(KFYI News) — A panel of Arizona State University economists spoke Thursday at the annual "economic outlook luncheon" sponsored by the Economic Club of Phoenix at the Arizona Biltmore and said Arizona is expecting "slow but steady" economic growth for the rest of 2014 as well as 2015.
Prof. Lee McPheters, director of the JPMorgan Chase Economic Outlook Center within ASU's WP Carey School of Business, noted that job growth in Arizona has been well below the national average since the Great Recession. According to the US Bureau of Labor Statistics, "the national economy has now recovered 99 percent of lost jobs, while Arizona has regained just over 50 percent," he said.
He added that even Arizona's growth has been lopsided. "There were 50,000 new jobs in 2013. The Phoenix area accounted for 90 percent of those," McPheters said, indicating that in other areas of the state, employment was flat or even negative.
In addition, he said that the traditional areas of job growth for Arizona are trailing national job growth in those areas. A smaller percentage of the jobs created in Arizona since the recession are in hospitality and restaurants than is the case for the nation as a whole. McPheters says that's because income growth in Arizona has also trailed the national average, thus giving Arizona residents less money to spend on vacations and eating out.
Economics professor Dennis Hoffman notes that Arizona's job growth isn't likely to accelerate any time soon. He says Arizona has fallen from third place to sixth in net in-migration in the past 12 months, behind Texas, Florida, Colorado, North Carolina, and South Carolina.
Part of the reason, he says, is Arizona's education system. "Education skills are the key to growth and incomes, and when businesses look at Arizona and they see a good likelihood of finding skilled workers, they come here." But he noted that, since Arizona is near the bottom in the US in per-student education spending, and student test scores are also below the national average, many businesses will shy away from our state.
State leaders have pooh-poohed the low per-student spending level, saying it doesn't mean our schools are substandard. But Hoffman says that's not the public perception.
"Frankly, that's the showcase number that's used across the nation to determine whether or not there's an emphasis on education in your state," Hoffman said. "We try to deflect that, but it's kind of like a CEO trying to deflect reports of bad earnings per share."
"The challenge is whether or not we have enough skilled workers," Hoffman said. "Our metrics on education are not good." He added that businesses also like to choose states with robust education systems for the sake of their employees' families.
In the area of real estate, Michael Orr, director of the WP Carey School of Business' Center for Real Estate Theory and Practice, says after about three years of rapid growth, the Phoenix area's real estate market has flattened out. He said with most of the houses that became available through foreclosure now in the hands of new owners – largely investors who are renting them out because the rental market is especially strong right now – demand for homes has fallen to a similar level.
As a result, the median home price is now steady around $220,000, and Orr expects that number to fall slightly in the months ahead, "but it won't be enough of a drop to panic about."
Another reason for low demand for houses is that young adults are not looking to buy homes. National surveys show that "Millenials", as they're called, seem happy to rent instead of buy, giving them more flexibility to move whenever their job or personal situation dictates.
Orr expects Millenials to settle down and buy homes eventually, but he notes that they're doing everything later than earlier generations, including moving out of their parents' house, moving in with a "significant other", getting married, and buying a home.