Job growth in Arizona expected to stay steady - East Valley Tribune: Business

Job growth in Arizona expected to stay steady

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Posted: Friday, April 8, 2005 6:21 am | Updated: 8:51 am, Fri Oct 7, 2011.

Arizona’s post-Sept. 11, 2001 economic growth cycle is expected to peak this year as job creation reaches more than 100,000, then falls back slightly to just over 90,000 next year.

That’s according to the Arizona Department of Economic Security’s two-year forecast. Nonfarm jobs are expected to grow at an annual rate of 4.2 percent this year and 3.7 percent next year, compared with 3.4 percent last year.

The expected slowing in 2006 is attributed to rising interest rates and energy prices as well as fewer economic stimulants such as tax breaks and other government incentives and economic slowing in other countries, said Don Wehbey, the senior DES analyst.

"We saw a rather slow buildup and then we are seeing something of a very slow descent, where it’s not even dropping off," he said. "We’re still expecting to see growth, not falling off. It’s not putting on the brake."

Higher interest rates usually occur in the later stages of an economic cycle and play an increasing role in hindering job growth, said Tom Rex, an economist at Arizona State University.

"So 2006, you would expect the numbers would probably be pretty similar, maybe a little higher or maybe a little lower than 2005," he said. "If fuel costs were to keep going up, that could have a depressing effect. Interest rates almost certainly will be higher. They’re pretty darn low now."

About 25,000 construction jobs are expected to be created through 2006, including more than 13,000 this year. Rising interest rates, along with higher energy and materials costs, will prompt some slowing in this sector, Wehbey said.

"Higher interest rates will tend to cut the demand back on housing," he said. "But what we do expect to see is commercial buildings being built because businesses are ramping up. Businesses are expecting to purchase more, they’re planning to buy more business equipment and they’re planning on hiring more."

Educational and health services are expected to add more than 32,000 jobs through 2006, including roughly 16,000 jobs this year. Job growth in this sector is not expected to slow next year, Wehbey said.

"If you look at education and health, they’re just going strong and steady," he said. "They’re not thwarted by too much. I’ve never seen that particular sector lose employment."

Leisure and hospitality is expected to add more than 18,000 jobs through 2006 because of an improving economy and better prospects for tourism, Wehbey said. With the cheaper dollar relative to foreign currencies, tourism should benefit as foreign tourists take advantage of more favorable exchange rates, he said.

"We’re expecting to see firming up in the leisure and hospitality sector," he said.

Job growth in trade, transportation and utilities is expected to slow over the twoyear period as rising energy prices and interest rates claim a larger share of consumers’ disposable income. About 21,300 new jobs are expected this year, followed by 16,100 new jobs next year.

Professional and business services should add nearly 38,000 through 2006, mostly in employment services, followed by the professional, technical and scientific services sector.

Because of the expanding local economy, the financial activities sector is expected to add nearly 10,000 jobs. However, higher interest rates, energy prices and consumer debt will limit the potential for stronger job growth.

Manufacturing is expected to add 4,000 jobs during the two-year period, mainly in products for local use in residential, commercial and industrial real estate development. Also, defense spending is expected to bolster employment in Arizona’s factories to produce equipment and supplies for ongoing military operations, Wehbey said.

The state’s public sector is expected to gain nearly 22,000 jobs through 2006, mainly as more government workers are needed to accommodate population growth, he said.

The already struggling information industry is expected to lose 200 jobs through 2006, mainly because telecommunications remains weak.

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