Economist sees hope for Ariz. recovery

Arizona State University economist Dennis Hoffman projected sustained but modest growth for Arizona through this year, but he said that the economic recovery should accelerate.

“When this state gets cooking, it’s cooking, and I think the winds are beginning to change,” he said Friday at the annual economic-forecast meeting of Westmarc, a West Valley coalition of business owners, government leaders and educators, at ASU’s West campus.

A year ago, Hoffman told Westmarc members that he was seeing the first “signs of life” in the state’s economy but did not expect much improvement until at least 2013.

Hoffman, director of ASU’s L. William Seidman Research Institute, sounded more upbeat this year, especially with a report showing that the national unemployment rate had dropped to 8.3 percent.

“The nation, at least temporarily, appears to be raining jobs,” he said. “We’ve created a lot of jobs in the last month.”

Consumer spending is expected to remain in the modest range, and some analysts predict that housing starts will stay in the “trough” for a prolonged period, but Hoffman again is picking up on winds of change.

“There is a buzz in the air,” he said, speaking of real-estate trends. “It may be a low buzz right now — it may be beginning to accelerate — but it’s a different attitude, in my experience, from 2009 to 2010 or even 2011.”

He put chances at a double-dip recession below 15 percent, although risks from the European financial crisis, the potential for worldwide political shocks and other unexpected events could affect that outlook.

Hoffman noted that an understanding of the Great Recession and its place in history is crucial to any forecasts for the economy.

“It absolutely sets the stage for Arizona and provides some understanding of where we’re likely to go from here,” he said.

A chart showing recessions in the post-World War II era underscored his point. In prior recessions, the economy tended to roar back, at points even exploding with growth, after about two years. Four years after the start of this recession, the nation is struggling to get back to prior levels of consumption.

“When I look at (this chart), it says very clearly to me that this recession, both in depth and duration, is simply unlike any recession that we’ve experienced in the postwar period,” Hoffman said.

The huge drop in household wealth — estimates put the loss in home-equity wealth at $7.38 trillion — is a major cause of the slow recovery.

“Never has household wealth evaporated the way it did this time,” Hoffman said. “Consumption is determined by how we view our wealth portfolio. So we have a vicious cycle — no spending, no jobs.”

Employment also plummeted, and people stopped moving to Arizona, an outcome that was a shock to one of the fastest-growing states in the country.

But the labor market is improving, and Arizona ranks seventh in the nation among states that are adding jobs.

“Clearly, it’s getting better,” Hoffman said.

by Lesley Wright - Feb. 3, 2012 03:42 PM The Republic | azcentral.com




Economist sees hope for Ariz. recovery