“Full Recovery” For Phoenix?
According to some economic experts, Phoenix is one of only two dozen cities in the entire world “on the road to full-recovery.” This is due to vast improvement in perosnal income and jobs.
(Courtesy of Betty Beard – Arizona Republic)
The Brookings Institution on Tuesday said that the Phoenix area is one of two-dozen metropolitan areas in the world that is likely on the “road to full recovery” because of improvements in personal income and jobs.
But several economists who follow Arizona’s economy more closely said the finding is premature, despite metro Phoenix placing second in the nation in October for the fastest rate of job growth compared with a year earlier.
The Phoenix area’s rate in October was 1.43 percent, placing it behind the Washington, D.C., area with 1.48 percent, according to Arizona State University. In terms of the actual number of jobs gained, it placed fourth.
“So, this is a significant turnaround for the Phoenix metro area, considering one year ago, Phoenix was neck and neck with Detroit for worst labor market in the country, with job losses exceeding 8 percent,” said Lee McPheters, research professor of economics and director of ASU’s Economic Outlook Center.
Nevertheless, he and several other economists said it’s probably wishful thinking to think of the Phoenix area’s economy as doing well or being on the road to a full recovery because of its stagnant housing prices and high number of foreclosures.
Unlike most studies that focus on the economies of states or countries, the D.C.-based Brookings researchers look at metro areas because they house about 12 percent of the world’s population and produce about half of its output in goods and services.
Brookings evaluated the economic performance of the largest 150 metro areas in the world before, during and after the recession and concluded that 34 metro areas are in full recovery or never felt the recession; 24 are on the road to full recovery; 14 are still declining; and the rest are still recovering.
Alan Berube, a senior fellow at the Brookings Metropolitan Policy Program and co-author of the study, said, “The Phoenix (area) is interesting in that among the regional economies most affected by the housing bubble, Phoenix is the only one that seems to have turned the corner on both jobs and income.”
He also said the weak housing market is holding back metro Phoenix as well as Las Vegas and Riverside, Calif., from a more-robust recovery.
Berube said the Las Vegas area is worse off than metro Phoenix because its economy is less diversified and it relies heavily on sectors most affected by the economy, namely housing, tourism and retail sales.
Tom Rex, another ASU economist, called the Brookings findings regarding the Phoenix area “nonsense” after reading the report. He said it relies on out-of-date data or relied on a too-small sample.
He agreed, though, that metro Phoenix is doing a little better than the average U.S. metro area, based on Bureau of Labor statistics on wages and salaries. But he said the Valley still has a long way to go to fully bounce back from the recession.
“To get back to the pre-recession peak means that the Phoenix area will have to grow much more than the typical area,” Rex said.
Moody’s Economy.com has placed the entire state, as well as the Phoenix and Tucson areas, “at risk for recession.”
And Marshall Vest, a University of Arizona economist, said that although the state’s economy was recovering nicely earlier in the year, it has given back much of those gains.
“You see that in employment, in retail, restaurants and bars. You see it in the number of passengers flying through Sky Harbor Airport and Tucson International. Just about every measure suggests that we have hit a soft spot in the recovery,” he said.
Brookings’ global view shows that economic power has been shifting from the U.S. for decades toward China, India and Latin America.
For many metro areas in Asia and Latin America, the recession was “no more than a glancing blow,” it said. Those areas include Beijing; Bogota, Colombia; Buenos Aires, Argentina; Cairo, Egypt; Hong Kong; Lima, Peru; Manila, Philippines; Melbourne, Australia; Rio de Janeiro, Brazil; Seoul, South Korea; and Shenzhen, China.
The Valley was one of the few American metro areas that stood out for its major employment gains in the pre-recession period from 1993 through 2007, along with Las Vegas and Austin.
Before the recession, the Valley ranked 20th among metro economies, largely because of construction. It fell to 114th place during the recession and later rose to 68th, according to Brookings.
Still, other areas that also depended heavily on construction fell more. Las Vegas landed in 146th place among the 150 metro areas, ahead of Thessaloniki, Greece; Barcelona, Spain; Dubai, United Arab Emirates; and Dublin, Ireland.