Despite tantalizing signs of recovery, slow growth will continue to dog Arizona’s economy for another two or three years, according to experts at the 50th annual Economic Forecast Luncheon co-sponsored by Arizona State University’s W. P. Carey School of Business and JPMorgan Chase.
“We expect 2014 to be the eighth year in a row for subpar growth in Arizona, which was hit harder than most states in the recession,” said Research Professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business.
“While growth is slow compared to past recoveries, we are making good progress compared to other states. Arizona jumped all the way up from the No. 49 state for job growth in 2010 to No. 8 in 2012 and No. 7 by October of this year. The long-term economic outlook here is positive.”
Arizona saw 2 percent job growth through the 12 months ending in October 2013. The state has regained 46 percent of the jobs it lost in the recession, but it still has 170,000 more jobs to go. That doesn’t compare well to the nation as a whole, which has already regained 83 percent of its lost jobs. Still, several of the industries gaining in Arizona tend to have higher wages. The state ranks among the top 10 for growth in construction, wholesale trade, finance, information and real estate.
Among the Arizona expectations from McPheters for next year:
• Employment growth could rise from 2.1 percent this year to 2.4 percent in 2014.
• Personal income could go up from 4 percent this year to 5.4 percent next year.
• Population growth may jump from 1.4 percent to 1.5 percent.
• Retail sales will likely fall from 7.6 percent this year to 6.5 percent next year.
McPheters maintains that uncertainty continues to inhibit consumer spending, and Arizona tends to follow the U.S. economic cycle, which remains sluggish.
Professor Lee Ohanian, associate director of ASU’s Center for the Advanced Study in Economic Efficiency and an adviser to the Federal Reserve Bank of Minneapolis, echoed that message.
“The U.S. economy remains significantly depressed, and many facets are in worse shape now than five years ago,” said Ohanian.
“Employment as a fraction of the adult population and most components of gross domestic product (GDP) are farther below their normal trend levels today than during the financial crisis. Severe recessions are typically followed by very rapid recoveries to the economy’s long-term trend, but that isn’t happening this time.”
Ohanian says productivity growth is very low and the government has been using mostly short-term stimulus measures, instead of long-term economic policy changes, to combat this. He sees no evidence most of the short-run fiscal policies have increased employment.
“Current economic policy represents a drag on our economy,” said Ohanian. “I anticipate the 2014 U.S. economic growth will be similar to the last few years, with slow job growth and slow productivity growth that will expand real GDP per capita around 2 percent or perhaps a bit higher, and total real GDP around 3 percent.”