Recession holding on in Arizona

It was hard not to look for a window to jump from after Wednesday’s economic forecast briefing by leading Arizona economists.

“The recession in Arizona is not over,” said Lee McPheters, an economist and research professor at Arizona State University’s W.P. Carey School of Business.

The Arizona numbers he shared were staggering:

• Job losses were the worst in state history, with 264,000 jobs lost or expected to be lost between 2008-2010;
• The first decline in personal income since records were kept;
• Retail sales declined 8 percent last year and 12 percent this year;
• The possibility that Arizona’s population may have actually declined.

“We’ve just not seen a decrease like this before,” McPheters, an Ahwatukee Foothills resident, told an audience of 1,000 in downtown Phoenix during the 46th Annual Economic Forecast Lunch sponsored by ASU and JPMorgan Chase.

And the bad news hits every segment of the economy including commercial real estate, partly because with employment shrinking, the demand for everything from apartments to retail space has evaporated.

Elliot Pollack, an economist and real estate expert, said that it could take a decade before commercial real estate prices return to the 2007 level. And with a 25 percent vacancy rate for office space, he doesn’t expect any new significant building for five years.

“There is no quick fix,” said Pollack. “I agree with (McPheters) that employment is not coming back quickly.”

But the one thing that the economists did agree on is that things will get better.

“We will work our way out of this,” said Pollack, “but it will take time.”

McPheters said he thought it would take until 2014 before Arizona employment reached the 2007 peak of 2.7 million employed.

The good news is that historically, when Arizona does bounce back from a recession, the recovery is swift.

“When it does come back, it comes roaring back,” said McPheters.