Recession over? Not in Arizona, experts say - East Valley Tribune: News

Recession over? Not in Arizona, experts say

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Posted: Saturday, August 8, 2009 3:48 pm | Updated: 2:58 am, Sat Oct 8, 2011.

National publications and news stories may be declaring the recession at an end, but Arizona economists say it is too early to pop the champagne corks here.

National publications and news stories may be declaring the recession at an end, but Arizona economists say it is too early to pop the champagne corks here.

The state was about three months ahead of the rest of the nation in plunging into the worst economic abyss since World War II, and it will lag at least as far behind coming out, they said.

"Don't believe everything you read in the newspapers," said Elliott Pollack, who runs his own economics consulting firm in Scottsdale. "It appears to me we will continue to be in a difficult environment for a while, and the recovery will be much more anemic than normal."

Arizona is not faring as well as the United States as a whole because the state and Valley economies are tied closely to housing and population growth - two factors that will be slow to recover, economists said.

"Places like Arizona, Nevada, California, Florida were affected by an overinflated asset bubble in housing, and those states will lag behind during this recovery," said Marshall Vest, director of the Economic and Business Research Center at the University of Arizona's Eller College of Management.

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Vest concedes evidence is building that the national recession may be at or near an end.

"You can make the case that we hit the bottom as early as May," he said.

But in Arizona, the process of working through foreclosure sales and excess inventory in the crucial housing industry still has a ways to go, he said.

"About two-thirds of home sales in the Valley are distressed sales of some sort, but the good news is there is a demand for these houses," Vest said. "There is private-sector money to buy these houses. It is absolutely necessary to get housing turned around."

Getting the real estate markets in better balance is important for Arizona because in normal times, about 20 percent of the state's jobs are related to real estate and growth - construction, mortgage banking, title insurance, real estate brokerage, architecture, furniture sales and many others, Vest said.

With an unemployment rate of 8.7 percent, Arizona's rate is lower than the national average, but Vest thinks it could rise over 10 percent before it heads back down.

Still, "there is light at the end of the tunnel," he said.

Pollack is slightly less optimistic, although he said that technically, the national recession could end during the current quarter. But for any expansion to last, the consumers will have to kick in and start spending, he said.

"I'm guessing the recovery will be slow because they won't spend a bunch," he said.

That's because unemployment remains high and job losses are continuing, he said. In fact, Pollack's gloom about the employment picture in Arizona is severe. He thinks the number of jobs in Arizona in 2014 will be no higher than 2007.

"Essentially, there will be no economic progress in seven years," he said.

Lee McPheters, associate dean of the W.P. Carey School of Business at Arizona State University, is slightly more optimistic, but even he thinks it will be 2013 before Arizona returns to the job level of 2007.

"We think the state will lose jobs in 2010, which would be an unprecedented three straight years of job losses," he said. "Then you would have to start growing at 3 to 4 percent a year for several years to get back to where we were."

But he added that "Arizona has always done that."

Brian Cary, corporate economist for the Salt River Project, agrees with predictions that Arizona might not hit bottom until mid-2010.

"The reason we are behind is our (housing) boom was more robust during the first half of the decade," Cary said. "The converse is also true, that we have fallen further and faster in the collapse of the housing market, and that has rippled into other segments."

He cites some favorable housing indications - including stabilizing of prices and growing sales volume - but the recovery will be slow, he predicted.

"We've had a long history of attracting folks from elsewhere. But when you're losing jobs rather than creating them, there is no reason for others to come here."

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