Economy worries Arizona companies

Arizona’s business community, including employers in the East Valley, is pessimistic about the economy despite recent stock market jumps, according to a survey of 352 businesses.

Despite the gloominess, most of the businesses report they currently are doing well and expect to do even better before the end of the year, according to Valley-based WestGroup Research, a market research firm that conducted the survey.

It’s not surprising to hear the business community’s economic outlook remains dim, said Dawn McLaren, an economist with the Bank One Economic Outlook Center at Arizona State University’s W.P. Carey School of Business.

“There are a couple of things that have to come back before our Arizona economy can do well,” she said. “Those two things are investment in capital equipment and investment in human capital, and neither of those seems to be picking up very much.”

In order for the economy to really turn around, businesses have to feel confident enough to begin hiring people so those employees are making money and can turn around and “buy more stuff,” McLaren said.

“Business isn’t doing that because, although they’re doing well and expect to

do a little better the next time around, can they afford to take on that extra employee?” she said.

When asked what they think about the current economy, 45 percent of employers think it is weak compared with 19 percent who think it is strong. Homebuilders were the most optimistic, while auto parts stores were the most pessimistic.

“It probably means that consumer buying of auto parts is down, but consumer buying of homes is up,” said Ted Apostol, president of WestGroup Research. “Home (buying) is up because of the interest rates. I think all the business groups seem to be fairly pessimistic about whether the economy is going to get better, but they don’t see it necessarily as keeping them from being successful.”

Sixty percent of respondents said their businesses did at least as well in 2002 as they did in 2001, and 79 percent think they will do at least as well this year as they did last year.

“Most of these guys are small businesses,” Apostol said. “I think they feel like they can insulate themselves from the economy by just working harder and doing a better job at what they do. The economy is poor and it affects me, so I’ve got to work harder and I’m going to be successful anyway.”

Recessions usually weed out businesses that aren’t making it, so businesses that cut their costs as much as possible and survived are succeeding, McLaren said.

“They can say, ‘Well, we’re doing OK’ . . . but beyond that, if they’re looking at sluggish growth, growth is not negative, but it’s still not something that they can say, ‘Oh, let’s go ahead and invest in this and invest in that,’ so they are being pessimistic,” she said.

The survey included 96 restaurants, 92 auto body shops, 59 law firms, 41 auto dealers, 33 homebuilders, 17 tire dealers and 14 auto parts stores.