November 2018 AZ Economic Outlook

November 9, 2018 by Robert A. Dye, Ph.D., Daniel Sanabria

Arizona’s Economic Momentum to Continue

The Arizona economy is expected to continue improving into 2019. Our outlook is supported by strong population growth and ongoing job growth. We expect net migration into the state to continue at a moderate pace as the state’s comparatively low taxes and affordable house prices remain significant draws, especially compared with nearby California. We expect to see strong job growth through Q4, supported by gains in the construction, government, and private services sectors. Construction employment is expected to improve further, motivated by a tight housing market, particularly around Phoenix. We forecast Arizona’s real gross domestic product growth to be above the U.S. average through the last half of 2018 and into 2019. However, long-run hurdles for the Arizona economy persist, including low household income and education attainment, which impact spending and the skillsets of the labor force. Despite a high profile teacher walkout in Q2, educational funding continues to face headwinds in Arizona. Voters passed Proposition 126 this November, which prohibits Arizona’s state and local governments from levying sales taxes on most services. Critics of the measure believe it will put additional strain on the state’s educational system. Meanwhile, the resolution of the U.S.-Mexico-Canada Agreement on trade, which remains to be ratified by each country, removes some uncertainty for Arizona businesses moving forward. According to the Census Bureau, 36 percent or $7.6 billion worth of Arizona exports are sent to Mexico, with 10 percent or $2.2 billion to Canada.

For a PDF version of this report, click here: November 2018 AZ Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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August 2018 AZ Economic Outlook

August 13, 2018 by Robert A. Dye, Ph.D., Daniel Sanabria

The Arizona Economy Is Warming Up

    The Arizona economy has been a laggard in terms of growth through this expansion cycle. However, last year was a turning point for the state’s economy as it grew at its fastest rate since 2006, and is poised to accelerate further in 2018. Some drivers of previous strong growth of the Arizona economy remain in place. Arizona continues to be a popular destination for retiring baby boomers and an affordable alternative to nearby states like California. According to the Census Bureau’s American Community Survey, ex-Californians made up approximately 24 percent of the people who migrated to the state in 2016. The stronger positive net migration has helped Arizona population growth to steadily improve in recent years, which supports the state’s housing and healthcare industries. Tourism, another staple industry for the Arizona economy, continues to benefit from an ongoing expansion in the overall U.S. economy. Total visitors to the Grand Canyon were up 5.2 percent in May compared to May 2017 according to the National Park Service. This is consistent with the improving Arizona hotel occupancy rate in the first half of 2018. Uncertainty surrounding trade remains a headwind for the state’s manufacturing sector. According to the Census Bureau, 36 percent or $7.6 billion worth of Arizona exports are sent to Mexico, 10 percent or $2.2 billion to Canada, and 6 percent or $1.2 billion to China. A bilateral agreement between the U.S. and Mexico is a growing possibility. However, trade issues with China are going in a different direction, with new tit-for-tat tariffs announced on both sides.

For a PDF version of this article, please click here: August 2018 AZ Economic Outlook

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.
 

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Arizona Builds Economic Momentum | May 2018

May 14, 2018 by Robert A. Dye, Ph.D., Daniel Sanabria

Arizona real gross domestic product was up 3.2 percent in 2017, the highest reading since 2005. Stronger than expected nonfarm payroll gains in 2017 drove state economic activity. Following a large upward revision in Arizona job growth, the most recent estimates now show that Arizona added a net 58,500 jobs in 2017 versus the estimate of 35,000 jobs used in our February Arizona forecast. State job growth was solid through March as employment in the construction, manufacturing and services sectors continued to improve. Steady job growth and relatively high housing affordability and low business costs continue to draw people into the state. According to the official Census Bureau estimates, the Phoenix metropolitan area registered fourth in the nation for largest population growth in 2017, driven by strong gains in Maricopa County. Sustained population growth supports labor force growth which is a key determinant of potential state economic activity. This supports our expectations for a continued moderate expansion of the Arizona economy for the remainder of 2018. The growing Arizona population is also leading to increased demand for housing. Greater demand is keeping the inventory of available houses tight, boosting single-family home prices in Northern Arizona. The Case-Shiller Home Price Index for the Phoenix metropolitan area was up 6.3 percent for the year ending in February. The months’ supply of homes for sale ticked down to 2.3 months’ in March, according to the Arizona Regional MLS. The tight supply of housing will encourage more construction in both single- and multifamily projects in the region this year.

