TEMPE, Ariz. (May 11, 2016) — Looking forward, the US and state of Arizona economy will remain much the same as the country slowly continues to recover. In Arizona, job growth has, in fact, recovered and is shifting into high gear with the state currently ranked #1 in the nation in private sector job growth.That’s just some of what three Valley economists said earlier today as they delivered a comprehensive economic overview and forecast for the state and nation at the Economic Club of Phoenix Annual Economic Outlook Luncheon.
“The Arizona economy has finally recovered all the jobs lost in the recession and since the start of the year, growth has really picked up,” says research professor, Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business. “We are seeing strong job creation in the private sector, especially in finance, information, and health care, as well as construction. Arizona is on track to add about 80,000 jobs in 2016, which would be the best gains in the past 10 years.”
McPheters also says that Arizona’s personal income growth forecast will remain about the same for the state – between 4.5 and 4.6 percent. Arizona currently ranks 14th in the nation for personal income growth. He said employment in Arizona is at an all-time high. Arizona’s advantages for economic development include our pro-growth economic setting, competitive tax structure, reasonably affordable commercial space, labor, housing and a relatively new infrastructure.
McPheters also notes Arizona ranks eighth in the nation for population growth, although he says the state’s population growth remains below the historical average of 3.2 percent at 1.5 percent and is likely to remain about the same in the coming year.
“The rest of 2016 will provide plenty for people to worry about, and fragility still exists, so shocks of any form may reverberate rapidly” says Dennis Hoffman, economics professor and director of the L. William Seidman Research Institute, W. P. Carey School of Business. “However, the US economy will likely perform much like it has in 2014 to 2015 with no real growth acceleration.”
According to Hoffman, professional and business services will continue to dominate the national job sector which added 65K jobs in April. This was followed by 54K jobs being added in education and health services sectors. Employment challenges are also dwindling sharply for Millennials having essentially recovered from the impact of the financial crisis. The employment rate for people between the ages of 25-34 is now above the pre-crisis average with percentage employed back to about 21 percent.
But why has wage growth been so slow across the nation? Hoffman says it’s due to more service jobs over manufacturing jobs being created and US industry concentration. Hoffman says another huge contributing factor is the graying of America with 10-thousand boomers hitting 65 each day! Also contributing is a decline in collective bargaining power that has essentially vanished as the percentage of workers in unions has hit an all-time low. Still, Hoffman notes, we are reaching a point nationally “when everyone who really wants a job – can have a job.”
Over the next year nationally, Hoffman says that equities will face headwinds with higher unit labor costs and sluggish revenue growth. He also notes there is evidence of wage induced inflation and moderating job growth.
Elliot D. Pollack, chief executive officer of Scottsdale-based economic consulting firm Elliott D. Pollack & Company, predicts that population estimates will grow in greater Phoenix slightly in 2017 by more than 86K, an increase of 1.9 percent.
“The economy is doing as well as can be expected given the national situation and current population flows. The real estate market is improving as well,” says Pollack. “The outlook for housing is as good as it’s been in the post-2007 world and the demographics for apartments have never been better. Additionally, the outlook for office and industrial continues to get better with an overall real estate market that continues to improve.”
Pollack also says that the Valley’s current economic growth, low mortgage rates, affordability and lending that has begun to loosen are all contributing factors in an optimistic housing future. Those with previous home foreclosures will soon be out of the penalty box and able to purchase homes again and he estimates that 2016 is the best year for homebuilders since 2001 with 20-thousand new housing units projected for this year and possibly in the years that follow.
He emphasized that baby boomers looking to down-size combined with millennials who are waiting longer to marry and still paying off students loans continue to ensure a robust rental market.
On the commercial real estate front – Pollack emphasized that vacancy rates are way down and that we are a year or two away from a potential industrial boom. On the other hand, retail continues to be challenged with competition from the internet.
More details and analysis from the event, including the presentation slides, are available from the business school’s “Research and Ideas” website at research.wpcarey.asu.edu.