national & regional economic outlook - franke...
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National & Regional Economic Outlook
The Alliance Bank Business Outreach Center 2014 Economic Outlook Conference
November 6, 2014
Ronald J. GundersonProfessor of EconomicsNorthern Arizona University
A Few Bright Spots
Gasoline prices have dropped sharplyRetail sales should improve as a resultNew job creation is better this year than in
several yearsConsumer Confidence is up!
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Consumer Confidence Index
Date IndexOctober 2014 94.5
September 2014 89.0
October 2013 72.4
Most Recent Low
February 2009 25.3
Most Recent High
October 2007 95.2
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Source: The Conference Board, October 2014 (90.0 represents healthy conditions)
The Current Picture
Wages are not keeping up so income hasn’t rebounded
Millions of persons are working part-time even though they would like to be full-time
It is taking longer to find jobs (structural unemployment)
People are still struggling with mortgage debt
Source: Boak & Rugaber, AP Economics Writers. August 1, 2014.
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Wealth Without Workers; Workers Without Wealth
We are in the midst of an economic revolution, but this is not our first experience with a revolutionary environment.
Source: The Economist, October 4, 2014
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The 19th century industrial revolution transformed the human condition, but for the typical wage-earner, this meant hard labor in crowded, disease-ridden cities.
It was nearly 100 years before the typical worker benefited from the revolution.Source: The Economist, October 4, 2014
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Industrial Revolution
Digital Revolution
Today’s digital revolution is creating a similar situation worldwide, but we don’t have 100 years to find a solution.
Source: The Economist, October 4, 2014
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Technology Changes
Technology has destroyed a large number of medium-skilled jobs
Increased the number of persons competing for lower-skilled jobs, while expanding the range of tasks that can be automated
Workers are competing against each other and against machines!
Source: The Economist, October 4, 2014
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A Bold Response
Raise the productivity and employability of the less-skilled.
Revamp education, not just for the young, but adults need lifetime learning to keep up.
This will increase employability, but further advances in technology will keep wages low.
Source: The Economist, October 4, 2014
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The Future
The market system thrives on finding new ways to do old things!
Joseph Schumpeter called this: Creative Destruction
Unless a market society continues to provide solutions to the downsides that accompany the benefits of new technology, Schumpeter felt capitalism will disappear.
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Regional Economic Trends
Flagstaff & Northern Arizona
RegionIncrease in Total Employment
Sept. 2014/2013
Arizona 67,500
Phoenix MSA 54,000
Flagstaff MSA 800
Lake Havasu/Kingman MSA 1,300
Prescott MSA 1,700
Rest of State 9,700
Total Employment Change(Sept. 2014/2013)
Source: Arizona Office of Population and Employment Statistics, October 16, 2014 12
Sector % Change in Employment
Total Nonfarm Employment 0.5%
Manufacturing 4.7%
Construction & Natural Resources (4.8%)
Trade/Transportation & Utilities (2.0%)
Leisure & Hospitality (5.8%)
Government 5.4%
Employment Change – Sept. 2014/2013Flagstaff MSA
Source: Arizona Office of Population and Employment Statistics, October 16, 2014
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Sector % Change in Employment
Total Nonfarm Employment 0.4%
Manufacturing (3.6%)
Construction & Natural Resources (4.0%)
Trade/Transportation & Utilities 1.9%
Leisure & Hospitality 1.8%
Government 0%
Employment Change – Sept. 2014/2013Lake Havasu City - Kingman MSA
Source: Arizona Office of Population and Employment Statistics, October 16, 2014
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Sector % Change in Employment
Total Nonfarm Employment 1.2%
Manufacturing 3.1%
Construction & Natural Resources 2.3%
Trade/Transportation & Utilities 5.2%
Leisure & Hospitality (4.9%)
Government 1.9%
Employment Change – Sept. 2014/2013Prescott MSA
Source: Arizona Office of Population and Employment Statistics, October 16, 2014
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Flagstaff Real Estate (Overall market)
Median Single Family Home Price* September 2014 ---- $359,900
September 2013 ---- $305,000
September 2012 ---- $274,700
May 2007 ---- $399,750 (peak median price)
*The median price is often not the best measure because it largely reflects which part of the market is moving.
Source: Flagstaff Real Estate News, Ann Heitland, Remax Peak Properties, Various Issues.
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Flagstaff Single Family Homes Median Sales Price
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392,500 387,900
323,000338,950
297,000281,500 274,700
305,000
359,000
2006 2007 2008 2009 2010 2011 2012 2013 2014
Median Price ($) (September)
Flagstaff Real Estate (Overall Flagstaff Regional market)
Supply of Homes (Sept. 2014/2013) $0 – $200,000 fell from 2.1 months to 2.0 months
$200,000 – $300,000 rose from 2.8 months to 3.4 months
$300,000 – $400,000 stayed the same at 4.4 months
Flagstaff is still a sellers’ market up to $400,000.
The number of homes for sale in September rose 6.5% from a year ago.
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Source: Flagstaff Real Estate News, Ann Heitland, Remax Peak Properties, Various Issues.
Year # of Homes Sold % Change in Homes Sold
2014 (9 mo’s) 613 (9 mo’s) No change
2013 805 10.0%
2012 732 10.9%
2011 660 7.1%
2010 616 (5.1%)
2009 649 14.1%
2008 569 (17.5%)
2007 690 (12.2%)
Annual Single Family Home Sales –Overall Flagstaff Market
Source: Northern Arizona Association of Realtors for Flagstaff Region; reported in monthly reports in Real Estate News, Ann Heitland,REMAX Peak Properties
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Flagstaff Business Activity (FY 2015)Taxable Sales – July-September
Percent ChangeTaxable Business Activity from previous year
Total Business Activityw/o Utilities 6.6%
Auto Sales 11.3%
Construction 17.4%
BBB 7.2%
Other Retail 1.8%
Source: City of Flagstaff Sales Tax Division
Flagstaff Tax RevenuesTotal w/o Utilities
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-6.32
3.29
2.04
6.84
3.51
6.62
FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY '15 (3 MO'S)
Percent ∆ From Previous Year
Flagstaff Tax RevenuesAuto Sales
22
3.38
18.3617.72
16.59
10.4211.28
FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY '15 (3 MO'S)
Percent ∆ From Previous Year
Flagstaff Tax RevenuesConstruction Contracting
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-21.12
12.32
-12.03
10.27
3.01
17.38
FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY '15 (3 MO'S)
Percent ∆ From Previous Year
Flagstaff Tax RevenuesBBB (Hotels, Restaurants)
24
-0.02
3.73
6.09 6.21 6.07
7.2
FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY '15 (3 MO'S)
Percent ∆ From Previous Year
Cost of Living of Flagstaff vs.Other AZ Metro Regions 3rd Qtr. 2014
Metro RegionACCRA
Cost of Living IndexFlagstaff 118.2
Lake Havasu City 101.3
Prescott/Prescott Valley 97.4
Phoenix/Mesa 95.7
Tucson 96.8
Source: ACCRA Cost of Living Index. National Average = 100.025
Increased NAU Student Enrollment
NAU Enrollment – Mountain CampusFall 2014 20,134Fall 2013 19,320Fall 2012 18,431Fall 2011 17,761Fall 2010 17,529Fall 2009 16,032
Total increase since 2009: 4,102 students or >25%Source: NAU Office Planning and Institutional Research