2017 arizona economic update & outlook
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Arizona EconomicUpdate & Outlook
ASU/JPMorgan Chase Economic Forecast Luncheon
December 5, 2016
Forecast Reality Check(2016 Forecast vs. Latest 2016 Data)
Source: Forecasts December 2, 2015 Economic Forecast Luncheon
Indicators Forecast2016
Estimate2016
New Jobs (thousands) 68.0 76.0Employment (% change) 2.6 2.9Population (% change) 1.7 1.6Unemployment Rate (%) 5.8 5.2Single Family Permits (% change) 30.0 10.0
Indicators 2015 2016 2017New Jobs (thousands) 66.0 76.0 81.0 Employment (% change) 2.6 2.9 3.0Population (% change) 1.5 1.6 1.6Unemployment Rate (December) 5.9 5.2 4.8 Single Family Permits (% change) 25.0 10.0 15.0W. P. Carey School of Business, ASU, based on data available December, 2016
Arizona Economic OutlookGreatest Risk: National Business Cycle
U. S. Bureau of Labor Statistics, October 2016 (Seasonally Adjusted)
3.0%
3.8%
Unemployment Rates Still Above5% in Several Western States
5.2% 6.7%
5.5%
5.5%
3.5%3.2%
5.2%
5.4%
4.7%
Arizona Ranks 6th in Private JobCreation Year-To-Date 2016
Ranked by % Change:(January – Oct. 2016)
11
843
4
26
50
2
6
7
Top 10 Growth States5
42
9
3
1
1314
Lost Private Jobs
U. S. Bureau of Labor Statistics
10 Hawaii
U.S Economic Recovery Has FavoredWorkers With Skills and Education
Cumulative Employment Gains By Education
Torsten Slok, Deutsche Bank
Arizona Industry % Change U.S. RankNonfarm Employment 2.7 8Private Employment 3.3 6Financial Activities 5.5 2Information 6.1 3Admin & Support 5.8 5Health Care 4.0 5Construction 6.9 7
Arizona Industries in Top 10 Ranked by Percent Change: Year to Date 2016
W. P. Carey School of Business & U. S. Bureau of Labor Statistics, year to date October, 2016
Arizona Ranks First in InformationIndustry Job Creation 2009-2015
Ranked by % Change:(2009 - 2015)
10
6
2
1 7
Top 10 3
895
4
36 Lost Jobs
U. S. Bureau of Labor Statisticshttp://www.bls.gov/opub/ted/2016/
4 < 2% Growth
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
3.3
2.3
1.8
1.0 1.0 0.91.3 1.2
1.5 1.5 1.6 1.6
Forecast
Arizona Population Growth StableBut Below Historical Averages
W. P. Carey School of Business & U. S. Census Bureau; Average 1977 – 2007 = 3.2%
Annual Percent Change
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
80,804
55,633
37,666
19,15312,826 10,755 10,306
16,18918,386 16,841
22,311 24,54028,220
Home Building Slowly Improving 10% Gain in 2016 to be Followed by 15% in 2017
ForecastW. P. Carey School of Business, ASU & U. S. Census Bureau
15% rise
Single Family Permits – Arizona
What Is Holding Back Home Building?
• Live with parents• Marry much later• Fewer with kids• Prefer urban locale • House is “not a
good investment”
49% in 1970
20% in 2015
Some (Millennials) Don’t Want A House At All!
What Is Holding Back Home Building?
• Labor costs are up• Labor less available• Land/lot costs are up• Land/lot restrictions• Lending still tight
Look at the “Three L’s” for Answers
What Is Holding Back Home Building?Weak Income Gains Hurt Affordability
In one hour, the robot does double the dailywork of a human bricklayer and skips lunch
BIG QUESTION:
How to build homes forthe $250,000 market& make a profit?!?
Is ThisThe Future?
Arizona Watch-List Heading into 2017 Arizona’s October year-to-year 49,600 job gains
were the lowest so far in 2016
Single family permits may grow less than 10% in 2016 after 30% rise in 2015
Minimum wage increase positives (lower turnover, more in-migration, rise in labor force participation) may outweigh negatives
Caterpillar, Northern Trust, Comcast, Home Depot, Santander announce relocations to Arizona…look for more to come in 2017
Arizona among national leaders in job growth in information, finance, health care but mining & manufacturing are weak
Strong “headline” indicators overshadow longterm structural issues in state economy
Long Term Trend: Arizona Is Below National Average on Measures of Economic Prosperity
Per Capita AZ Personal Income42nd Among All States: 2015
Per Capita AZ GDP43rd Among All States: 2015
Productivity and Prosperity Project, ASU; https://wpcarey.asu.edu/sites/default/files/econperform10-16.pdf
National Average
Long Term Trend: Arizona is Below National Average Ratio of Employment to Population
AZ Employment/Population Ratio42nd Among All States: 2015
National Average
Productivity and Prosperity Project, ASU; https://wpcarey.asu.edu/sites/default/files/econperform10-16.pdf
Long Term Trend: Arizona is Below National Average of Output/Worker & Earnings/Worker
AZ Output (GDP) Per Worker43rd Among All States: 2015
AZ Earnings Per Worker31st Among All States: 2015
National Average
Productivity and Prosperity Project, ASU; https://wpcarey.asu.edu/sites/default/files/econperform10-16.pdf
Arizona Statistics RankIN THE HEADLINES
Domestic In-Migration (2015-Census) 4th
Private Job Growth (Year to Date-BLS) 6th
ROOM FOR IMPROVEMENTValue of Exports (Year to Date-Census) 19th
Earnings per Worker (2015-BEA) 31st
LONG TERM ISSUESPer Capita Income (2015-BEA) 42nd
Output (GDP) per Worker (2015-BEA) 43rd
Poverty Rate (2015-Census) 45th
56% Cut in University $/Student ( 2008-2015) 50th
A top 10 state for job creation and population increases - domestic migration continues strong
Current indicator growth rates are much more positive than per capita measures of prosperity
Possible new policies on exports could affect trade – but state benefits from higher defense spending
Labor force, quality of life, cost structure will drive growth but national business cycle is greatest risk
Arizona Economic Outlook Summary-2017
2015 2016 2017
2.6%2.9% 3.0%
W. P. Carey School of Business, December 2016
Arizona Job Growth in 2017:3rd Consecutive Year of Gains
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Arizona EconomicUpdate & Outlook
ASU/JPMorgan Chase Economic Forecast Luncheon
December 5, 2016