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Things are looking up for Tucson, with an economy that is set to grow in 2015 and 2016. That was one of the key takeaways from the recent University of Arizona Eller College of Management annual Economic Outlook Forecast Luncheon.
More than 500 people heard presenters George W. Hammond, director and research professor at Eller's Economic and Business Research Center, and Anthony Chan, chief economist at Chase, share their predictions regarding job growth, the housing sector, the stock market, interest rates and more.
Despite some stumbling at the start of 2014, the year that's mostly behind us has helped set the stage for growth. To put things in perspective, Chan spoke first and provided an in-depth analysis of the national and global economy.
"In 2015, we expect more support from the central banks of Europe and China and less support from the United States," he said. "Such action is likely to generate faster global growth and better-performing equity markets in Europe as the Eurozone recovers to something approaching 1 percent growth.
"As for China, we expect some improvement despite the effects of restructuring of that economy, but acknowledge that financial markets have already front-loaded some of the expected positive monetary and fiscal policy effects."
For the United States, Chan said growth closer to 3 percent is likely as current momentum spills over into 2015, especially as faster consumer spending is supported by the recent plunge in energy prices.
"Finally, led by Brazil, we expect that Latin America will continue to lag the overall improvement in global economic growth," he said.
Tucson's economy is forecast to expand again next year and "even pick up a little steam," according to Hammond. In his presentation, titled "Battling Headwinds," he gave a comprehensive overview of current economic conditions, breaking down factors that slow growth and pointing to indicators that will fuel acceleration.
Tucson added jobs and residents during the past year, continuing its recovery from the Great Recession.
"The metropolitan area added 4,200 jobs during the past four quarters," Hammond said, "which translates into a rate of 1.2 percent. That job growth is a positive sign, but it was below the state and national growth rates of 2.0 percent and 1.9 percent, respectively."
Most of the job gains during the past year came in leisure and hospitality, professional and business services, education and health services, and financial activities. Tucson experienced job losses in construction and manufacturing.
"Construction continues to be the missing link in the recovery, with employment running at levels last seen in the mid-1990s," Hammond said. "Slow population and household gains have dampened residential real-estate activity during the past year."
Also dragging down local growth has been significant federal fiscal drag, in the form of declining employment and reduced federal procurement spending. Federal fiscal drag affects Tucson more than the nation as a whole, because federal activity (civilian and military) represents a larger share of the local economy.
"Indeed, according to the latest data, the federal government sector accounted for 7.7 percent of Tucson’s gross domestic product in 2012, more than double the national share," Hammond said.
The outlook calls for Tucson job growth to gradually improve, rising from 0.8 percent in 2014 to 1.3 percent by 2016. That reflects modest improvements in net migration and less federal fiscal drag. Rising job and population growth raise income gains, which support additional local spending.
During his presentation, Hammond encouraged the audience to utilize the new Making Action Possible for Southern Arizona interactive website, which is at www.mapazdashboard.arizona.edu. The project, which launched on Dec. 5, is a partnership involving Eller’s Economic and Business Research Center, the Community Foundation for Southern Arizona and the Southern Arizona Leadership Council.
The goal of the site is to measure progress and inspire action. MAP users will find real-time data visualization and analysis for 36 socio-economic indicators grouped into six categories: economy, education, health and social well-being, infrastructure, quality of place, and workforce and demographics. Users can compare southern Arizona to the U.S., states in the West and select metropolitan areas.
"There are so many ways MAP can benefit our community," Hammond said. "Examine the data to drive business decisions, build collaboration or cross-sector partnerships. Or, analyze the data to help shape and pursue effective policies or seek external funding opportunities."
Hammond closed his presentation with an upbeat prediction.
"Overall, Tucson continues to battle headwinds, but the local economy is growing and moving forward," he said.
For more information or to view Hammond’s slide presentation, visit Eller’s Economic and Business Research website.