PHOENIX – Arizona’s economy is showing “slow, grinding” improvement, but a full recovery will likely take until 2015 and won’t occur until population growth and construction pick up again, a leading economist said Friday.
“From 2015 and beyond we’re in great shape,” Elliott Pollack told business leaders attending Economic Outlook 2012, sponsored by the Greater Phoenix Chamber of Commerce and Cox Communications. “If you’re looking for a lot of stuff between now and 2015 you’re going to be sorely disappointed.”
The event featured two other economists who said the outlook for the national and global economies – and their impact on Arizona – is less than sunny in the near term.
Pollack, CEO of the economic and real estate consulting firm Elliott D. Pollack & Co., noted that jobs in Arizona have grown modestly this year – the first uptick since 2007. Only the federal government and professional business services have lost jobs in the past year while every other sector has gained jobs, he said.
“That’s good news. But it’s still going to take till 2015, 2016 till we get back to where we were in 2007,” Pollack said. “So it is truly a lost decade in terms of employment.”
Stagnant population growth also is hampering the recovery, in large part by curtailing construction, he said. Prior to 2007, Arizona’s population had increased every year since World War II.
“The good news is we’re finally growing again, and we’ll continue to grow, but not at the levels we are used to for the next couple of years,” Pollack said.
“The bad news is there is no strong recovery without recovery in construction,” he added.
Another drag on the economy, Pollack said: Fewer new households are forming, primarily because young people are having trouble finding jobs but also because people can’t sell homes elsewhere and move here.
While the economy is weak these days, Arizonans can be optimistic about the future, he said.
“There’s a boom out there somewhere, a huge boom for Arizona,” he said. “Unfortunately it’s not 2011, it’s not 2012.”
Beckie Holmes, director of interactive intelligence at Cox Communications, said that the U.S. economy in 2012 is going to look a lot like 2011. The impact of federal government spending on the economy eventually must give way to private sector investment, she said.
“Under the continuation of existing policies our debt burden will continue to grow,” she said. “In order to fix the deficit it’s going to require some very hard choices on the part of our politicians; they are going to have to choose spending or tax cuts or both.”
Holmes said that moving too far too quickly in the other direction could harm the economy.
“If the private sector is there to help support growth while the government pulls back, it will be a slow recovery,” she said. “If they’re not, it will be a recession.”
Angel Cabrera, president of the Thunderbird School of Global Management, said emerging economies around the world offer promise to Arizona manufacturers. For example, a growing middle class in India and China will increase demand for consumer goods there, he said.
“This is a dramatic shift,” Cabrera said. “What’s happening in the world economy, and the speed by which economic activity is moving from west to east, is of unprecedented proportion.”
However, the debt crisis in Greece, and its potential to spread to other European nations, could have a catastrophic effect on global financial markets, he said.
“We really have to pray to the gods that Europe gets its house in order because this could be very painful for all of us,” Cabrera said.
Ryan Clark is a reporter for Cronkite News Service