Slow, Steady Job, Population Growth Forecast For AZ In 2018

More jobs: This was a caution area for McPheters, who said that in October 2017, Arizona added 32,000 jobs for the previous 12 months. That’s half as many as the 65,000 jobs added from October 2015 to October 2016.

“That comparison alone suggests job growth has slowed, and that bears watching,” said McPheters, who predicts 61,000 new jobs next year, although unemployment will likely decline tick down slightly to 4.2 percent.

“We think that 2 to 2.5 percent job growth is a new normal for the Arizona economy. It’s not going to be an era where we have the 4 percent job growth we had 20 years ago.”

In a strange twist, McPheters found that metro Phoenix added 51,000 new jobs in 2017, while statewide, the number of jobs added for the calendar year will likely be about 47,000. That’s because Tucson is losing jobs.

“That’s not good for the state or the economy,” he said.

Higher wages: McPheters forecasts average hourly wages will increase by about 4.5 percent, to $26.26, up from the $25.13 average of this year.

He noted that Arizona leads the nation in the growth of food-service jobs despite the increase in the minimum wage to $10 an hour in January.

More houses: Arizona’s housing industry continues to recover with a 15 percent increase in the number of single-family home permits forecast. That’s about 32,580 new houses — twice as many as the 16,189 new homes in 2012.

In the Phoenix area, McPheters expects the boom in multifamily construction to cool. He sees a 32 percent decline in permits for apartments, to about 6,883, for next year.

ASU alum in audience at luncheon
ASU alum Ed Sandidge and nearly 700 others listen at the Economic Forecast Luncheon in downtown Phoenix on Wednesday. Photo by Charlie Leight/ASU Now

McPheters said one area of concern is education.

“When you look at the drivers of business relocation, things have really changed. There was an era when the cost of doing business and the tax structure were always number one and two,” he said.

“In modern times, the answer is invariably quality and availability of labor, and right now Arizona has a somewhat lower proportion of college-educated persons. We’re lower than our competitors, in particular Colorado.

“We need to be sure that within the state we are growing people who can benefit the economy.”

Other speakers at the event were John Williams, president and CEO of the Federal Reserve Bank of San Francisco, and Anthony Chan, Chase’s chief economist.

Williams said that the national economy is in good shape and that the U.S. has essentially reached maximum employment, with an unemployment rate of about 4 percent.

“Even in a very strong economy, there’s always someone who’s not in a job, and the reality is that we’ll never get to zero,” he said.

Williams said the “misery index” is measured as the unemployment rate, about 4 percent, added to the inflation rate, which is now about 1.5 percent, for a misery index of 5.5 percent. He noted that the index was twice as high in 2011 and exceeded 20 percent in 1980.

Chan said that the current recovery is the third longest economic expansion in U.S. history, going back to 1900.

“When you look at economic expansions, the good news is that they don’t die of old age. You need some sort of a catalyst to end it,” he said, such as a housing bubble.

“The bottom line is I don’t see any catalyst, and that’s why I think this economic expansion can go on for two or three more years.”