Here’s what experts predict for Arizona economy in 2023
An Arizona State University economist said the Grand Canyon State has managed to withstand the one-two punch of COVID-19 and record-breaking inflation, and a rebound in 2023 is possible. But the Arizona economy may have to gird itself for a recession in 2023 if the Federal Reserve System gets too aggressive with policy.
“What would that mean if somehow, someway, the Fed were too tight? It would mean tough sledding for Arizona, a hard fall for the economy,” said Dennis L. Hoffman, professor of economics and director of the L. William Seidman Research Institute at ASU’s W. P. Carey School of Business. “It will have harsh and laboring impacts.”
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Hoffman presented his findings at the 59th annual Economic Forecast Luncheon on Wednesday in downtown Phoenix, sponsored by the W. P. Carey School of Business and PNC Bank.
“For almost six decades, this luncheon has attracted business and governmental leaders to hear a panel of distinguished speakers, economists, project business conditions for the coming year,” said W. P. Carey School Dean Ohad Kadan, who made his first appearance at the luncheon since joining the school in July.
In addition to Hoffman, speakers included Daniel J. Brady, senior vice president and chief investment strategist for PNC Asset Management Group, and Christopher Waller, a governor at the Federal Reserve System.
Hoffman said Arizona has recovered from the pandemic downturn before most states because its economy is strong and diverse. Health care, manufacturing, transportation/warehousing and scientific/technology industries are among the strongest in the nation, and unemployment is near a 40-year low.
Pre-COVID-19, Arizona outpaced all U.S. states in job creation and is gaining some ground in getting those jobs back, according to Hoffman. However, the state’s recent employment growth has been slower than the national average and will add over 100,000 jobs in 2022, with 86,000 in the metro Phoenix area.
Hoffman said Arizona sustained the pandemic and continuing inflation because of its business-friendly attitude and remaining as open as possible during the worst of COVID-19.
“We embraced business and recovered jobs faster than most of the nation did,” Hoffman said. “I would say we are still several hundred thousand jobs below trend. And it’s going to be a long time to make that up.”
The Arizona economy
But Hoffman said aggressive Fed policy might trigger a national recession, bringing higher unemployment rates, reduced job growth and a slowdown in residential building. However, Hoffman believes in the current strength of the Arizona and Phoenix economies; the effect should be milder compared with other states.
He attributes this to the five Arizona industries that ranked among the fastest-growing in the nation:
• Health care, which added more than 15,000 jobs in the past year, is up 3.9% and is ranked second in the nation.
• Manufacturing added more than 10,000 positions in the state, has grown by 5.7% and is ranked fifth in the country.
• Transportation/warehousing added more than 12,000 jobs and has shot up 9.4%. It is ranked fifth in the nation.
• Science/technology has become a hub, adding approximately 13,000 positions and is up by 7.6%, ranking eighth in the country.