For a PDF version of this report click here: AZ-Outlook-0518.

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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Arizona to Experience Moderate Growth in 2018

February 13, 2018 by Robert A. Dye, Ph.D., Daniel Sanabria

The Arizona economy will continue to grow at a moderate pace in 2018, supported by ongoing job growth. Phoenix, which makes up about 75 percent of the state’s economy, gained 37,300 jobs in 2017. Tucson, which makes up about 12 percent of the Arizona economy was up a modest 2,000 jobs last year. Both areas are experiencing tighter labor markets. In December, the unemployment rate was down to 3.8 percent in Phoenix and 4.5 percent in Tucson, both near nine-year lows. However, the Phoenix area is attracting more in-migration. According to U-Haul, Tempe saw the largest increase in one-way truck rentals in the nation, up 39 percent in 2017. Recent gains in Phoenix’s population have boosted the area’s labor force which was up 2.6 percent in 2017. This means that the Phoenix labor market still has some room to run. Labor force growth for Tucson was up by 1.2 percent in 2017. This sets up our expectations for another year of modest job growth in Southern Arizona. There is certainly some upside potential for growth in the near term. The recently passed federal tax reform, along with improving business sentiment and positive U.S. economic outlook, may lead to increased investment amongst state businesses. Rising domestic demand and consumer sentiment will be supportive of the state’s tourism industry. Arizona’s trade with Mexico is a risk factor for the state economy given the unresolved NAFTA renegotiation process. The state’s total trade with Mexico was about $15.7 billion in 2016. The next round of NAFTA negotiations is scheduled to place at the end of February in Mexico City.

For a PDF version of this report click here: AZ_Outlook_0218

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

 

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Arizona Labor Market Sees Late Summer Momentum

November 14, 2017 by Robert A. Dye, Ph.D., Daniel Sanabria

The Arizona economy is expected to improve heading into 2018. Our outlook is supported by moderate state population growth and recent gains in Arizona’s labor market. From the population side, net migration into the state has steadily improved since the Great Recession, helping to spur additional demand for goods and ser-vices. While we expect the state to continue to draw in a net 70,000 people on average over the next couple of years, this remains well below the net 123,000 average of 2004-2006. From the labor market side, the pace of Arizona job growth was tepid at best from January to June of this year, averaging only 1,200 net new jobs per month. This raised concerns that the Arizona economy was cooling through the year. However, Arizona job growth jumped late this summer adding approximately 11,000 jobs per month in both August and September. We expect to see ongoing moderate job growth through Q4. Construction employment is expected to improve because housing supply remains tight, particularly in the Phoenix metropolitan statistical area. State manufactur-ing benefited from the weaker dollar, adding about 4,800 jobs in the 12 months ending in September. However, recently the trade-weighted dollar has strengthened from September lows. So, we expect only a slight lift to the Arizona economy from manufacturing going forward. Private services employment will be the main driver of state job creation, particularly in the leisure/hospitality and the education/healthcare sectors. Moderate Arizona job growth will push state real gross domestic product growth above the U.S. average in the last half of 2017.

For a PDF version of this report click here: AZ_Outlook_1117

The articles and opinions in this publication are for general information only, are subject to change, and are not intended to provide specific investment, legal, tax or other advice or recommendations. The information contained herein reflects the thoughts and opinions of the noted authors only, and such information does not necessarily reflect the thoughts and opinions of Comerica or its management team. We are not offering or soliciting any transaction based on this information. We suggest that you consult your attorney, accountant or tax or financial advisor with regard to your situation. Although information has been obtained from sources we believe to be reliable, neither the authors nor Comerica guarantee its accuracy, and such information may be incomplete or condensed. Neither the authors nor Comerica shall be liable for any typographical errors or incorrect data obtained from reliable sources or factual information.

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