Tag Archives: JPMorgan Chase Economic Outlook Center

Arizona Is Losing Economic Grounds To Other Southwestern States, 2008

Rebound for Arizona and U.S. Slows Down

Jobs, home prices and population growth are all slowly rebounding in Arizona. However, experts from the W. P. Carey School of Business at Arizona State University say we still have a long way to go, and the automatic federal budget cuts known as the sequester aren’t helping our momentum. The experts delivered their forecasts today at the annual Economic Outlook Luncheon sponsored by the Economic Club of Phoenix.

Research Professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School, confirmed Arizona is once again a Top 15 growth state for both employment and population, but we’re not back to normal levels. From 1960 to 2007, we routinely ranked among the Top 5 states for both employment and population growth. In the rough years from 2008 to 2011, we dropped down to No. 48 and No. 14 in those areas.

“Last year, we finally bounced back to No. 8 for employment growth and No. 7 for population growth,” said McPheters. “However, the sequester and other factors have been clouding the economy here in recent months, and the year-over-year job-growth ranking issued this March dropped Arizona down to No. 13. The state will have to wait a couple more years for full recovery.”

Arizona added 48,900 jobs in 2012. The state is projected to add 61,000 jobs this year. The fastest-growing industries are construction, wholesale trade, information, state government and leisure/hospitality.

“Arizona has gained back 39 percent of the 314,000 jobs we lost in the recession,” explained McPheters. “However, that’s a pace well behind the nation as a whole, which has regained 67 percent of its 8.8 million lost jobs.”

In recent years, population growth in Arizona had dropped from the state’s typical 2- to 3-percent range to less than 1 percent. Finally last year we popped back up to 1.3 percent.

Personal income may also be coming back. The consensus of Arizona Blue Chip economists shows growth in this area of 3.7 percent in 2012, 5.1 percent expected in 2013, and 6 percent expected in 2014.

“The bottom line is that Arizona is doing better than most states, but this will still be the seventh year in a row of lean, subpar growth for us,” said McPheters.

Dennis Hoffman, economics professor and director of the L. William Seidman Research Institute at the W. P. Carey School of Business, reiterated that Arizona is recovering more slowly from this recession than from others in the past. However, we are coming back stronger than the nation as a whole in most areas of the economy. Hoffman expects the United States to see 2- to 3-percent gross-domestic-product (GDP) growth this year. That will likely include more moderate job growth and low inflation.

“The economy is plodding along, assisted by the real-estate and stock-market recoveries, low fuel prices and innovation in the business world,” said Hoffman. “Still, we face a lot of uncertainty from our national-debt crisis, political squabbling in Washington, economic difficulties in Europe and China, and changing demographics. One huge issue remains the problem of future funding for Social Security and Medicare.”

At the state level, Hoffman says we’re going to be strongly affected by the decisions still to be made this year on possible Medicaid expansion, the loss of the temporary sales tax, the potential taxing of online sales, and other big issues. For now, state revenue has been coming back with the rebounding economy.

When it comes to the housing market, Mike Orr, director of the Center for Real Estate Theory and Practice at the W. P. Carey School of Business, delivered good news about the recovery. Specifically, the median Phoenix-area home price was up a whopping 58 percent from a low of $111,000 in May 2011 to $175,000 this March. Foreclosures were down 60 percent just over the last year from March 2012 to March 2013, and Orr expects foreclosure rates to dip below long-term averages by the end of next year. Also, less than 5 percent of Arizona home loans (not already in foreclosure) are delinquent now.

However, we do face some problems in the housing market. For one thing, there’s a chronic shortage of homes for sale. Now that there’s no flood of cheap foreclosures and short sales coming onto the market, buyers are dependent mostly on normal resales and new-home sales.

“Higher prices would normally bring more ordinary home sellers into the market, but many are either locked into their homes because of negative equity, or they’re simply waiting for prices to go up more,” explained Orr. “As a result, some buyers are turning to new-home sales, but developers are reluctant to overbuild as much as they did at the market peak. Therefore, we may see about 50,000 to 60,000 new people being added to our local population this year, but only around 12,000 new single-family homes being built.”

