: While all other segments were shrinking during the last three years, these employers continued to add workers.

Murthy said enrollment at private colleges tends to go up when the economy is weak, as people look for new skills. Conversely, when the economy improves, people do not go back to school.

``But our unemployment rate in Arizona is still quite high,’’ she said, with the latest figures statewide still at 9.5 percent.

Murthy’s general optimism about job growth is tempered, though, by other factors that could change things. One is the rising price of oil.

Most immediately, Murthy said that the more people have to spend on gasoline, the less they have for other things. And Murthy warned of a ``double whammy’’ because those higher energy costs also boost food prices.

She also said that the Japanese tsunami and its aftermath have affected the supply chain, potentially affecting manufacturing in Arizona.

But there is no particular up side for Arizona from the problems in Japan that could benefit Arizona manufacturers. That’s because the Japanese mainly make memory chips; what’s produced in Arizona are processors.

The forecast shows one major exception to predicted job growth: Pima County. There, Murthy figures the number of people working at the end of this year will be no higher than at the beginning. And the county will add just 2,700 workers in 2012, a meager 0.8 percent.

Murthy said a couple of factors appear to be at work.

One is that while manufacturing employment is expected to increase, there is an exception.

``We have seen in recent years there have been cutbacks in aerospace because of cuts in certain federal programs,’’ she said. ``That’s one of the reasons why (in) Tucson you’re not seeing as much gain,’’ Murthy continued, where aerospace is a dominant industry.

In fact, aerospace makes up 3.5 percent of the total Pima County workforce. For the entire rest of the state, the industry amounts to less than nine-tenths of one percent.

Complicating matters, Murthy said, is some aerospace projects are being outsourced to Mexico and other countries.

The other weak element in Tucson’s economy is the leisure and hospitality sector. While it is expected to grow by 3.1 percent statewide this year, Murthy is predicting a 0.2 percent drop in Pima County.

She said some of that is because the Tucson economy remains weak, meaning people are not going out to eat at much.

And agency economists say there could be something else: The teams that had been doing their spring training have left, meaning fewer people making the trip to Southern Arizona.

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