It’s going to be at least four years until the state’s jobless rate drops below 7 percent, according to economists from Arizona State University.
Lee McPheters, a professor at the W.P. Carey School of Business, predicted Thursday that the state will have nearly 300,000 more people working in 2015 than there were last year. The job growth, he said, will initially be slow — only about 1 percent this year — before finally picking up toward the middle of the decade.
But the consensus of the economists was that even by the end of 2015, there will still be fewer people working in Arizona than had jobs in the state when employment hit its peak in 2007 when the economic bubble burst.
“Arizona is still struggling,’’ said McPheters, with job growth in the last year no better than 47th of all the states.
Robert Mittelstaedt, dean of the school, said part of the reason for the slow growth is lack of consumer confidence. One key factor, he said, is because homes are not worth what they once were.
He acknowledged that for most people, this is simply a paper loss: If they are not selling their homes now, the value is academic. But Mittelstaedt said that’s irrelevant to homeowners.
“It’s a psychological thing,’’ he said.
“Even if people aren’t selling that asset, they have that asset,’’ Mittelstaedt continued. “They’re counting that asset in their head as something that they have.’’
And if that paper value has dropped, so does the desire to open up the wallet.
“That doesn’t mean if the car falls apart they’re not going to say it’s time for a new car,’’ Mittelstaedt said. But luxury items are something else.
“Until you get stability in home prices and get some job growth, you’re simply going to have a consumer that’s very reluctant to make long-term commitment for major purchases,’’ he said.
But McPheters said that, at some point, Arizonans will be out shopping a lot more regardless of how strong the economy recovers.
“There’s an element of pent-up demand,’’ he said.
“How long can you go without replacing the washing machine, your automobile,’’ McPheters continued. “These big-ticket items eventually wear out and they have to be replaced.’’
Professor Dennis Hoffman, the self-acknowledged optimist of the group, said he foresees higher consumer confidence — and the purchasing that goes with it — without a major increase in employment or income.
“The way you can do that is you just come back slightly a little more toward normal consumption patterns,’’ he said.
Hoffman acknowledged the “wealth effect’’ and how declining home values affect spending.
“But wealth has come back in a lot of other areas,’’ he said. That includes the rise in the stock market and the commensurate increase in the value of 401(k) retirement accounts.
And what really makes Hoffman upbeat on the state’s future is that Arizona still has the same “fundamental magnetism’’ for growth.
“It was climate, it was the fact we don’t have harsh winters they do elsewhere, we don’t have Category 5 tornadoes,’’ he said.
“We don’t have earthquakes, we don’t have major flooding,’’ Hoffman continued. “We don’t have things that folks are going to want to get away from.’’
Still, he acknowledged, there are other factors that temper all that.
“People are frozen in houses,’’ Hoffman said, unable to move to Arizona until they can sell what they have.
“But they’re not going to be frozen forever,’’ he said. And there is that growth in the 401(k) values.
“So they’ll adjust their portfolios, rid themselves of a house in the Midwest and show up on our doorstep,’’ he said. And Hoffman said that does not make him an optimist.
“You say, ‘Why would that happen?’ he said.
“I guess I would turn that around: Hell, it’s happened for 50 years,’’ Hoffman explained. “Why wouldn’t that happen?’’
In the interim, though, there are other factors at work. One of those is gasoline prices, which have been flirting with $4 a gallon.
“People have to make choices,’’ McPheters said. “They’re probably going to buy gasoline and spend less on eating out, entertainment, some other services that they can either do without or postpone.’’
Here, too, Hoffman had a contrary view.
“I think that running with our hands in the air and screaming about the price of gas is way overdone,’’ he said.
“Folks are only going to buy fuel if they can afford to buy fuel,’’ Hoffman said.
And he said the marketplace has adapted with the sale of more gasoline-friendly vehicles.
Mittelstaedt said that, on the employment front, there’s another thing to consider: the changing job market in Arizona.
He said that, nationwide, the unemployment rate among those without a high school education is about 35 percent. Among those with a college degree it is less than 10 percent.
“A lot of the jobs that have left the economy are not things that we’re going to get back because the industries have to adapt to compete globally,’’ Mittelstaedt said. That means some jobs are going to be shipped overseas.
At the same time, the jobs that cannot be shipped out — those in construction — are going to remain scarce for some time to come.
“You have a substantial excess supply of housing, nationally, not just in Arizona,’’ he said.
Key economic indicators and outlook:
|Employment (in thousands)||2,377||2,401||2,449||2,510||2,586||2,676|
|% change from prior years||-2.10%||1.00%||2.00%||2.50%||3.00%||3.50%|
|Single family permits: 10,641||11,705||15,217||22,825||28,531||34,237|
|Population (in thousands)||6,392||6,488||6,605||6,737||6,885||7,057|
Source: W.P. Carey School of Business, Arizona State University