Is recovery from recession underway? In this month's Economic Minute, Dean Robert Mittelstaedt of the W. P. Carey School of Business takes a look at the Arizona economy. With historically poor employment numbers, a scarcity of good jobs, consumers in debt-reduction mode and state finances in crisis, the real question is how does Arizona regain momentum. Follow the PowerPoint slides for a snapshot of current conditions. The Economic Minute is a regular feature of the W. P. Carey School's monthly Economic Club of Phoenix lunches. (6:20)
Knowledge: Is recovery from recession underway? In this month's Economic Minute, Dean Robert Mittelstaedt of the W. P. Carey School of Business takes a look at the Arizona economy. With historically poor employment numbers, a scarcity of good jobs, consumers in debt-reduction mode and state finances in crisis, the real question is how does Arizona regain momentum. Follow the PowerPoint slides for a snapshot of current conditions. The Economic Minute is a regular feature of the W. P. Carey School's monthly Economic Club of Phoenix lunches.
Dean Robert Mittelstaedt: I have been designated today to give our economic minute update, and if you'll go ahead and bring up those slides, oh, there we are. So the real question is, is there a recovery underway? You know, we've had generally good corporate earnings (other than, as you heard, Alcoa was bad last week, and that people worry about the industrial sector, and Parker Hannifin was good yesterday) and so people are saying maybe there's something there. Tiffany's earnings were up, but Tiffany's earnings were up because they said that the high-end was still buying, but the smaller items, the lower end of their business, wasn't very good.
The question is, are job losses bottoming out? We saw figures last month that were better than they had been, but it's not clear that this is the end. Autos and houses are selling, but everybody's worried about whether that's the stimulus effect and whether that's going to stop. The junk bond default rate turned down slightly but it turned down slightly from a pretty extraordinary level. And, the Economist ran a cover recently that asked the question, is there another asset bubble already out there?
All of those kinds of things are in the macro picture. You read the papers, as do I, and I think a lot of those are still big question marks. The real question mark for us though locally is what it looks like in Arizona. You have seen this slide from our guys in the past that the economy in Arizona really is a whipsaw that is much better when times are good and much worse when times are bad, but this looks like an awful big deep, deep dip.
So, if you look at the job losses, this is the worst job situation that we have seen here, percentage-wise or number-wise, in a very long time, with over 264,000 jobs lost in Arizona in the last three years. That is not something which is good for growth, obviously, and worse than that it's not just the jobs, but it's the way that it affects the State budget, and so sales taxes have continued to decline, as well as individual income taxes and corporate taxes, and those are the three things that constitute 90 percent of the state's general fund -- which is why you see the difficulty that's out there.
That has led to a very interesting phenomenon, and that is that people come to Arizona for many reasons -- this data, I understand, is going to be debated significantly. This is an estimate that the Census Bureau makes between censuses -- a real-time estimate of what the population does. We've seen the weakest population growth since 1945, but this still leaves us in the top 10 states in the country. We've gone, over the last four years, from an increase generally of a high of 200,000 for people moving here or total growth here per year to last year only, when about 100,000 net. Natural growth -- births over deaths -- was half of that, so migration, domestically, was only 15,000 people net in the United States and internationally about 25,000 people moved here.
Obviously, that's because of the job situation, and so part of what we want to look at is, not only what the population growth is, but in this state that's always followed the jobs. The question that continues to arise now is how we get job growth going again with the fact that consumers are still reducing debt? You've heard about reductions in debt in both of the last two months, November and December, and a shortage of high-value jobs. The question of whether or not consumption will stay at a level that's permanently -- or at least in the near-term -- permanently lower than it has been in the past. I think we need to continue to talk about really aggressive, competitive economic development policies for the state. There are people who also talk about, potential shortages of well-qualified workers, even if jobs begin to recover; given all the workers that have been laid off in industries that are being completely displaced. That will, in fact, create additional needs and challenges for us.
Finally, we've got to settle the budget crisis in Arizona. I realize there are a lot of political issues here, but I think that both from an economic and a reputation standpoint, it needs to get settled. I mean, companies don't want to move to a state that is in flux and where you don't know what's going on, and we don't know what the standards are.
So, that's the news, good, bad or whatever it is that we can come up with at this point.
The only good news I could find is that we are in Arizona for a reason, and I saw (because I'm a pilot as many of you know, and I read this pilot stuff) a notice last week that two pilots landed small airplanes on skis on a hard frozen lake in the city limits of Minneapolis. They had actually checked with the FAA ahead of time. The FAA said they didn't know of any restriction against it, but it turned out when they landed that the cops came because there is a restriction in Minneapolis, apparently, against landing an airplane in any public park. What happened was they got a ticket and after three hours were allowed to take off to leave. Enjoy your lunch.