Things are looking up for Tucson, with an economy that is set to grow in 2015 and 2016. That was one of the key takeaways from today’s University of Arizona Eller College of Management annual Economic Outlook Forecast Luncheon at the Westin La Paloma Resort in Tucson. Some 540 people packed the room to hear presenters George W. Hammond, director and research professor at Eller’s Economic and Business Research Center, and Anthony Chan, Chase chief economist, share their predictions regarding job growth, the housing sector, the stock market, interest rates and more.
Despite some stumbling at the start of 2014, the year behind us helped set the stage for growth. To put things into perspective, Anthony Chan spoke first, providing an in-depth analysis of the national and global economy.
“In 2015, we expect more support from the central banks of Europe and China and less support from the United States. Such action is likely to generate faster global growth and better performing equity markets in Europe as the Euro-zone recovers to something approaching 1 percent growth,” Chan said. “As for China, we expect some improvement despite the effects of restructuring of that economy, but acknowledge that financial markets have already front-loaded some of the expected positive monetary and fiscal policy effects.”
In the case of the United States, Chan said growth closer to 3 percent is likely as the current growth momentum spills over into 2015, especially as faster consumer spending is supported by the recent plunge in energy prices.
“Finally, led by Brazil, we expect that Latin America will continue to lag the overall improvement in global economic growth,” he said.
Locally, Tucson’s economy is forecast to expand again next year and “even pick up a little steam,” according to Hammond. In his presentation, entitled “Battling Headwinds,” Hammond gave a comprehensive overview of current economic conditions, breaking down factors that slow growth and pointing to indicators that will fuel future acceleration.
Tucson added jobs and residents during the past year, continuing its recovery from the Great Recession. “The metropolitan area added 4,200 jobs during the past four quarters, which translates into a rate of 1.2 percent. That job growth is a positive sign, but it was below the state and national growth rates, of 2.0 percent and 1.9 percent, respectively,” he said.
Most of the job gains during the past year came in leisure and hospitality, professional and business services, education and health services, and financial activities. Tucson experienced job losses in construction and manufacturing.
“Construction continues to be the missing link in the recovery, with employment running at levels last seen in the mid-1990s. Slow population and household gains have dampened residential real estate activity during the past year,” Hammond said.
Also dragging down local growth has been significant federal fiscal drag, in the form of declining employment and reduced federal procurement spending. Federal fiscal drag affects Tucson more than the nation as a whole, because federal activity (civilian and military) is a larger share of the local economy. “Indeed, according to the latest data, the federal government sector accounted for 7.7 percent of Tucson’s gross domestic product in 2012, more than double the national share,” he said.
The outlook calls for Tucson job growth to gradually improve, rising from 0.8 percent in 2014 to 1.3 percent by 2016. That reflects modest improvements in net migration and less federal fiscal drag. Rising job and population growth raise income gains, which support additional local spending.
During his presentation, Hammond encouraged the audience to utilize the new Making Action Possible for Southern Arizona (MAP) interactive website, mapazdashboard.arizona.edu. The project, which launched on Dec. 5, is a partnership between Eller’s Economic and Business Research Center, the Community Foundation for Southern Arizona, and the Southern Arizona Leadership Council.
The goal of the website is to measure progress and inspire action. MAP users will find real-time data visualization and analysis for 36 socio-economic indicators grouped into six categories: Economy, Education, Health and Social Well-Being, Infrastructure, Quality of Place, and Workforce and Demographics. Users can compare Southern Arizona to the U.S., states in the West, and select metropolitan areas.
“There are so many ways MAP can benefit our community. Examine the data to drive business decisions, build collaboration or cross-sector partnerships,” Hammond said. “Or, analyze the data to help shape and pursue effective policies or seek external funding opportunities.”
Hammond closed his presentation with an upbeat prediction. “Overall, Tucson continues to battle headwinds, but the local economy is growing and moving forward,” he said.
For more information or to view Dr. Hammond’s slide presentation, visit Eller’s Economic and Business Research website, ebr.eller.arizona.edu.