In Arizona, certain sectors of the economy are plunging as the pandemic delivers its heavy toll. Many restaurant workers are laid off, almost all hotel rooms are empty, small shops are closing by the day.
Federal stimulus funding also is not reaching some small businesses that need it most.
How severely these factors will impact Arizona’s economy in the long run is not entirely clear. National economists’ forecasts for the U.S. overall range from a quick recovery after a brief recession to a long heavy contraction.
In Arizona, however, economist Jim Rounds believes this decade could end up being the state’s best yet.
That does not mean there will not be a downturn for a year or two, said Rounds, president of Rounds Consulting and a longtime Arizona economist who often advises state and municipal leaders on economic policy and strategy.
“In terms of where we’re going, we’re going to see the pain everywhere,” said Rounds who sat down for an interview with Arizona Chamber of Commerce and Industry President and CEO Glenn Hamer recently to share his perspective on what’s ahead.
Some businesses will not survive, he said. But the state is well positioned to weather the storm and come back stronger in the next two years.
Arizona well positioned to weather the storm
Arizona came into the pandemic with one of the strongest economies in the nation. A healthy rainy day fund of $1 billion has proven to be sound planning, he said. Another billion would even be better.
“The beauty of this is the basic economic foundations that we’ve been setting up with the governor for the last several years. We have a good workforce. We have good infrastructure. We have a good regulatory environment — all these things that are really strong,” Rounds said. “Once those are set, it allows us to create the high wage jobs that then create all the other low wage jobs as well.”
By continuing to focus on maintaining these pillars, Arizona will see a healthy recovery and has the potential to bounce back in a huge way, Rounds said.
The key: fine tuning on front end, long term planning for back end
It will require not only taking steps to help businesses during the current fiscal crisis, but long term planning as well. Plotting ahead with strategies like working to further fuel the growing technology and bioscience sectors and luring more suppliers to the state, he said.
Arizona State University, the Arizona Chamber of Commerce & Industry, Greater Phoenix Economic Council, Arizona Commerce Authority, Arizona Office of Tourism, Valley Partnership and other organizations are already strategizing for long term survival.
“There’s no playbook for what we’re talking about. This is so unusual, but we need a set of instructions,” Rounds said.
“The number one key on all these complicated economic issues is to have the right info. How to maximize business retention opportunities. How we’re going to come out of this downturn.”
Casualties, potential breakdowns on road to recovery
Inevitably, there will be economic consequences. Small independent operators are at risk of extinction.
“I think what we’re going to end up seeing–and I’m pretty confident in this, unfortunately–is a lot of the places that we like to go grocery shopping at, the small stores, the restaurants, they are going to be gone and they are going to be replaced with the Applebees and the Chilis.
“Eventually some stores will be coming back because we’re still growing, but I think it’s going to shift to a larger corporate presence.”
The state’s mushrooming unemployment figures are also troubling. More than 350,000 claims have been filed since the coronavirus outbreak several weeks ago.
“These are huge numbers when we talk about hundreds of thousands of jobs lost or gained, we’re usually talking about the U.S. level,” Rounds said.
That’s where “fine tuning” and strategic long term planning will count, he said.
Opportunity for a “huge” comeback
If all the pieces come together, this could be an opportunity for the state, Rounds said.
“Where I’m most optimistic among some of my colleagues, I feel like we can take advantage of this downturn, this crisis, and learn from it.
“I would love to see Arizona be this huge immunology hub for the entire country going forward, a lot of high tech activities in healthcare. I’d like to see lot more manufacturing coming back and I’d like to see more suppliers locate locally because that increases the multiplier effects that creates all those jobs we talk about.”
Cover photo courtesy of KTAR.