Experts: Job growth shows Ariz., national economies on rebound

Although it may not feel like it to many people, the economy is in the midst of a solid rebound that will gain strength over the coming years, a panel of economists said Wednesday.

The recovery, though, will be slow, more like the pace of a tortoise than a hare, said Joel Naroff, a Philadelphia economist who has won a number of awards for his accurate forecasts. The tortoise, though, is nearing the finish line.

"Better times are ahead. I truly believe this is a recovery, that this is an economic change that you can count on," he told more than 1,000 people attending the 47th annual economic-forecast luncheon Wednesday sponsored by Arizona State University's W.P. Carey School of Business and JPMorgan Chase bank. The event was held at the Phoenix Convention Center.

The panel of four economists said the recovery will be slow because of a weak housing market, little commercial construction, hard-to-get mortgages, rising gasoline prices that can cut into consumer spending, and state and local budget cutbacks that will mean more lost jobs. Consumer confidence remains low, too, depressing spending.

The National Bureau of Economic Research said the recession officially ended in June 2009, when the economy started growing again. But when Naroff asked the audience how many believed that, only about a dozen people raised their hands.

Nevertheless, there are signs that the economy is picking up.

U.S. factory output is growing. Auto sales are rising. Small businesses are adding workers.

On Wednesday, the stock market had its best day since September.

Naroff expects the nation to gain 180,000 to 200,000 jobs by spring or summer, and he believes that could be the shot in the arm the economy needs.

Such job growth could finally persuade consumers who have been nervous about job security to shop more, which in turn could prompt even more hiring. Businesses have about $1.3 trillion set aside that could be spent on employees and construction, but they are waiting for consumer spending to rise, Naroff said.

"For the first time in a very, very long time, I can honestly say I am getting optimistic about where we're going to be a year from now, if not sooner," he said.

ASU economist Lee McPheters said that Arizona has been bumping along the bottom this year but that key indicators such as job and population growth, retail sales, personal income and single-family home construction are all expected to improve next year. He is director of ASU's Economic Outlook Center.

"2011 is going to be the best year for Arizona's economic growth in the past three years," he said. "So, I think there are bright skies ahead."

Recovering jobs in Arizona

It is going to take two to three years for Arizona to recover the approximate 275,000 jobs it lost in the recession, McPheters said. In August, the state finally began adding jobs compared with a year earlier, but by only about 1 percent.

McPheters said metro Phoenix leads the nation for growth in private jobs, although the year-over-year gain in October was just 24,300 jobs, or 1.3 percent, according to the latest data from the U.S. Bureau of Labor Statistics.

Metro Phoenix ranked just behind Washington, D.C., but most of that city's 43,700 jobs gained were government positions. A year earlier, the Valley was the worst metro area in the nation, with a 7.3 percent job loss, down 135,100 positions compared with the previous year.

Arizona last year ranked 49th, behind Nevada, for having the most job losses.

But by October, 36 states had gained jobs for 2010, with Arizona ranked 12th in most jobs added.

Arizona now has about 2.4 million jobs, and it could take until mid-2013 before it gets back to the 2.7 million jobs it boasted in 2007, before the recession started, McPheters said.

He expects the state's unemployment rate to hover around 9 percent all next year. It has been above 9 percent throughout 2010 and is now 9.5 percent.

Although the nation lost about 6 percent of its jobs during the recession, Arizona lost about 11 percent, McPheters said. "Arizona is showing signs of life, but we are not in a robust recovery," he said.

James Glassman, managing director and senior economist for JPMorgan Chase & Co. and another luncheon speaker, said he believes companies are poised to begin hiring again because they have been making record profits after slashing their workforces and asking the remaining employees to work harder and longer.

He pointed to a Wednesday report from ADP Employer Services, a provider of payroll services, that said nationwide employment at private companies jumped by 93,000 in November, as small businesses added the largest amount of workers in three years.

But because the country lost about 8 million jobs in the recession, Glassman said, he believes it could take a decade before the country gets back to full employment.

Many economists have bemoaned the fact that the nation will have a "jobless recovery," unlike recessions before the 2000s in which hiring tended to pick up promptly after the economy stopped contracting. But Naroff said most of those jobs were manufacturing ones that moved overseas. He said jobless recoveries are now normal.

Real-estate comeback slow

The real-estate market, particularly housing, and the fact that population growth has slowed to about 1.5 percent a year remain the biggest drags on the local economy, economists said.

Home prices in Arizona have fallen for 15 of the past 17 quarters and today stand at about what they were in 2000, McPheters said.

Scottsdale economist Elliott Pollack estimates that there are 50,000 to 70,000 excess single-family homes in metro Phoenix alone and that it will take at least four more years for housing supply to equal demand.

He said about 51 percent of homes in the state have negative equity, meaning their current values are less than what is owed on them. Loan modifications are mostly failing, and foreclosures remain high, although they peaked a year ago.

Pollack, who is also a real-estate developer, said home values will rise over time.

He expects home prices to rise about 60 percent by 2014 from where they are today. But that means those people who bought homes in the mid-2000s will still be somewhat underwater.

"Time will take care of a lot of that (negative equity)," he said. "But if you bought your house in 2004, 2005 and 2006, you better have a lot of time on your hands because it is going to take awhile."

Once housing prices improve and people across the country feel more comfortable about selling their homes and moving, Pollack said, Arizona will see strong population growth again. "Despite the fact that things are going to be slow for a while, painfully slow, somewhere out there in the universe is a huge boom for Arizona," he said.

by Betty Beard The Arizona Republic Dec. 2, 2010 12:00 AM




Experts: Job growth shows Ariz., national economies on rebound