Today’s Economic Outlook Luncheon was held at the JW Marriott Desert Ridge Resort & Spa in Phoenix. The Economic Club of Phoenix hosts this event every spring, as one of its opportunities for Valley business leaders and others to network and engage. The club was founded by a group of prominent business executives called the Dean’s Council of 100, in conjunction with the W. P. Carey School of Business. More information about the club can be found at www.wpcarey.asu.edu/ecp.

Today’s presentations will be posted at knowWPCarey, the business school’s online resource, at http://knowwpcarey.com.

economy

Arizona Could Hit Full Economic Recovery in 3 Years

We’re finally on the path to full economic recovery, and Arizona may get there in about three years. That’s the main message from experts who spoke today at the 49th Annual Economic Forecast Luncheon co-sponsored by Arizona State University’s W. P. Carey School of Business and JPMorgan Chase.

About 1,000 people attended the event at the Phoenix Convention Center, where economists painted a generally brighter picture for 2013.

“As of September, Arizona ranked fifth among states for job growth, and the Phoenix area was fourth among large metropolitan areas,” said Research Professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business. “Arizona is expected to add 60,000 jobs in 2013, led by professional and business services, retail, hospitality and health care. We should finally dip below 8-percent unemployment in 2013 — down to 7.6 percent.”

McPheters added, as long as the national economy doesn’t drag us down, Arizona may see 2.5-percent growth in its employment rate next year. The state had 2-percent growth this year. Despite the jump, Arizona has gained back less than a third of the jobs it lost during the recession. McPheters believes it will take another three years to return to pre-recession employment levels.

In 2013, McPheters expects improved 5-percent growth in personal income, up from just 4 percent this year. He projects retail sales will go up 6 percent, from 5 percent this year. He expects Arizona’s population to rise 1.5 percent, and he believes single-family housing permits will shoot up a whopping 50 percent, with the local housing market now on the mend.

Both McPheters and Beth Ann Bovino, deputy chief economist at Standard & Poor’s, hinged their forecasts on whether the national economy can really pull forward; otherwise, Arizona will go down, too. The biggest question out there is whether Congress can avoid the “fiscal cliff” – where automatic spending cuts would kick in, just as various tax cuts expire. Bovino says that could plunge the United States back into recession and push national unemployment back above 9 percent by the end of the year.

“If we can avoid the fiscal cliff, then it looks like the economy could finally be in a self-sustaining recovery,” said Bovino. “We expect this year’s gross domestic product (GDP) to hit 2.1 percent, stronger than previously projected. For 2013, we’re looking at about 2.3 percent. Reports also show a stronger jobs market and signs that households are willing to buy big items, such as cars and homes.”

Bovino adds the U.S. unemployment rate was at 7.9 percent in October, and she sees signs more people are joining the workforce and getting jobs. However, she says the labor participation rate is still near a 30-year low, meaning more people will still be coming back to the workforce to look for jobs, keeping the unemployment rate low for a quite a while. Despite this, Bovino expects the national unemployment rate to drop to 7.6 percent next year.

She also has a good outlook for the national housing market, with housing starts already up 45 percent this September over last September. Bovino referenced a report that 1.3 million homes rose above water – with the value going higher than what was owed – in the first half of this year alone. She expects residential construction to go up almost 19 percent in 2013.

In the financial sector, Anthony Chan, chief economist for private wealth management at JPMorgan Chase & Co., says corporations remain flush with cash. They’re waiting for some clarity on where the market will go as a result of the fiscal-cliff situation and other factors.

“U.S. corporations are reluctant to go through global mergers and acquisitions or make big investments until they have a clearer picture,” said Chan. “Corporations are keeping high cash balances, in order to deal with the uncertainty. They’re making near-record profits in some cases, and many values on the stock market look good. However, everyone’s waiting to see what will happen.”

