Metro Phoenix’s economy has started the new year hitting on all cylinders, with full employment, industrial expansion and more home-price gains on the horizon.
The outlook is promising for homeowners and job seekers but could prove frustrating for employers and homebuyers, according to analysts who offered a regional update in an event sponsored by the Greater Phoenix Economic Council.
The Thursday webinar was held hours after the Commerce Department reported a 6.9% surge in fourth-quarter U.S. Gross Domestic Product, the latest indication that the national economic recovery remains on a solid footing.The regional outlook largely dovetails with other forecasts for Arizona and the Phoenix area, such as a presentation by Arizona State University in December.
A more balanced economy
Arizona late last year recouped all of the jobs lost during the last recession, joining Idaho, Texas and Utah. Metro Phoenix hit that milestone a bit earlier and counted around 2.29 million payroll jobs as of November, compared to a pre-pandemic peak of 2.26 million in December 2019, said Kristen Stephenson, a GPEC senior vice president for research and analysis.
The Phoenix region “is close to full employment, essentially meaning everyone who wants a job has one,” she said.
The unemployment rate for the Valley, which topped 13% in 2020 as payroll employment slipped slightly below 2 million, has since ebbed to 2.4%, she added.
Job growth ahead could be more muted as many employers continue to struggle to fill open positions.
Still, the regional economy continues to expand, paced in particular by semiconductors and health care, she added, with continuing vibrancy in the services sector, including finance.
The metro Phoenix economy in recent years has diversified, with less reliance on construction and retail, while health care, finance/insurance and transportation/warehousing are among the gainers. Construction, a typically cyclical industry, has ebbed to 6% of metro Phoenix payroll employment from 9% 15 years earlier, she noted.
“That allowed us to recover faster from the recession,” Stephenson said. “Our economy is pretty well balanced.”
However, living costs have risen noticeably, and the region no longer is nearly as cheap as it was relative to many other U.S. cities. That could prove an impediment to future growth if it discourages people from moving here and employers from expanding.
More housing inflation ahead
Higher housing costs are a big factor behind the cost-of-living jump. And following a brief slowdown late last year, home prices have started 2022 on a rising trajectory, said Tina Tamboer, a senior housing analyst with the Cromford Report.
Demand remains solid, but the main catalyst for higher housing prices around metro Phoenix reflects tight supplies, with relatively few homes going up for sale.
The outlook doesn’t bode well for prospective home shoppers, and expected increases in interest rates will erode affordability further.
Homes are sitting on the market for only about eight days on average, and many buyers have paid more than the list price, Tamboer said. Housing inflation might not match the Phoenix region’s 32% median gain for the 12 months through November 2021, as tracked by the S&P/Case-Shiller index, but they won’t likely recede anytime soon, she predicted.
“We’re not looking at any precipice for prices to decline or even go flat right now,” Tamboer said, adding that buyers and their agents should be prepared to move quickly.
“We have a long way to go before price increases slow down.”Another speaker, Greg Vogel of Land Advisors Organization, said a big current constraint on supply is “getting land ready for development,” with many municipalities backed up and delaying the plating process because of water concerns. Also, he said, curtailed immigration has crimped hiring in the construction trades, contributing to higher building costs.Reach the reporter at firstname.lastname@example.org.
SOURCE: Arizona Republic