The economic recovery from the Great Recession of 2008 has been a long one, but the Greater Phoenix economy will finally see healthy growth in 2018.
That’s the assessment of local economist Elliott Pollack, CEO of Elliott D. Pollack and Company, an economic and real estate consulting firm in Scottsdale.
“Greater Phoenix is about the only place in the state that has created more jobs since the end of the recession than it lost during the recession,” he said. “It’s doing well from that standpoint. Job growth right now is showing year-over-year at about 2.2 percent. That will be revised in February and I expect that to go up. I think we’re doing better than the numbers initially said, and it’s really across the board. It’s in manufacturing, it’s in construction and it’s in areas where most of the jobs are now created — education, health services, leisure and hospitality, and financial services.”
Jewish News spoke to Pollack before he delivered his economic outlook forecast to the Business & Professionals Division: Real Estate & Finance of the Jewish Federation of Greater Phoenix on Thursday.
As Pollack pointed out, while the Valley will do well this year, the recovery throughout the rest of the state will remain anemic.
“Phoenix is doing very well, Tucson is not so much and the balance of the state is spotty to say the least,” he said. “Most of the non-metro areas are doing mediocre. You have places like Flagstaff that is doing OK. Greenlee County added a bunch of employees, but essentially most of the state has not done very well in this cycle, and that has to do with the their economic base, which has to do with either government, tourism or mining for the non-metro areas.”
Nationally, Pollack expects the nation’s economy to have its best year, despite the lateness of the recovery cycle.
“The fact the economy is this strong this late in the cycle is quite good,” he said. “Part of it is because the economy has been so weak for so long, but also the usual problems have not developed. On top of that, we’ve got the stimulus from the tax cut and there will probably be some stimulus from some infrastructure money being spent. So, 2018 should be a decent year and it should be a good year. We’re going to have a stronger economy, somewhat higher inflation and larger deficits, but basically the outlook is quite good.”
The Conference Board’s economic forecast noted that consumer and business spending closed 2017 “on a high note, pushing growth above 3 percent for the final three quarters of 2017.” The board projects GDP to rise by 2.9 percent in 2018 compared to 2.3 percent for 2017. The Conference Board is a nonprofit business membership and research group organization that provides economic projections for nations around the world.
For Arizona and the Valley in particular, this lengthy economic recovery cycle has been almost unprecedented, as the Greater Phoenix economy has traditionally recovered quickly from past downturns. But, Pollack said, the severity of the national recession changed one key component of the Valley’s economy.
“Population flows have slowed,” he said. “The number of people moving from one state to another or one county to another and internationally slowed considerably, lowering Arizona’s capture rate, which was very high in 2005 and 2006. Arizona captured 10 percent of everybody who moved in the country. At the bottom of the recession, there were fewer people moving and we only captured 2 percent. We’re now capturing 5 percent to 6 percent, which is a reasonable number, but there are fewer people moving.”
Due to overbuilding before the recession, the Valley was one of the states at ground zero when the housing market collapsed. Pollack said that inventory has finally been absorbed and home building is now more modest.
“We were building 60,000 houses, when the market really only needed 35,000,” Pollack said. “Housing is doing well and 20,000 to 21,000 units will be built this year — about 10 percent more than last year — and there is nothing that’s being built that isn’t demanded.”
He said that demand for single-family housing will likely grow as more millennials begin to enter the economy, marry and have children. Until then, the apartment market is going strong not only due to millennials, but also baby boomers who have downsized.
“Basically, 2018 is going to be a pretty decent year and my guess is most of 2019 will be as well,” Pollack said. “Greater Phoenix is going to be growing more rapidly than anyplace else in the state. We will probably grow in the area of 2.5 to 3 percent in 2018 in terms of employment; we will probably grow about 1.8 percent in terms of population; and the jobs will be well diversified with not only leisure-hospitality, education and health services, but also manufacturing and in construction.” JN