Transcript 1996 Survey of Maricopa County Manufacturere

Arizona Update & Outlook
Long Road To Recovery
ACMA Conference
Sedona, Arizona
February 4, 2010
Update & Outlook
• Is the Recession Over?
• Why Consumers Worry
• Arizona Budget Basics
• Arizona Outlook
Is Recession Over?
 Yes - it’s over (19%)
 No - not over (64%)
 Don’t know (17%)
Is Recession Over?
• Recession is a contraction
• Ends when indicators turn up
• At the bottom of the cycle
• When conditions are worst!
But…Current Recession
Longest in Post-War
10 Previous Post-War Recessions
Months
Average Post-War Recession
10 mos.
Longest (1973-1975 & 1981-1982)
16 mos.
Current Recession (Dec 07 – Sept 09?)
21 mos.
The Great Depression (1929-1933)
43 mos.
National Bureau of Economic Research
End in Sight? Return to Previous
Employment Peak Takes Longer
Recession
Jobs Recovery
8 from 1947 - 1982
11 months
1990 - 1991
24 months
2001
36 months
2007 - 2009
48 months (?)
(Months required for U.S. employment to recover from recession
and return to previous peak before recession began)
ISM Index Is Back Above 50
60
55
50
45
40
35
30
(Manufacturing)
25
20
2005
2006
2007
2008
2009
Institute for Supply Management, Report on Business
2010
Truck Tonnage Up Since Summer
2005
2006
2007
American Trucking Association
2008
2009
Retail Sales Up After Dec. 2008 Bottom
$ billions of U. S. Retail Sales
2009 sales 7% below 2008
2004
2005
U. S. Census Bureau
2006
2007
2008
2009
Arizona Retail Sales Fall Since 2007
(Monthly Percent Change Yr/Yr)
20
10
0
-10
-20
2005
2006
2007
Arizona Department of Revenue
2008
2009
GDP Rebounds in Fourth Quarter:
Expect Smaller Gains In Q1
Percent Growth Real GDP
8
5.7%
6
4
2
1.5%
2.2%
0
-2
-4
-6
-6.4%
-8
Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09
U. S. Bureau of Economic Analysis
GDP: How Strong in Q4?
Percent Change in Real GDP at Annual Rate
2.2
1.5
2.5?
-0.7
-0.7
-2.7
Q1
5.7
Q2
2008
Q3
-5.4 -6.4
Q4
Q1
Q2
2009
Q3
Q4
Q1
2010
Beware the double dip
GDP
1980-82
“W”
Recovery
1979
1980
1981
1982
1983
1984
End of stimulus may bring
double dip recession
Stiglitz Says U.S. Recovery
May Not Be ‘Sustainable’
Buy & Hold? How’s That Been For You?
S & P 500
1999 & 2009
Consumers Stopped Buying &
Borrowing – Savings Rate Up
14
12
10
8
5.9%
6
4
2
1% rise in saving cuts
spending by $100 bil.
0
-2
1970
1976
1983
1989
1996
2002
2009
Why Consumer is Key
• Accounts for 70% of GDP
• But 2010 spending will be weak
• New borrowing is down
• Saving rate up as debt reduced
• Will this be the “new normal?”
How Long Will Deleveraging Last?
Why Consumers Worry
Worry Meter
• Job Losses Continue
• Unemployment Up
• Home Values Down
• No End in Sight?
Why Consumers Worry
Arizona consumers &
businesses are in the
state’s worst downturn
(by far) in modern times.
7.3 Mil. U. S. Jobs Lost
in Past Two Years
Time Period
Job Loss
Dec. 2007 – Dec. 2008
Dec. 2008 – Dec. 2009
Two Year Total
3.1 Mil
4.2 Mil
7.3 Mil
Fewer U. S. Jobs Now than 9 Years Ago
Dec. 2000
132.5 mil
Jobs
Jobs (thousands)
135,000
Dec. 2009
131.8 mil
Jobs
125,000
115,000
1996
1997
1999
2001
2003
2005
2007
2009
U. S. Bureau of Labor Statistics, seasonally adjusted data
U.S. Job Losses Slowing
4
-85
-154 -139 -127
-303
-304
-380
-463
-519
-597
-681 -652
US Bureau of Labor Statistics, thousands of U. S. nonfarm jobs
Ja
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D
O
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N
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Se
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A
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Ju
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M
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A
ar
.
