Economist offers negative prognosis for Arizona's job growth - East Valley Tribune: Capitol Media Services

Economist offers negative prognosis for Arizona's job growth

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Posted: Friday, May 2, 2014 10:50 am

Economist Aruna Murthy had a few words about the state's projected job growth Thursday when she made her predictions.

“Stagnant.” “Slow.” “Subpar.”

That's based on her forecast that Arizona employers will hire just 53,500 new workers all of this year. That means the number of Arizonans working at the end of this year will be just 2.1 percent higher than it was at the beginning — the same slow growth rate the state has recorded for the past two years.

Murthy, the director of economic analysis for the state Department of Administration, said the largest growth rate will be in Maricopa and Pinal Counties where she predicts employment will increase this year by 44,600. But even that picture is hardly rosy: Those two counties added 48,500 workers last year.

And everywhere else is expected to fare even worse.

Murthy figures Pima County will add just 4,400 workers this year, just a 1.2 percent year-over-year growth. The situation will be only slightly better than that in the other 12 counties combined, with 4,500 new jobs, equating to a 1.3 percent increase.

At this rate, Murthy and her staff predict the state won't reach its pre-recession employment levels until sometime in 2017.

That recovery, however, won't be across the board.

Leading the prediction for growth for this year and next is the state's health care industry.

Murthy said anticipated population growth will lead to the continued need for more doctors and urgent care centers. She figures employment in things like doctors' offices and urgent care centers will grow 3 percent this year and 3.2 percent in 2015.

There also will be increases in employment in the traditionally lower-wage segments of the economy like retail trade, which is likely to see a 3 percent jump in the number of workers, with a 3.8 percent growth rate in the number of people working at bars and restaurants.

At the other end of the spectrum, Murthy says Arizona's manufacturing industry will lose jobs this year, with the potential for small growth in 2015. But she said, though, there are no signs employment in that sector of the economy will come back to where it was in 2006 in the foreseeable future — if ever.

Murthy said what fueling — or, in this case, not fueling -- the state's job growth is economic uncertainty.

It starts with consumers.

Murthy said that starts with the fact that Arizonans are putting more money into savings.

“It tells you that people are not willing to spend as much as they would like to spend,” she said. Murthy said that desire to go out and buy is important “for a market economy like the United States,” versus, say, Japan where savings rates always have been high.

She said consumers are still uneasy about their jobs and not willing to take on new debt. In fact, Murthy said, many people are using the money they have to pay off existing debt instead.

At the same time, Murthy said that Arizonans are earning less now than they were before the recession.

She said that, in inflation-adjusted dollars, Arizona per capita income was $39,819 in 2007. The most recent available figures put that at just $37,078.

All that, in turn, leaves companies unsure of demand.

“And when the demand becomes uncertain, you're unable to make business investments because you're not sure if I produce a particular widget, will that widget be sold,” Murthy said. “The result is it creates an environment not conducive to strong growth.”

The dim prognosis for manufacturing employment comes despite the fact Gov. Jan Brewer has made a big push to attract these firms to Arizona. Just last month she signed legislation to exempt these kinds of firms from having to pay the same state sales taxes on electricity and natural gas that other companies and individuals still face.

That's on top of previously approved measures specifically aimed at manufacturers, like one that gives them the ability to base their state corporate income tax on what percentage of their products they sell within Arizona. Put another way, a firm that makes items solely for the military can now escape this tax entirely.

Murthy said other factors are working against such efforts.

One is that much of Arizona's manufacturing sector is linked to things like defense and other federal spending. She said federal budget restraints have reduced demand.

That showed up in the most recent employment figures which found employment in computer and electronic parts down by 1,800 in the last year, with a 1,300 year-over-year drop in jobs at aerospace firms.

The other issue, Murthy said, is that manufacturing is not what it used to be.

“It has become more capital intensive than a labor intensive industry overall,” she said, with items that used to be made by humans now being built by expensive machinery.

She said there's no indication that's going to change. Murthy said as companies seek to do more with less, they opt to automate.

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