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Arizona/Phoenix/Western States Update & Outlook

ASU/JPMorgan Chase 54th Annual Economic Forecast Luncheon

November 29, 2017

Lee.McPheters@asu.edu

Arizona Ranks 13th in Non-Farm Job Creation Year-To-Date 2017

Ranked by % Change: (January – Oct. 2017)

10

4 34

5

8

2

13

9

Top 10 Growth States 6

17

3

7

14 1

Losing Jobs

U. S. Bureau of Labor Statistics & W. P. Cary School of Business

50

Arizona Industry % Change U.S. Rank Non-Farm Employment 1.8 13 Food Services 6.5 1 Financial Activities 4.0 1 Health Care 3.0 5 Construction 2.4 27 Manufacturing 2.1 9 Trucking 2.0 7

Food Service & Financial Job Growth Gains Best in the U.S.

U. S. Bureau of Labor Statistics & W. P. Carey School of Business, Year -to-Date October 2017

Oct Nov Dec Jan Feb Mar April May June July Aug Sept Oct

65.5

53.1 56.2 57.3 55.4 54.1 48.8 48.7

60.4

43.6 39.7 37.5

32.0

Thousands of New Jobs Year-Over-Year

U. S. Bureau of Labor Statistics

Slowest Growth Since The Expansion Began: Permanent Dip or Blip?

But Arizona Job Growth Has Slowed During the Second Half of 2017

2011 2012 2013 2014 2015 2016 2017 2018

26,000

51,300 57,100

49,800

65,600 68,100

49,000

61,000

Arizona To Add 61,000 Jobs in 2018 Annual Job Creation

U. S. Bureau of Labor Statistics & W. P. Carey School of Business, November 29, 2017

Forecast

Unemployment in Western States (Seasonally Adjusted Unemployment Rates, October 2017)

3.3 5.0

2.7

6.1

4.3

3.9

4.2

4.9

4.5

2.9 3.9

4.5

U. S. Bureau of Labor Statistics

Among Ten Lowest

Unemployment Notes • Arizona’s 4.5 % unemployment

rate lowest in 10 years (Dec ‘07) • Colorado has 3rd lowest rate, Idaho 6th, Utah 10th

• New Mexico’s unemployment is the second highest in the nation, behind Alaska (7.2%)

• Arizona unemployment rate is projected to average 4.3% in 2018

2 1

4

10

Arizona Ranked 8th Fastest in Population Growth in 2016

U. S. States Ranked by Percent Change 2016

8

U. S. Census Bureau, Dec. 2016

9

7

5

3 13

19

6

41

Top 10 Growth States Lost Population

2

3

5

1

8

10

9

6

7

Arizona Ranks Among Top Five States for Domestic In-Migration

4 Alaska Hawaii

U.S. Census Bureau, Dec. 2016

31 States in Red Lost Domestic Population to 19 States in Green

Arizona & West Draw College Grads

IPUMS Data – University of Minnesota

Net Migration of College Educated under 40

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1.0 1.0 0.9

1.3 1.1

1.4 1.5 1.7 1.6

1.7

Forecast U.S. Census Bureau & W. P. Carey School of Business, November 29, 2017

Arizona 2018 Population Growth Will Yield 120,000 New Residents

Annual Average 1977 – 2007 = 3.2%

Percent Change

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

80,804

55,633

37,666

19,153 12,826

10,755 10,306 16,189

18,386 16,841 22,311 24,853

28,332 32,580

4th Year of Home Building Gains 15% Arizona Rise Expected in 2018

Forecast

Arizona Single Family Permits

U.S. Census Bureau & W. P. Carey School of Business, November 29, 2017

Arizona U.S.

Arizona Home Ownership Rate Has Declined from Pre-Recession Peak

U.S. Census Bureau

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

10,868

5,876

674 1,088 1,784

4,036 5,778

8,784

5,781

10,150

7,645 6,883

Multi-Family Permits to Dip in 2018

Forecast

Greater Phoenix Multi-Family Permits

U.S. Census Bureau & W. P. Carey School of Business, November 29, 2017

Phoenix Indicators 2016 2017 2018 Employment (thousands) 1,973 2,024 2,081 Employment Growth (% change) 3.1 2.5 2.8 New Jobs (thousands) 60.1 51.0 57.0 Population (% change) 2.1 2.0 2.2 Single Family Permits (thousands) 18.4 21.5 24.5

Greater Phoenix Outlook

W. P. Carey School of Business, November 29, 2017

Arizona Indicators 2016 2017 2018 New Jobs (thousands) 68.1 49.0 61.0 Employment (% change) 2.6 1.8 2.2 Unemployment Rate (December) 5.0 4.5 4.2 Population (% change) 1.7 1.6 1.7 Single Family Permits (% change) 11.4 14.0 15.0

Arizona Economic Outlook Greatest Risk is National Economy

W. P. Carey School of Business, November 29, 2017

Potential Threats & Headwinds To U.S. Economic Growth

• Fed Makes “Policy Mistake” • Congress Makes “Policy Mistake” • Productivity Weakens • Korean, Other International Crisis • Tax Cut Fails, Consumer Confidence Craters, Markets Contract

Arizona unemployment rate is at 10 year low.

Key industries are strong and growing: Finance, Manufacturing, Construction, and services such as Health Care and Food Services

But growth rates for past 5 years indicate a slower, sustainable “New Normal” for Arizona and Phoenix

Population, start ups, and cost structure will drive growth in 2018 – U.S. business cycle is greatest risk

Arizona Economic Outlook Summary-2018