PHOENIX – Arizona will likely see lackluster economic growth in the coming year as the hangover from the housing bust continues to dampen the economic recovery, economists presenting at an annual forecast meeting said Wednesday.
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The lack of a rebound in the construction industry is one of the major reasons the state continues to see lower-than-normal job growth, according to presentations at the Arizona State University business school's annual forecast luncheon in Phoenix.
The forecast calls for about 68,000 new jobs next year, meaning it will take another 18 months for Arizona to finish replacing all 312,000 jobs lost in the Great Recession that ended in June 2009, ASU economist Lee McPheeters said.
"It looks like we have a very slow-growth economy," McPheeters said. "Partly that is because the numbers are in fact non-spectacular, but it's also due to the fact that we have a tendency to look back at previous economic performance."
Arizona's projected job growth should be about 2.5 percent in 2015 compared with about 2 percent this year. That's still less than the 3 to 5 percent growth the state often sees.
Private economist Elliott Pollack blames much of the slow recovery on the lack of a rebound in construction.
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"Probably 80 percent of the difference in this recovery ... has been due to the lack of construction," Pollack said. "We gained about 8 percent of the construction jobs we lost — normally by this time we'd have gotten back about half the construction jobs we lost. So if you're looking for a reason for the mediocre growth in Arizona, it is solely at the feet of construction, or lack thereof."
The good news for the housing industry is that the economy is accelerating, mortgage rates remain low, homes are still affordable and foreclosures and delinquencies are down, Pollack said. And there are signs the construction industry is ticking up, especially in apartments and office buildings, he said.
But there is plenty of bad news still left: People still aren't moving into Arizona at historic levels, Pollack said. The state remains at 8th for new residents, down from 2nd place. Arizona is still feeling the effects of SB1070, which sent a message to people that Arizona isn't welcoming, he said.
A series of other issues are dragging down the state's housing market, like higher-than-average unemployment, people with little equity or who have a foreclosure on their credit reports, and young people putting off starting a family or still living at home.
Nationally, the economy is expected to continue slow growth in the coming year but real wage growth will remain anemic, said John Lonski, chief capital markets economist at Moody's Analytics. Part of that is because underemployment remains high and overseas labor markets continue to have excess capacity.
"I don't think we're quite through this process yet of adjusting the U.S. labor market to the reality of global slack and intense competition from the always-cheaper and increasingly skilled workforces of emerging markets," Lonski said.
But for U.S. consumers and investors overall, things look reasonably bright, said James Glassman, senior economist at JP Morgan Chase & Co. The country is about halfway though the recovery, interest rates remain low and there's still plenty of room for growth.
"We're in the middle of a recovery, and we still have a ways to go — and that's why I think we're looking at a pretty positive outlook for financial markets," Glassman said.