An economic forecast with lots of variables
From left: ASU professors Dennis Hoffman and Gustavo Ventura and PNC Bank Managing Director Daniel Brady answer questions following their talks at the ASU/PNC Bank Economic Forecast Luncheon on Wednesday, Nov. 13, at the Sheraton Phoenix Downtown hotel. Photo by Charlie Leight/ASU News
The prospect of a new presidential administration is prompting some discussions among top economists.
Tariffs, immigration, possible deportation, tax cuts and reduced renewable energy credits are top of mind to financial analysts.
But on the plus side, Arizona and Phoenix rank among the top 10 U.S. labor markets for 2024; the image of the Valley is evolving as a dynamic area for high tech and regional distribution, and nationalism may favor more foreign onshore investment in Arizona.
Win, lose or draw, change is on the way.
“Hopefully this is a brand new ballgame for the country and Arizona,” said Dennis L. Hoffman, director of Arizona State University’s Office of the University Economist and the L. William Seidman Research Institute at ASU’s W. P. Carey School of Business. “Let’s hope it’s like the Diamondbacks when they were in the World Series and smoked the Yankees and not that game against Milwaukee in September when we choked that big eight-run lead. ... There’s lots of reasons for caution but there’s lots of reasons to be optimistic.”
Hoffman presented his findings at the 61st annual Economic Forecast Luncheon on Wednesday in downtown Phoenix, sponsored by the W. P. Carey School of Business and PNC Bank.
“For six decades this luncheon has attracted businesses and governmental leaders as well as a panel of regional and national economists who project business conditions for the coming year," said W. P. Carey School of Business Dean Ohad Kadan, who made his third appearance at the luncheon since joining the school in July 2023.
Kadan took time to mention to the crowd of approximately 300 people that Poets&Quants recently placed W. P. Carey as No. 1 in the U.S. and No. 2 in the world for its 2025 Best MBA Programs for Entrepreneurship ranking. Kadan also highlighted President Michael Crow’s selection to the 2024 TIME100 Climate list of leaders and innovators driving real climate action.
“We are proud to highlight those great accomplishments at ASU,” Kadan said.
In addition to Hoffman, speakers included Daniel J. Brady, management director of investment strategy at PNC Bank and Gustavo Ventura, economics professor at ASU’s W. P. Carey School of Business.
Nationally, Hoffman said the business cycle remains the greatest risk to growth; state-to-state migration has been slowing throughout the country in recent years; the quality-of-life reputation has been undercut by heat waves and water issues; CHIPS and Science Act benefits will not be felt for two to three years; and the U.S. economic policy is in a state of uncertainty.
But not all of that is applicable to Arizona, Hoffman said.
“We’re optimists. This is Arizona. It’s a great place to be. It’s a great place to live. Great place to work,” he said.
Hoffman delivered promising numbers through a PowerPoint presentation which showed:
- Arizona ranks 9th in rate of job creation.
- The state’s unemployment remains at a near record low: 3.5%.
- Wage growth in Arizona is strong, especially in the areas of private education and health services, professional and business services, and construction and manufacturing.
- Five key industries drove 90% of Arizona’s job growth in 2024: health services, wholesale trade, construction, education and professional/tech.
“Job growth is largely back in the West and is back to more normal times, just like they looked pre-pandemic,” Hoffman said. “Unemployment rates in Arizona remain near record low. We’ve really had a great run. So people are working and we’ve got wage growth across the board.”
Hoffman said tight federal policy has reined in Arizona job growth the past few years, but the state created approximately 68,800 jobs in 2024. That number is projected to slightly decrease in 2025 to 65,000 jobs due to inflation.
“When inflation kicked in, it was a worldwide phenomenon. Every country endured inflation,” Hoffman said. “Certainly we’ve got much more moderation, but the laboring effects of those high interest rates remain with us.”
And speaking of interest rates, Hoffman said rising rates are cooling down residential housing sales but not necessarily prices.
“What does this all mean? This means if you take sales volume, price times quantity, people are going to make less,” Hoffman said. “Agents make their money off of quantity. Inspectors, people involved in the business of real estate transactions, depend on sales volume.”
Brady said dealing with inflation is tricky business.
“We’ve really changed the regime from the last couple of years where global central banks were trying to aggressively tighten monetary policy to bring inflation down,” Brady said. “We’re now in a different regime where that is completely flipped. We’re in this great cutting cycle where banks are cutting their interest rates and loosening up monetary policy.”
Hoffman also broached the topic of what president-elect Donald Trump’s economic policies might have for Arizona. He said talks of tariffs, anti-global trade, fixation with foreign company ownership, tax cuts, immigration, deportation, federal independence and possible reduced renewable energy credits might have impacts on Arizona’s economy.
“There is huge rhetoric on deportation,” Hoffman said. “Now I’m going to go to the end game. I don’t think it’s going to happen. I don’t think it’s going to happen in the mass wave that some of the rhetoric suggests.”
Hoffman said that working-age immigration is up by 5.6 million since the pandemic and, since 2010, 10 million immigrants have been added to the working-age population.
“Immigrants are responsible for the net increase in working-age population,” Hoffman said. “My generation is riding off into the sunset and there’s not enough new domestic folks to fill our slots.”
He said deportation, should it happen, would hit several industries hard, including hospitality, construction, health services, retail, manufacturing and business services.
Hoffman concluded his 20-minute presentation and final outlook for the state with a word — solid.
“This is a strong position for Arizona,” said Hoffman, noting that Arizona ranks sixth among metro labor markets, just behind Los Angeles and Dallas/Fort Worth. “Our unemployment is strong. Population growth is strong. Retail is strong. Rents are moving up, demand is hot. ... Land is not as affordable as it used to be but population and attracting people has always been strong for us.”
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