Arizona (and the West) Shall Rise Again – Just you Wait!

48th ASU/Chase Economic Forecast

Lee.mcpheters@asu.edu

• Getting Better? Or Worse?

• Arizona Adding Jobs - Slowly

• Full Recovery is Years Away

• Long Term Outlook is Positive

Arizona Update & OutlookArizona Update & Outlook

How Long Is “Long Term?”

Arizona Full Recovery

3-4-5 Years?

71% say economy is “getting worse” Gallup PollNovember 26, 2011

56% “getting worse” November 26, 2010

29% say U.S. economy is now “in a depression”

But..real GDP has recovered to prior peak

before start of the recession

2006 2007 2008 2009 2010 2011

Gross Domestic Product ($2005)

“…mania of pessimism”- John Paulson

Objective Approach“What are the numbers?”

Modern Approach“How do you feel

about the numbers?”

Unemployment

& Weak Job Growth

Reduce ConfidenceIncrease Pessimism

Meanwhile…

Year-over-Year Arizona Job Growth Is (Slowly) Improving

Indicator 2011 2010Labor Force 3,171,000 3,179,000

Unemployed 282,000 307,000

Unemp. Rate 9.0% 9.8%

Jobs–12 Mos 44,700 -15,000

Arizona Labor Market ImprovesCompare October 2011 vs October 2010

W. P. Carey School of Business & U. S. Bureau Labor Statistics

( Percentage Change 2010 vs 2009)

41 States Lost Jobs in 2010

Alaska 3

6

Hawaii

5

2

Lost Jobs (41)

Added Jobs (9)

9

49

444

48

40

17

3850

42

28

78

1

25

43

(Ranked by Percent Change Oct. 2011 vs Oct. 2010)

45 States Now Adding Jobs

5

3

1

4Losing Jobs (5)

Adding Jobs

6

7

10

2

9

13

32

8

1521

36

14

Az Industry Rank New JobsOverall Az Jobs #7 44,700

Health Care #3 14,100

Construction #3 4,600

Trans./Warehouse

#4 4,100

Manufacturing #9 4,700

Arizona Growth RankingsStates Ranking by Percent Growth: Oct. 2011 vs Oct. 2010

W. P. Carey School of Business & U. S. Bureau Labor Statistics

Arizona Jobs Still Down by 300,000And At Same Level as 2004

Peak 2.7 mil

2.4 mil

2004 2005 2006 2007 2008 2009 2010 2011

Metro Area Percent Job GainsHouston 3.1% 79,500

Seattle 2.3% 37,700

Tampa 2.2% 24,100

San Diego 2.0% 24,000

Boston 1.9% 47,000

Pittsburgh 1.9% 21,800

Phoenix 1.8% 29,900

Best Metro Job Growth 2011Job Gains – Oct. 2011 vs Oct. 2010 – Labor Force > 1 Million

W. P. Carey School of Business & U. S. Bureau Labor Statistics

Realistically…

Full Recovery isYears Away

U.S. Full Job Recovery Will Take Years

2001 Recession

1990 Recession

Current Employment

After four years, Arizona jobs are still10% below 2007 peak

4 More Years For Az Jobs Recovery

Assume: 2.5% job growth starting in 2012- back to peak in 2015

96 Months/8 Years To Return to Peak

4 More Years For Az Jobs Recovery

Economic Outlook:

Slow(very slow)

Growth

2010 2011 2012Personal Income (%) 2.9 5.5 6.0

Employment (%) -2.1 1.0 1.8

Retail Sales (%) -1.7 7.5 8.0

Population (%) 1.1 1.2 1.5

ARIZONA Economic Forecast

W. P. Carey School of Business, ASU; based on data available as of Dec. 1, 2011

Major Arizona Risk – U.S. Economy

31,200

85,000

127,700 126,300

39,800

-57,300

-190,300

-51,900

24,00045,000

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Arizona Jobs Growing AgainAnnual Numeric Change In Arizona Employment

YTD Az Job Growth 0.8% Thru Oct.

ForecastU.S. BLS & W. P. Carey School of Business

Annual Percent Change

Arizona Dept. of Revenue & W. P. Carey School of Business

Arizona Retail Sales Outlook:Consumers Still Cautious

Forecast

U.S. Census Bureau & W. P. Carey School of Business Forecast

Population Growth BelowAverage – For Arizona

(Annual Percent Change)

2005 - 2007 2008 - 2010

U. S. Census Bureau and W. P. Carey School of Business

Annual Average Migration toArizona Slowed In Recession

97,492

42,553

Long Term Arizona Population Growth Projections Still Strong

Thousands of New Residents Per Year

U. S. Census Bureau and IHS Global Insight

Percent Families That Can Afford Median Priced Home

National Association of Home Builders

Silver Lining: Phoenix Housing Again More Affordable Than U.S.

Short Term Outlook Weak

Plan Now For ArizonaLong Term Recovery

(Ranked by Percent Change 2011 – 2015 Job Growth)

Arizona Top Growth State: 2015

6

2

1

73 10

4

9

5

8

17

11

12

13

14

15

16

19

20

18

Source: IHS Global Insight

• Educated work force

• Competitive tax structure

• Affordable energy, water, land

• Transportation infrastructure

• Strong national/global brand

Quality Growth Depends on More Than Population

Increases

The Paradox of Recovery

RECESSION AND RECOVERYRecession Cause Recession Cure

Too Much Confidence More Confidence

Too Much Credit More Credit

Too Much Spending More Spending