Saturday, September 25, 2010

Economists: Arizona recession is finally over

The longest recession since the Great Depression is officially over - across the United States and, by many economists' accounts, in Arizona.

With unemployment at a 27-year high and poverty on the rise in the state, an announcement from Cambridge, Mass., that the recession officially ended 15 months ago was greeted by many with eye-rolling skepticism.

But Arizona economists agree: Despite job shortages, declining home values and a distressingly high foreclosure rate, the recession is history.

The National Bureau of Economic Research's determination that the recession officially started in December 2007 and ended in June 2009 is mainly an academic one. The panel of seven experts from universities such as Harvard, Princeton and Stanford determined after looking at a variety of indicators, such as the Gross Domestic Product and Gross Domestic Income, that the recession ended and the economy began expanding last summer.

The panel, however, made it clear that it knows the economy has not been favorable and that it has not been operating normally since then.

It's common for recession starts and stops to be declared up to a year or more after the fact because it can take that long to get the most accurate data. The panel didn't declare that the latest recession began until December 2008, long after it was obvious to most Americans.

And the statistics are grim. Since the recession began in December 2007, 7.3 million jobs have disappeared, and nearly 2.5 million homes have been repossessed nationwide. Arizona has lost about one-tenth of its jobs since the recession began. More than 125,000 Maricopa County homes have been foreclosed on since January 2007.

Arizona lagging

Most Arizona-based economists believe the recession also has ended in the Grand Canyon State, but they disagree on the timing. Some say fall 2009, some say spring 2010, and some say even this month. They generally agree the downturn lasted longer in Arizona than nationally and that the recovery continues to be slow.

That's obvious to Amy McMullen, 51, of Gold Canyon, who was one of many who commented about the news on The Arizona Republic's azcen site on Facebook. McMullen said that, personally, she is doing OK because her husband is working. A resident since 2002, McMullen has seen firsthand the real-estate boom and bust that brought the economy down. She had been buying homes and fixing them up to rent or sell, but the economy wiped out that market.

"I am frightened by the number of empty storefronts I see when I go into town," she said. "And it's a little scary to see how quiet things are getting, even more so than normal for this time of year, I think.

"So, yeah, parts of the Phoenix area are starting to look like ghost towns for me. And I think that is a result of our economy."

It is typical for unemployment to rise after a recession ends as discouraged job seekers try to re-enter the workforce. And after the past few recessions, it has taken even longer for unemployment to peak. After the end of the 2001 recession, it took 19 months.

Scott Ruecker, 39, of Phoenix, who has been trying to find steady work all year, said, "Anyone who thinks the recession is over lives in a different reality.

"It's been impossible to find a job that pays me more than I get in unemployment. A lot of sales jobs want you to work for free for three months. Anyone who wants a job like that doesn't need one."

He is seeking a job in tech support, but it seems to him that everyone who has those jobs is keeping them.

Job outlook better

Arizona doesn't have an organization like the economic research bureau to establish when the economy expands or contracts, and regional economists vary in the measures they use. The one indicator they seem to favor at the state level is employment. The data are reported monthly and considered reliable.

Job losses show how deeply the recession has hurt Arizona. The state has shed about 271,400 jobs since the recession began through July, according to the U.S. Department of Labor's seasonally adjusted numbers.

Even though the Arizona Department of Commerce last week said the August unemployment rate rose to 9.7 percent, its highest in 27 years, economists say that the job market actually reached a bottom last year and that job losses have been slowing.

The number of jobs in metro Phoenix in August already is greater than the number of jobs in the metro area in August 2009, according to the state Commerce Department. When statewide job data for September is reported next month, Arizona may finally begin to see jobs grow compared with the number of jobs a year earlier. If that occurs, it will be the first year-over-year job increase after 31 months of declines.

Arizona State University economist Lee McPheters said the contraction in employment and the recession in Arizona ended a year ago, in fall 2009. "But, in my opinion, we are still bumping along the bottom. This is a long, drawn-out trough for Arizona," he said.

Marshall Vest, a University of Arizona economist, said that in April he determined the national recession ended in June 2009. He contends that the recession in Arizona ended around the end of 2009 or the beginning of 2010 but that it will take several months for the recovery to become evident.

Economist Nathan Topper, who follows Arizona for Moody's Economy .com, believes Arizona came out of its recession in the first quarter of 2010 and was one of the last states to do so.

"Slow population growth and the weak housing market are the primary reasons Arizona has lagged the nation during the recovery," he said. "The oversupply of homes, including the shadow inventory of homes on the verge of foreclosure, presents the greatest risk to what has proven to be a weak recovery thus far. Home prices are expected to decline later this year, which will dampen consumer confidence."

Jim Rounds, a Scottsdale economist, was even more conservative. He said the recession is probably just ending now because the state is on the verge of adding jobs.

Housing woes

The recession has been especially deep in Arizona because of its real-estate crisis, which, despite occasional signs of improvement, is still growing.

In its monthly housing report, ASU's W.P. Carey School of Business reported Monday that August marked the third straight month that the median existing-home price dropped in the Phoenix area and that foreclosures made up the highest percentage of the month's home sales since January.

Tom Rex, another ASU economist, said the latest recessions, going back to the early 1990s, have been unusually long because the imbalances that caused them were not corrected. "Certainly in the current cycle, the real estate and financial markets were a significant cause of the recent recession and remain a real problem to the economy," he said.

by Betty Beard The Arizona Republic Sept. 21, 2010 12:00 AM

Economists: Arizona recession is finally over

Real Estate News

HootSuite - Social Media Dashboard