Archive for December 11th, 2008

Tucson Citizen ran a story today on the Slowing Population Growth in Arizona and Pima County.  We’ve touched on the topic before, when real estate related growth slows Arizona and Pima County dip into a recession. Not since the dip in population growth in the early 1990’s has Arizona experienced an economic pull back. How about we stop being lazy and taking the low hanging fruit - growth, and start laying tracks to our economic future by diversifying our economic engine.

As you can see from the chart, growth is slowing and Pima County is hurting.  We must plan ahead and diversify our economic base away from non sustainable growth and towards industries that provide high quality jobs at livable wages.

The big three economic engines in our region are Construction, Tourism and the Government sector. I guess the good news is one of the three is staying strong.

 

From a recent economic development forum up in Phoenix sponsored by ASU and JP Morgan Chase;

Other key findings and predictions:

• The recession is “extraordinarily deep and extraordinarily widespread,” the most dangerous since the 1920s, said Joel Naroff, a Philadelphia economic forecaster.

• Arizona’s economy is in the worst shape of any state in the West - and its job market has seen the second-largest losses in the nation, behind Rhode Island - because of major overbuilding of homes in 2005-06 and weak job growth today, said Lee McPheters, an economics professor and director of the JPMorgan Chase Economic Outlook Center at Arizona State University.

And although experts offered glimmers of hope for a recovery, they noted that the slide hasn’t stopped yet.

Jobs

Arizona’s job numbers have been falling monthly through most of the year. The latest job numbers, down 2.8 percent from a year ago, are the worst since 1976, McPheters said. He expects no growth in jobs next year.

The state went from being the nation’s No. 1 job creator in 2006 to 49th this year, according to the U.S. Bureau of Labor Statistics.

Arizona’s unemployment rate, which reached 6.1 percent in November, is likely to rise to at least 7 percent, McPheters said. But it has been worse, reaching 10 percent in 1976 and 1982.

The construction industry is expected to lose about 80,000 jobs, or about one-third, from its peak in 2006 by the end of next year. The brightest spot is that health care is gaining about 1,000 jobs a month, McPheters said.

Real estate

The residential-housing market probably will recover faster than other real-estate sectors, such as office, industrial and retail, Scottsdale economist Elliott Pollack said. But the housing market is still three to four years away from full recovery, he said.

The problem is that there was a surplus of single-family homes built in 2005 and 2006 and there aren’t enough people moving to the state, enough jobs being created or enough people confident enough to buy new homes.

Pollack estimates metro Phoenix has a housing surplus of 40,000 to 50,000. Tucson and Prescott also are suffering from an oversupply of homes, but the rest of the state is not, he said.

“My guess is that the residential market is not going to reach normal until 2012,” he said.

At the same time the Valley is coping with too many houses, Arizona Public Service Co. has reported its lowest number of residential hookups since it began keeping records in the 1950s, an indication that in-migration has slowed dramatically.

Construction of offices, industrial buildings, apartments and retail space also has outpaced the demand, and construction is likely to slow down if not stop in a year or two, he said.

Retail

Naroff said the lack of consumer confidence and spending is now a more serious problem than the ailing housing market. Consumer spending accounts for about two-thirds of the country’s economy.

The Arizona Blue Chip Economic Forecast, a consensus of about 20 economic experts in the state, predicts retail sales will fall 3 percent this year in Arizona and increase only about 1 percent next year.

But eventually he and other experts expect that consumers will get tired of sacrificing and curtailing their purchases because of the dour economy.

“Once that psychology changes, I wouldn’t be surprised in one year if growth will happen a lot faster than anyone expected,” Naroff said.