He said high-yield investments, such as bonds, and gold remain relatively attractive. The U.S. dollar keeps falling against currencies from emerging markets, as monetary agencies work through different strategies of dealing with the rough economy.

In the local housing market, Elliott D. Pollack, chief executive officer of Scottsdale-based economic and real estate consulting firm Elliott D. Pollack and Company, also drew some conclusions.

“Even though about 40 percent of Arizona homeowners are underwater on their mortgages, we’re starting to see a recovery,” said Pollack. “The single-family-home and apartment markets look great. Industrial real estate has improved quite a bit. Only office and retail have quite a way to go.”

Pollack adds new residential foreclosure notices are down almost 70 percent from the peak in 2008. Phoenix-area home prices are up more than 35 percent over last year. New-home sales are also doing well, with 67 percent of the local subdivisions active today projected to be sold out in less than a year. Builders are going to have to work to meet the demand, with less land and labor available.

Pollack sees a strong rental presence, with about 22 percent of local single-family homes being used as rentals right now. That’s up from less than 12 percent just a decade ago. Landlords appear to be buying up many single-family homes, and more people are moving to the area.

“In the absence of a fiscal cliff, things should continue to improve over the next several years,” said Pollack. “By 2015, things should be normalized. As I like to say, we’re only one decent population-flow year away from the issue being resolved.”

More details and analysis from the event, including the presentation slides, are available from knowWPCarey, the business school’s online resource and newsletter, at http://knowwpcarey.com.

economy

2013 Economic Forecasts for U.S. & Arizona

Arizona’s economy improved somewhat this year, but what can we expect in 2013? Top experts on the U.S. and Arizona economies will deliver their forecasts for the state, nation, stock market and housing market at the Valley’s largest and most trusted economic-forecasting event on Dec. 5.

The 49th Annual Economic Forecast Luncheon is co-sponsored by the Department of Economics at Arizona State University’s W. P. Carey School of Business and JPMorgan Chase. About 1,000 people are expected to attend the event at the Phoenix Convention Center.

“Arizona’s economic forecasters are patting themselves on the back, since their projections made a year ago appear to be accurate for 2012; the state seems certain to record about 2-percent job growth, and we are seeing the beginning of a housing comeback,” says Research Professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business. “However, 2013 is a different story. A huge cloud of uncertainty is caused, not only by questions about what the next Congress will do, but also about how the overall U.S. economy will react to recession in Europe and slower growth in China. Though the national economy always has some impact on Arizona, until housing and population growth really pick up, the state seems destined to closely follow the national business cycle. If the U.S. economy contracts, then Arizona’s economy will, too. That’s the major risk we’re watching.”

Presentations will include forecasts on:

* Arizona and the regional economy from McPheters, who is also editor of the prestigious Arizona and Western Blue Chip Economic Forecast publications.
* The U.S. economy from Beth Ann Bovino, deputy chief economist at Standard & Poor’s, a widely quoted media expert with two decades of financial experience, including a position at the Federal Reserve.
* The financial sector from Anthony Chan, chief economist for private wealth management at JPMorgan Chase & Co., who served as an economist at the Federal Reserve Bank of New York, appears monthly on CNBC and is a member of the Reuters, Bloomberg and Dow Jones weekly economic indicator panels.
* Real estate and construction from Elliott D. Pollack, chief executive officer of Elliott D. Pollack and Company, a highly regarded Scottsdale-based economic and real estate consulting firm.

The 49th Annual Economic Forecast Luncheon will be held in the Phoenix Convention Center’s West Ballroom on Wednesday, Dec. 5 from 11:15 a.m. to 1:30 p.m. Admission is $90 per person. Proceeds are used to support student scholarships, faculty research, and other academic and professional activities in the Department of Economics at the W. P. Carey School of Business.

For more information, including registration details, go to www.wpcarey.asu.edu/efl or call (480) 965-3531.