Thanks to strong improvement in housing prices and improved population in-flow, Arizona should expect above-average growth through the year, according to the bi-annual U.S. State Monitor Report from BMO Economics. Expected real GDP growth in the state is 3.2 percent, up from a 1.8 percent rate currently expected for 2013.
Nonfarm payrolls in Arizona were up 2 percent in 2013 – above the national average. The unemployment rate edged up through much of 2013, but moved lower late in the year to finish at 7.6 percent, the lowest since late 2008 and a significant improvement from the recession high of 10.8 percent.
“Although unemployment in Arizona is still higher than it should be, there has been solid progress made in generating good paying jobs that will bolster our overall economy,” said Steve Johnson, Regional President, Arizona, BMO Harris Bank. “In particular we’ve seen a boost in professional services and the tourism industry, which is great news for business owners in those sectors.”
Population growth has picked up to a 1.3 percent year-over-year pace driven by the improving economy. While that is still below the 3.3 percent rate experienced during the housing boom, positive momentum is expected to continue through the coming years.
Reduced home inventories are allowing for improved construction activity, which was at a near stand-still during the recession.
“Arizona’s housing market is experiencing a strong recovery, despite a recent soft patch. According to the S&P Case-Shiller Index, Phoenix prices have surged more than 40 percent from their lows,” said Robert Kavcic, Senior Economist, BMO Capital Markets.
“While the increase in mortgage rates through the summer softened sales and home building activity, that should prove to be temporary. The foreclosure rate fell to 1.3 percent in the third quarter of last year, from its high of 6.3 percent. Additionally, surging home prices have reduced the number of home mortgages under water to less than 25 percent,” Mr. Kavcic added.
To view a full copy of the report, visit www.bmocm.com/economics.