Robert Kavcic, senior economist at BMO Capital Markets, expects Arizona’s economy to outperform the nation by 0.4 percent when final 2015 results are in, and by the same margin this year and in 2017. The estimates measure changes in Gross Domestic Product for the state and nation.
“The Arizona economy is posting solid and stable economic growth amid an ongoing housing-market recovery and positive demographic trends,” Kavcic wrote in a report last week, as the state also benefits from good performance in tourism.
Employment has been rising as consumer confidence improves, while the state’s jobless rate slowly declines. Most recent job gains have come in the services sector, and Kavcic indicated that he expects Arizona high-tech manufacturing to pick up.
“The encouraging job-growth and jobless-rate trends might now be prompting firmer wage growth,” the report said, citing weekly earnings up 2.9 percent in the fourth quarter, above the U.S. pace. “As the massive amount of slack left over from the recession gets absorbed, Arizona wage growth should continue to firm.”
Arizona’s GDP of just under $42,000 per person is on the low side, ranking 42nd among the states, according to Kavcic.
The housing recovery has settled into a “sustainable pace,” with moderate supply increases and Phoenix-area home prices up 5.9 percent in November, according to the S&P Case-Shiller index.
“The good news is that the foreclosure rate has leveled off below 1 percent and is now among the lowest in America, though a still-elevated vacancy rate has also subdued the pace of price growth in recent months,” the report said.
Improved statewide economic conditions are driving stronger population gains around 1.5 percent. “That is still well below the 3.3-percent pace at the height of the housing boom but twice the national average,” Kavcic reported. “Interstate migration has accelerated from the recession lows, netting out to an inflow of 46,000 people in 2015, with a smaller assist from international inflows.”