Arizona’s economy is on the cusp of a slow recovery after three years of decline, an Arizona State University economist said Wednesday.
Economist Lee McPheters told more than 1,000 attendees at the W.P. Carey School of Business/JPMorgan Chase 47th Annual Economic Forecast Luncheon that 2011 will be the best year Arizona has seen since before the recession. A full recovery will come in about three years.
“After three really weak years of economic performance, I think it’s pretty clear we’re on the threshold of recovery,” he told reporters before the luncheon. “Arizona is much stronger than it was a year ago.”
Recent data indicates that Arizona has become the No. 1 fastest-growing market for private sector jobs while it was among the weakest this time last year. Nationwide, it’s ranked 12th for job creation. The Phoenix metropolitan area shows the second highest job growth of large cities in the nation, trailing Washington, D.C.
Though it won’t be a vigorous recovery, the state has turned the corner as consumers slowly begin to regain confidence to spend, McPheters said.
Nationally, slow improvement is also the case.
Philadelphia economist Joel L. Naroff, president of Naroff Economic Advisors and recipient of several recent awards for economic-forecasting accuracy, said the nation’s cycle of weak job growth coupled with high unemployment has led to low job security, which directly affects consumer spending.
“I think this cycle is slowly beginning to break,” Naroff said, predicting that the negative cycle will turn positive by summertime.
Americans expected a swift, “V-shaped” recovery, he said, but that was never possible because of the housing market and financial sector collapses that led to the recession.
Instead it might be a slow, mostly jobless recovery — but that is normal.
The state is expected to add about 48,000 jobs in 2011, but that still won’t bring the state to the pre-recession levels of 2007, McPheters said.
While the nation has seen 6 percent total job loss, Arizona saw 11 percent and the Phoenix metro area saw 12 percent, numbers that are difficult to recover from quickly.
In the coming months, Arizona’s unemployment rate will likely remain high, hovering around 9 percent through the end of 2011, he said.
Lagging housing market
The real estate market has shown almost no progress in the past year, said Elliott D. Pollack, CEO of Scottsdale economic and real estate consulting firm Elliott D. Pollack and Co. A full recovery isn’t predicted until 2014 or 2015.
In the Valley, one in five homes is a rental because families don’t have the money or the confidence to buy, he said. Tough mortgage standards mean more people are renting than ever before.
Though a recovery is eventually on the horizon, Pollack said he doesn’t yet believe prices have bottomed out. “The good news is that time will bail us out,” he said.
Road to recovery
James Glassman, managing director and senior economist for JPMorgan Chase & Co., told attendees that 2010’s growing corporate profits are a reason to have limited optimism.
Built-up demand from consumers who have been avoiding big purchases could lead to strong demand next year as businesses begin to rebound, he said.
“It’s not natural to stay in a deep hole,” Glassman said, but he predicted it might take a decade for the nation to get back to full employment.
Hints that Congress could extend tax cuts that were expected to expire this year could also boost recovery.
The forecast comes a day after Gov. Jan Brewer revealed several economic development proposals to attract new businesses to the state and create jobs.
The plans include income tax cuts for businesses and other tax incentives. The proposal would create a $25 million state fund to provide grants to businesses thinking about Arizona for expansion, relax state regulations and semi-privatize the Commerce Department.
The package requires legislative approval.