Saturday, February 19, 2011

Arizona's economy on the rise, expert says

It may not seem like much of a recovery for Arizonans hobbled by job losses or falling home values, but the state's economy actually is improving at a solid clip.

So says Nathaniel Karp, chief economist for BBVA Compass and one of the few bank economists who tracks conditions here.

"Arizona's economic recovery is among the fastest in the country," said Karp, speaking to BBVA Compass clients in Phoenix this week. "And we're seeing a faster recovery compared to a few months ago."

Karp acknowledged challenges remain for both Arizona and the nation. Arizona's state budget is in particularly bad shape, including unfunded pension liabilities, he said.

But he also pointed to relatively strong manufacturing gains and exports, especially in software and other technology items. Other positives include an increase in hours worked for Arizonans with jobs and moderating price declines for home values here.

Karp predicted Arizona's economy would grow 3.4 percent in 2011, better than his projected 3 percent expansion for the U.S.

On the national economy, Karp sees continuing mild inflation and moderately rising interest rates, despite sharper price increases for oil and various other commodities.

He doesn't see commercial real estate bottoming until summer, but said confidence among business leaders had risen after Congress extended income-tax laws and signaled greater clarity in regulation.

Another bank economist who spoke in Phoenix recently, Paul Kasriel of Northern Trust, also sees gradual economic improvement for the nation in 2011.

In an interview, Kasriel said he expected the U.S. economy to grow 3.3 percent this year, helped by exports, consumer spending and a gradual uptick in lending. Housing and state/municipal finances will act as drags. He didn't provide a forecast for Arizona's economy.

Kasriel sees mild inflation, along with slightly higher interest rates. He expects the national unemployment rate, currently at 9 percent, to dip to 8.6 percent by year's end.

"I think the worst is over for housing, and it should show improvements by the end of the year," he said. "Housing now is a better buy than it's been in 40 years."

While Kasriel doesn't see a big drop in the unemployment rate, he said the employment picture had stabilized.

"If you've been able to hang onto a job for the last several years, there's an increasing probability you'll stay employed," he said. "We couldn't have said that two years ago."

by Russ Wiles The Arizona Republic Feb. 18, 2011 12:00 AM

Arizona's economy on the rise, expert says

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