M
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Fe
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Ja
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ly
4,000 jobs added in November
-741
Ju
-681
Western Job Growth Is Weak
(Percent Change Dec. 2009 vs Dec. 2008)
25
44
30
49
38
41
47
26
1
50
22
8
39
28
Alaska #2
U. S. Bureau of Labor Statistics
18
123,800 Arizona Jobs Lost
Sector
Jobs: 12 Mos.
Overall Nonfarm
Construction
Government
Prof/Biz Services
Retail Trade
Manufacturing
Health Care
-123,800
-31,100
-20,500
-19,100
-15,000
-11,200
+6,400
Arizona Dept. of Commerce, Dec. 2009 vs. Dec. 2008
Two Years of Arizona Job Loss
(305,000 Jobs Lost Since Dec. 2007)
2
% Change Yr/Yr
0
-2
-4
-6
-8
-10
Jan 2008
July
Jan 2009
July
Jan 2010
Source: Arizona Department of Commerce, not seasonally adjusted
Worst Big Metro Economies
Job Loss – Dec. 2009 vs Dec. 2008 – Labor Force > 1 Million
Metro Area
Percent
Job Loss
Detroit
-6.2%
-114,500
Phoenix
-5.0%
-92,100
Atlanta
-4.4%
-105,300
Riverside
-4.3%
-51,100
Tampa
-4.2%
-51,000
W. P. Carey School of Business & U. S. Bureau Labor Statistics
“Bermuda Triangle” of
Economic Troubles
(Phoenix – Riverside – Las Vegas)
Triangle of Economic Troubles
Job Loss (yr/yr)
Home Value Decline
Foreclosure Rate
Under Water Homes
Phoenix
Riverside
Las Vegas
-5.0% (2nd)
-4.3%(4th)
-7.4% (1st)*
36% (9th)
39% (4th)
40% (2nd)
2.4% (12th)
3.3% (6th)
5.0% (1st)
54% (2nd)
54% (2nd)
70% (1st)
*Las Vegas labor force < 1 million
Job loss, U. S. Bureau Labor Statistics, Dec. 2009
Home values from National Association Realtors, third quarter 2009
Foreclosure rate from RealtyTrac, third quarter 2009
Negative equity from First American CoreLogic, third quarter 2009
AZ Unemployment Rate Below U.S.
Region
USA
Unemployment Rate
10.0% (Dec.)
Arizona
9.1%
Phoenix Metro
8.4%
Tucson Metro
8.1%
Flagstaff Metro
8.2%
US Bureau of Labor Statistics and AZ Dept of Commerce
What Factors Keep Arizona’s
Unemployment Rate Lower?
• Discouraged workers
• Fewer hours per job
• Out migration
Arizona 7th Greatest in Labor
Underutilization at 17.2% (US BLS)
Stimulus Impact Peaks in 2010
Component
2009
2010
2011
2012
$105
$136
$67
$5
Corporate Tax Cuts
$58
$31
$-4
$-14
Infrastructure/Other
$27
$55
$44
$34
State/Local Govt.
$62
$88
$22
$2
Total
$252
$309
$129
$27
Percentage
32%
39%
16%
3%
Personal Tax Cuts/Aid
How Many Jobs Has Stimulus Created?
• 305,000 Arizona jobs lost since
December, 2007 employment peak
• 6,810 Arizona jobs funded by
U.S. Recovery Act (Q4 2009)
• $1.1 billion received in contracts,
grants & loans
Recovery.gov website
Evaluating the Stimulus
Has The Stimulus Helped or Hurt?
Helped Economy
30%
Hurt Economy
38%
No Impact
28%
Don’t Know
5%
Rasmussen Poll, December 2009
Evaluating the Stimulus
•Only 599,000 jobs created?
The Stimulus program failed!
• Only 599,000 jobs created?
