Rocky Year for Arizona’s Economy
The Arizona economy officially dipped into recession in the first quarter of 2020, followed by a historic contraction in Q2. The Arizona economic outlook is entering a new phase of uncertainty as states hit the reset button on their economies. Net migration and population growth will likely remain positive in the near-term as people and businesses continue to relocate from higher cost states. The Census Bureau is expected to deliver redistricting counts from the 2020 Census to states at the end of March 2021. State population and net-migration data will be re-benchmarked to those results. Many state economic forecasts, including Arizona’s, are sensitive to net-migration estimates and so the 2020 Census represents yet another source of uncertainty for state economies. The relatively fast growing population for Arizona is supportive of the housing market. Phoenix topped the S&P Case-Shiller 20 City Index for the 11th consecutive month, up 9.0 percent year-over-year in May. The tight supply of existing homes on the market, in a low mortgage rate environment, will motivate new home construction in the near-term. However, we expect housing demand to be somewhat bifurcated due to a lingering high unemployment rate through 2021. Workers caught jobless in a suddenly weak labor market will be shutout of new housing opportunities. Arizona’s tourism industry will remain under stress for the rest of this year due to the reset in air travel. This will contribute to weak tax revenues this year. Fortunately, to date, the tax revenue shortfall has been less than feared, now estimated at $190 million for this fiscal year.
For a PDF version of this publication, click here: August 2020 Arizona State Outlook
