2017 arizona economic update & outlook

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Arizona EconomicUpdate & Outlook

ASU/JPMorgan Chase Economic Forecast Luncheon

December 5, 2016

[email protected]

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


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


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

Subtitle text can go here

Arizona EconomicUpdate & Outlook

ASU/JPMorgan Chase Economic Forecast Luncheon

December 5, 2016

[email protected]