Arizona enjoyed a vigorous economy this year and can expect more of the same in 2019, longtime Arizona economist and forecaster Lee McPheters told the crowd at the 55th annual Economic Forecast Luncheon in Phoenix this week.
“As of right now, there is no recession in sight,” McPheters said. “The only risk is if something happens at the national level. Then all bets are off.”
Hosted by the W.P. Carey School of Business at Arizona State University (ASU), the forecasting event is the largest and oldest of its kind in the state. About 700 people attended this year to hear local and national economists give their forecasts – and warnings – for the months ahead.
Two national economists, John Cochrane of Stanford University and Bart Hobijn of Arizona State University, said that the country should also see another prosperous year with solid growth, steady hiring and stable inflation.
Potential disruptions include America’s trade wars that threaten intricate global supply chains, an unpredictable stock market, flattening house prices, and a slowdown in global economic growth, Hobijn said.
Cochrane, the author of The Grumpy Economist blog, spoke of the need to encourage policies that spur innovation and startups. Moving away from the current political partisan divide and isolationist viewpoints also are important for long-term growth, he said.
In Arizona, meanwhile, the near future looks bright. Arizona is performing better than almost every state in several indicators, McPheters said. A slowdown of economic expansion is not expected to surface for another 12 to 18 months, he said.
In 2019, the state’s economy will continue to fuel up with large population growth. Arizona also will continue to be a powerful presence in America as a leader in several growth industries, he predicted. Arizona is now ranked No. 1 in construction growth and No. 2 in manufacturing. It is ranked among the top seven in six other industries including food services, information services and finance and insurance.
McPheters’ economic outlook for Arizona and Greater Phoenix indicates that:
- Growth may slow slightly in 2019 but Arizona will continue to rank among the top five states for job creation in manufacturing, construction and professional and technical services as the economy adds 71,000 jobs
• The Arizona unemployment rate will continue to decline, dipping to 3.9 percent for the first time in more than a decade
• Strong demand is expected to result in 35,510 new single family home permits
- Metropolitan Phoenix will account for eight out of every 10 new jobs created in the state
- In the Phoenix area, continuing job growth will spark some 6 million square feet of new industrial construction, and vacancy rates in multifamily, office, retail and industrial space will remain low
The biggest challenges for businesses will be a shrinking labor force and rising wages, according to McPheters. While home prices are up almost 50 percent, wages are only up 25 percent.
“Businesses are going to have to get used to paying higher wages,” McPheters said. “In all industries, we’re going to have to pay more if we’re going to be a dynamic labor market.”