ASU economists deliver national, statewide economic outlook
It looks as though the U.S. as well as the Arizona economy will remain much the same going forward as the nation continues to move past the effects of the financial crisis. In Arizona, job growth has, in fact, recovered and is shifting into high gear with the state ranked No. 1 in the nation in private-sector job growth.
That’s just some of what economists — including some from Arizona State University's W. P. Carey School of Business — said Wednesday as they delivered a comprehensive economic overview and forecast for the nation and state at the annual Economic Outlook Luncheon, sponsored by the Economic Club of Phoenix.
“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,” said 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 said that Arizona’s personal-income growth forecast will remain about the same for the state — between 4.5 and 4.6 percent; Arizona 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 its pro-growth economic setting, competitive tax structure, reasonably affordable commercial space, labor, housing and a relatively new infrastructure.
McPheters also noted Arizona ranks eighth in the nation for population growth, although he said the state’s population growth — 1.5 percent — remains below the historical average of 3.2 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,” said Dennis Hoffman, economics professor and director of the L. William Seidman Research Institute, W. P. Carey School of Business. “However, the U.S. economy will likely perform much like it has in 2014 to 2015 with no real growth acceleration.”
Hoffman said professional and business services will continue to dominate the national job sector, which added 65,000 jobs in April; 54,000 jobs were added in education and health-services sectors. Employment challenges are also dwindling sharply for Millennials who are job hunting. The employment rate for people age 25-34 is now well 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 said it’s due to more service jobs over manufacturing jobs being created and U.S. industry concentration. He said another factor is the graying of America with 10,000 Boomers hitting age 65 each day. Also contributing is a decline in collective bargaining power that has essentially vanished as the percentage of workers in unions hit an all-time low. Still, Hoffman noted, we are reaching a point nationally “when everyone who really wants a job can have a job.”
Over the next year, Hoffman said that equities will face headwinds with higher unit labor costs and sluggish revenue growth. He also said there is evidence of national wage-induced inflation and moderating job growth.
Elliot D. Pollack, chief executive officer of Scottsdale-based economic consulting firm Elliott D. Pollack & Company and ASU consulting economist, predicted that population estimates will grow in Greater Phoenix slightly in 2017 by more than 86,000, 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,” said 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 said the Valley’s current economic growth, low mortgage rates, affordability and lending that has begun to loosen are all contributing factors for 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 estimated that 2016 is the best year for homebuilders since 2001 with 20,000 new housing units projected for this year and possibly in the years to come.
He emphasized that Baby Boomers looking to downsize — combined with Millennials who are waiting longer to marry or still paying off students loans — will continue to ensure a robust rental market.
On the commercial real-estate front, Pollack emphasized that vacancy rates are way down and that Arizona could be a year or two away from a potential industrial boom. On the other hand, Arizona retail continues to be challenged with competition from the internet.
More details and analysis from the event, including the presentation slides and audio recordings of each presentation, are available from the W. P. Carey School of Business’ “Research and Ideas” website at research.wpcarey.asu.edu.
Written by Judy Keane