Economic Outlook Luncheon: 2 more years of slow growth, then economic boost
We’re finally seeing some signs of growth in Arizona, but don’t expect a big bounce in our economy until 2013. That’s the bottom line, according to economists from the W. P. Carey School of Business, who offered new midyear forecasts for the state and nation this week. They spoke in front of business leaders and others at the popular annual Economic Outlook Luncheon sponsored by the Economic Club of Phoenix.
Research Professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business, predicts slow growth throughout the rest of this year and next in Arizona. He says the United States has already seen seven straight quarters of gross-domestic-product (GDP) growth since the third quarter of 2009, but the growth isn’t as strong as in previous positive years. Still, he points out 48 states are now adding jobs, including ours.
“Arizona is still struggling, ranked No. 47 in the nation for job growth from March 2010 to March 2011,” says McPheters. “However, I anticipate we’ll see a boost in personal income, employment and population by 2015. I expect Arizona to add about 300,000 new jobs by 2015.”
McPheters also estimates 112,000 new homes and 665,000 new residents will come to Arizona by 2015. That would represent a 10.4-percent population growth. McPheters expects Arizona unemployment to fall from 10 percent last year to 9 percent this year, 8 percent next year, and finally all the way down to 6.5 percent in 2015.
Nationwide, Robert Mittelstaedt, dean and professor of management at the W. P. Carey School of Business, agrees with McPheters that the federal deficit threatens to slow our growth. Mittelstaedt says government debt and obligations locally, statewide and nationwide, along with the deficit, may affect us negatively for the next decade or so. He, too, doesn’t expect a rapid economic recovery.
“A robust recovery isn’t likely anytime soon because housing is too weak nationally, and especially here in Arizona,” says Mittelstaedt. “Sustained high unemployment nationally is a key problem.”
On the bright side, Mittelstaedt adds that globalization is helping us recover from the recession since some U.S.-based global companies are doing well. However, he thinks their growth will be somewhat limited as more countries build larger companies to compete with our top performers.
Professor Dennis Hoffman, director of the L. William Seidman Research Institute at the W. P. Carey School of Business, gave an in-depth look at the state budget situation. He says there’s a structural problem that won’t go away unless changes are made.
“Tax collections have been falling even more than Arizonans’ incomes,” explains Hoffman. “We have reduced tax rates by 10 percent since 2006, even though demand for state services keeps growing. Traditionally, in times of economic difficulty, more people seek help from the state.”
Hoffman says, when adjusted for inflation, the average income-tax amount collected from an Arizona resident dropped from about $1,650 in 2005 to about $1,050 in 2009. Hoffman expects state revenues to start rising as the economy recovers, but the temporary sales tax will expire, too. Therefore, he expects state lawmakers to face more pressure to balance the budget over the next five years, especially in fiscal year 2014.
“Right now, the state’s expenditures represent about $425 per $10,000 of personal income in Arizona,” says Hoffman. “However, the state is only collecting about $300 per $10,000 of personal income. Obviously, that’s not sustainable.”
This year’s Economic Outlook Luncheon was held at the Westin Kierland Resort & Spa in Scottsdale. The Economic Club of Phoenix hosts the event every spring, as one of its many activities for Valley business leaders and others to network and engage. The club was founded by a group of prominent business executives called the Dean’s Council of 100, in conjunction with the W. P. Carey School of Business at Arizona State University. More information about the club can be found at http://www.wpcarey.asu.edu.
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