This document summarizes an economic forecast for Arizona presented at a luncheon. It finds that while Arizona has experienced strong job growth and remains a top state for population increases, long-term measures of economic prosperity like per capita income and GDP per worker rank the state below average. The forecast predicts Arizona will see a third consecutive year of job growth in 2017 at 3.0% but notes the greatest risk to the state's economy comes from the national business cycle. Key factors for the state's continued growth are its labor force, quality of life, and cost structure.

1. Subtitle text can go here
Arizona Economic
Update & Outlook
ASU/JPMorgan Chase
Economic Forecast Luncheon
December 5, 2016
Lee.McPheters@asu.edu

2. Forecast Reality Check
(2016 Forecast vs. Latest 2016 Data)
Source: Forecasts December 2, 2015 Economic Forecast Luncheon
Indicators
Forecast
2016
Estimate
2016
New Jobs (thousands) 68.0 76.0
Employment (% change) 2.6 2.9
Population (% change) 1.7 1.6
Unemployment Rate (%) 5.8 5.2
Single Family Permits (% change) 30.0 10.0

3. Indicators 2015 2016 2017
New Jobs (thousands) 66.0 76.0 81.0
Employment (% change) 2.6 2.9 3.0
Population (% change) 1.5 1.6 1.6
Unemployment Rate (December) 5.9 5.2 4.8
Single Family Permits (% change) 25.0 10.0 15.0
W. P. Carey School of Business, ASU, based on data available December, 2016
Arizona Economic Outlook
Greatest Risk: National Business Cycle

4. U. S. Bureau of Labor Statistics, October 2016 (Seasonally Adjusted)
3.0%
3.8%
Unemployment Rates Still Above
5% in Several Western States
5.2%
6.7%
5.5%
5.5%
3.5%
3.2%
5.2%
5.4%
4.7%

5. Arizona Ranks 6th in Private Job
Creation Year-To-Date 2016
Ranked by % Change:
(January – Oct. 2016)
11
8
43
4
26
50
2
6
7
Top 10 Growth States
5
42
9
3
1
13
14
Lost Private Jobs
U. S. Bureau of Labor Statistics
10 Hawaii

6. U.S Economic Recovery Has Favored
Workers With Skills and Education
Cumulative Employment Gains By Education
Torsten Slok, Deutsche Bank

7. Arizona Industry % Change U.S. Rank
Nonfarm Employment 2.7 8
Private Employment 3.3 6
Financial Activities 5.5 2
Information 6.1 3
Admin & Support 5.8 5
Health Care 4.0 5
Construction 6.9 7
Arizona Industries in Top 10
Ranked by Percent Change: Year to Date 2016
W. P. Carey School of Business & U. S. Bureau of Labor Statistics, year to date October, 2016

8. Arizona Ranks First in Information
Industry Job Creation 2009-2015
Ranked by % Change:
(2009 - 2015)
10
6
2
1 7
Top 10
3
8
9
5
4
36 Lost Jobs
U. S. Bureau of Labor Statistics
http://www.bls.gov/opub/ted/2016/
4 < 2% Growth

9. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
3.3
2.3
1.8
1.0 1.0 0.9
1.3 1.2
1.5 1.5 1.6 1.6
Forecast
Arizona Population Growth Stable
But Below Historical Averages
W. P. Carey School of Business & U. S. Census Bureau; Average 1977 – 2007 = 3.2%
Annual Percent Change

11. 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
80,804
55,633
37,666
19,153
12,826 10,755 10,306
16,189
18,386 16,841
22,311
24,540
28,220
Home Building Slowly Improving
10% Gain in 2016 to be Followed by 15% in 2017
ForecastW. P. Carey School of Business, ASU & U. S. Census Bureau
15% rise
Single Family Permits – Arizona

12. What Is Holding Back Home Building?
• Live with parents
• Marry much later
• Fewer with kids
• Prefer urban locale
• House is “not a
good investment”
49% in 1970
20% in 2015
Some (Millennials) Don’t Want A House At All!

13. What Is Holding Back Home Building?
• Labor costs are up
• Labor less available
• Land/lot costs are up
• Land/lot restrictions
• Lending still tight
Look at the “Three L’s” for Answers

14. What Is Holding Back Home Building?
Weak Income Gains Hurt Affordability
In one hour, the robot does double the daily
work of a human bricklayer and skips lunch
BIG QUESTION:
How to build homes for
the $250,000 market
& make a profit?!?
Is This
The Future?

15. Arizona Watch-List Heading into 2017
 Arizona’s October year-to-year 49,600 job gains
were the lowest so far in 2016
 Single family permits may grow less than 10% in
2016 after 30% rise in 2015
 Minimum wage increase positives (lower
turnover, more in-migration, rise in labor force
participation) may outweigh negatives
 Caterpillar, Northern Trust, Comcast, Home
Depot, Santander announce relocations to
Arizona…look for more to come in 2017
 Arizona among national leaders in job growth in
information, finance, health care but mining &
manufacturing are weak
 Strong “headline” indicators overshadow long
term structural issues in state economy

16. Long Term Trend: Arizona Is Below National
Average on Measures of Economic Prosperity
Per Capita AZ Personal Income
42nd Among All States: 2015
Per Capita AZ GDP
43rd Among All States: 2015
Productivity and Prosperity Project, ASU; https://wpcarey.asu.edu/sites/default/files/econperform10-16.pdf
National Average

17. Long Term Trend: Arizona is Below National
Average Ratio of Employment to Population
AZ Employment/Population Ratio
42nd Among All States: 2015
National Average
Productivity and Prosperity Project, ASU; https://wpcarey.asu.edu/sites/default/files/econperform10-16.pdf

18. Long Term Trend: Arizona is Below National
Average of Output/Worker & Earnings/Worker
AZ Output (GDP) Per Worker
43rd Among All States: 2015
AZ Earnings Per Worker
31st Among All States: 2015
National Average
Productivity and Prosperity Project, ASU; https://wpcarey.asu.edu/sites/default/files/econperform10-16.pdf

19. Arizona Statistics Rank
IN THE HEADLINES
Domestic In-Migration (2015-Census) 4th
Private Job Growth (Year to Date-BLS) 6th
ROOM FOR IMPROVEMENT
Value of Exports (Year to Date-Census) 19th
Earnings per Worker (2015-BEA) 31st
LONG TERM ISSUES
Per Capita Income (2015-BEA) 42nd
Output (GDP) per Worker (2015-BEA) 43rd
Poverty Rate (2015-Census) 45th
56% Cut in University $/Student ( 2008-2015) 50th

20.  A top 10 state for job creation and population
increases - domestic migration continues strong
 Current indicator growth rates are much more
positive than per capita measures of prosperity
 Possible new policies on exports could affect trade
– but state benefits from higher defense spending
 Labor force, quality of life, cost structure will drive
growth but national business cycle is greatest risk
Arizona Economic Outlook Summary-2017

21. 2015 2016 2017
2.6%
2.9% 3.0%
W. P. Carey School of Business, December 2016
Arizona Job Growth in 2017:
3rd Consecutive Year of Gains

22. Subtitle text can go here
Arizona Economic
Update & Outlook
ASU/JPMorgan Chase
Economic Forecast Luncheon
December 5, 2016
Lee.McPheters@asu.edu