The funding was too small!
Too Small? Not Exactly!
Some States Over/Under
Funded by Stimulus Act
Share of
Stimulus Funds
Share of U.S.
Unemployed
Arizona
California
1.7%
11.0%
1.9%
14.9%
Florida
4.6%
7.2%
Washington
4.0%
2.2%
District Columbia
1.6%
0.3%
Average
2.0%
2.0%
State
Stimulus jobs from Recovery.gov website
Arizona Fiscal Woes Second to California
Arizona
Budget
Basics
Budget Basics: 3 Major
Revenue Sources Decline
• Sales taxes (-31%)
• Individual income taxes (-36%)
• Corporate income taxes (-46%)
• These are 90% of General Fund
Office of Strategic Planning & Budgeting, FY 2007 – FY 2010 data
Arizona Retail Sales Outlook:
2009 Will be 10 – 15% Below 2008
12.1
9.1
9.0
5.3
5.0
5.0
1.3
Annual Percent Change
-8.5
-12.0
2002
2003
2004
2005
2006
2007
Arizona Dept. of Revenue & W. P. Carey School
2008
2009
2010
Forecast
Arizona Personal Income: First
Decline Since Records Kept
10.7
9.3
10.0
5.6
5.0
3.7
2.1
Annual Percent Change
2002
2003
2004
2005
2.0
-1.5
2006
U.S. Dept. Commerce & W. P. Carey School
2007
2008
2009
2010
Forecast
Budget Basics: Much of
Spending is Formula Based
• K-12 Education
• Corrections
• AHCCCS & Health Care
• These are 2/3 of General Fund
Office of Strategic Planning & Budgeting
Arizona Taxable Retail Sales
and Personal Income
(YR/YR Growth 1985:1-2009:2)
20.0%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
Taxable Sales
Arizona’s Future Fiscal Crisis
15,000
13,000
The cumulative gap between
expenditures and revenue
from FY10 to FY14 is $15.4
Billion
4,114
3,783
11,000
2,236 3,479
1,323
9,000
1,781
1,081
7,000
FY05
FY06
FY07
FY08
Expenditures
FY09
Est.
FY10
Est.
FY11
Est.
Revenue
FY12
Est.
FY13
Est.
FY14
Est.
Federal
47
United States
Economic Forecast
2008
2009 2010
Real GDP Growth
0.4%
-2.5%
2.5%
Employment Growth
-0.4%
-3.8%
-0.5%
Inflation (CPI)
Housing Starts (000)
3.8%
-0.5%
1.5%
900
600
750
W. P. Carey School of Business, ASU
U.S. Outlook Summary
• Recession is over, pain remains
• “U” shaped recovery begins
• Unemployment stays near 10%
• Stimulus/bailouts unpopular
but support recovery
ARIZONA Economic Forecast
2008
Job Gain (Loss)
Percent Change
Single Family Units
Percent Change
Population Growth
2009
2010
-57,400 -183,000 -24,000
-2.1%
-7.0%
-1.0%
19,153
11,500
17,250
-49%
-40%
+50%
2.3%
1.5%
1.8%
W. P. Carey School of Business, ASU; based on data available as of Feb. 1, 2010
Arizona Employment:
rd
3 Year of Job Losses
Annual Percent Change In Non-Farm Employment
5.4
5.0
3.7
1.5
1.4
Forecast
-1.0
-2.1
-7.0
2003
2004
2005
2006
2007
2008
2009
2010
Arizona Department of Commerce and W. P. Carey School of Business, ASU
No AZ Job Growth Until 2011
Annual Numeric Change In Arizona Employment
127,500 125,700
85,000
39,200
31,200
0
-24,000
-57,500
-183,000
2002
2003
2004
2005
2006
2007
2008
2009
2010
Ja
M n-0
M ar-02
ay 2
Ju -02
Se l-0
N p-02
ov 2
Ja -02
M n-0
M ar-03
ay 3
Ju -03
Se l-0
N p-03
ov 3
Ja -03
M n-0
M ar-04
ay 4
Ju -04
Se l-0
N p-04
ov 4
Ja -04
M n-0
M ar-05
ay 5
Ju -05
Se l-0
N p-05
ov 5
Ja -05
M n-0
M ar-06
ay 6
Ju -06
Se l-0
N p-06
ov 6
Ja -06
M n-0
M ar-07
ay 7
Ju -07
Se l-0
N p-07
ov 7
Ja -07
M n-0
M ar-08
ay 8
Ju -08
Se l-0
N p-08
ov 8
Ja -08
M n-0
M ar-09
ay 9
Ju -09
Se l-0
p- 9
09
Properties in the Foreclosure Process
Maricopa County 2002 – 2009
Source: The Information Market
55,000
50,000
45,000
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
*Data through October 2009.
Option ARM Resets: Next Shoe To Drop
Single-Family Vacant Units
Greater Phoenix 1993–2009q2
Source: PMHS
120,000
102,275
100,000
80,000
58,050
60,000
51,650
29,775
40,000
20,000
15,42514,975
13,725
13,681
19,800
13,750 14,725
17,525
17,525
23,825 24,450
17,125 19,325
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
0
Home Building Hits Bottom in 2009
Arizona Single Family Permits
80,778 80,804
55,633
40,000
37,666
29,000
19,153
17,250
11,500
2004
2005
2006
2007
2008
2009
2010
U. S. Census Bureau and W. P. Carey School of Business
2011
2012
Balance between supply and demand will
not be fully achieved until about 2014.
But home building will get
progressively better
between now and then.
Elliott D. Pollack & Company
Arizona Housing Affordable Again
Percent Families That Can Afford Median Priced Home
80
60
40
20
1995
1997
1999
2001
2003
2005
2007
National Association of Home Builders, Phoenix MSA
2009
Hurdles On Road To Recovery
Commercial Real Estate Poses
A Major Risk to Recovery
“If future defaults follow current delinquency
patterns, we should expect an acceleration
of bank failures.”
Economy.com
Office Space Vacancy Rates
U.S. versus Greater Phoenix
Source: CB Richard Ellis and Marcus & Millichap
30%
Greater Phoenix
National
23.7%
25%
20%
19.1%
18.3%
16.9%
16.4% 16.1%
14.0%
16.0%
13.0%
12.8%
12.6%
15%
14.7%
13.9%
11.1%
10%
5%
0%
2003
2004
2005
2006
2007
2008
2009q2
Hurdles On Road To Recovery
Tight Credit Hurts Small
Business Job Creation
• Small business provides
25% of all jobs in U.S.
• But…small business has
accounted for 40% of jobs
lost in current recession
Why Arizona Recovers: Population
Growth is “Ace in the Sleeve”
1970 - 1980
Growth
Rank
2nd
1980 - 1990
3rd
1990 - 2000
2nd
2000 - 2008
2nd
Year 2008
2nd
Decade
Arizona 2nd Fastest Growth
State for 25 Years
Percent Change: 1980 - 2005
10
1
9
4
7
2
5
6 Alaska
8
3
US Census Bureau
Arizona Comes Back From Recession
(Employment Growth Rate & Ranking)
Percent
15
#2
#1
10
#2
#2
5
0
#20
#12
#47
#18
-5
-10
1974
1978
1982
1987
U. S. Bureau of Labor Statistics
1991
1996
2000
2004
2009
The Long Road to Recovery:
Arizona Jobs Return in 2013
Arizona Employment
2.7 million
2.7 million
2.4 million
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Arizona Department of Commerce and W. P. Carey School of Business, ASU
U.S. Rebound Will Lift Arizona
(Employment Year/Year Percent Change 1970-2009)
15
Arizona Job Growth
10
5
0
US Job Growth
-5
You are here
-10
1970
1974
1978
1983
1987
U. S. Bureau of Labor Statistics
1991
1996
2000
2004
2009
Arizona Outlook Summary
• 2009 - ugly
• 2010 - homely
• Weak job gains
• Unemployment high
• Population growth is critical
• Wait for US economic recovery
Arizona Update & Outlook
Long Road To Recovery
Lee McPheters
W. P. Carey School of Business
Arizona State University