Arizona & California Economic Outlooks for 2024

Article originally posted on HERE on March 4, 2024

Here’s what to expect in the economy in 2024 at the state level and at the national level.

First, good news is coming out regularly regarding the national economy. When the Fed first increased rates in March of 2022, most analysts expected the economy would spiral into recession from a tighter monetary policy. Dire warnings of spiking unemployment and a sharp drop-off in consumer spending became commonplace. But even as the benchmark interest rate was raised 11 times, unemployment actually fell and job creation surged. Wage growth at year-end 2023 (3.8%) outpaced inflation rates (3.3%), according to the U. S. Bureau of Labor Statistics.

Consumer spending has been particularly important in keeping the economy vibrant, and the most recent surveys show consumer confidence on the rise. But some polls reveal Americans feel frustrated by aspects of the current economy. Although inflation has been reduced, prices for staples such as groceries remain some 15% higher than two years ago, according to the BLS.

“Based on the trajectory of indicators we see now, an economic soft landing seems more and more likely,” says Lee McPheters, editor of the Western Blue Chip Economic Forecast and director of ASU’s Economic Outlook Center in the W. P. Carey School of Business.

ASU is part of a network of organizations working to build the future of Arizona. By connecting with local governments, community leaders and private industry, together we drive regional economic development that promotes human well-being. In this forecast, ASU experts and partners share their outlook for the year ahead.

The Arizona economy looks strong, outperforming the national economy, according to economists who met in December at the longest-running, most trusted economic forecasting event in the Valley, the 60th annual ASU/PNC Bank Economic Forecast Luncheon.

“Greater Phoenix has become a top global destination for the semiconductor industry and innovative companies among advanced manufacturing, bioscience and software technology,” says Chris Camacho, president and CEO of Greater Phoenix Economic Council.

“Where we are today is the result of decades of intentional planning between local municipalities and partners across the region including ASU,” he says. “Greater Phoenix is now entering the next economic frontier where we intend to become home to the next wave of game-changing companies, creating quality jobs and driving the region’s relentlessly innovative spirit.”

• Arizona magnetism: “Productive workers and businesses want to come and stay in Arizona,” says Dennis L. Hoffman, director of ASU’s Office of the University Economist and the L. William Seidman Research Institute at ASU’s W. P. Carey School of Business.

• 5 key industries: Health care, leisure and hospitality, wholesale trade, professional/tech and construction are responsible for 75% of the 66,500 private Arizona jobs added in Q3 2023.

• Companies coming to the Valley: Google, Meta, DoorDash, Mechanical Keyboards, Align Technology, according to the Arizona Commerce Authority.

• Semiconductor investment: Arizona leads the nation with $40B coming in since 2021.

• Startups: “Arizona offers businesses friendly tax and regulatory practices that will draw new commerce and help sustain the state’s economy,” Hoffman says.

• Construction: Added around 4,800 jobs in 2023, up 2.5% to almost 200,000 construction workers, the most in 15 years.

• Wholesale trade: 7,300 new jobs in 2023, second in the country.

Economic growth in 2024 is moderate but still positive as consumer spending remains robust and business confidence improves, according to ASU’s Seidman Institute’s Western Blue Chip Economic Forecast. Incomes are predicted to grow with 4.5% current personal income annual growth percentage consensus forecast as of Jan. 19, 2024.

The California economy is in better shape than predicted.

“In the near term, even as the state faces tough budget decisions, its labor market is in much better shape than many were expecting a year ago,” according to the Public Policy Institute of California.

• California added over 1.8M jobs since 2020 more than any other state, including Texas and Florida, according to the U.S. Bureau of Labor Statistics.

• California’s population will stabilize in 2024 after losses in the post-pandemic period, according to demographers at the California Department of Finance.

• The job market is under pressure from slower tech hiring, but services including health care have openings as California adds 325,000 new jobs this year, according to ASU’s Western Blue Chip Economic Forecast.

• Inflation is less than half of what it was a year ago, (3% compared to 7%).

• The unemployment rate is slightly higher, 5.1% at year-end 2023 after a run of 22 straight months below 5%, according to U.S. Bureau of Labor Statistics.

• The housing market is expected to adjust in 2024 with single-family permits up 6.0%, according to ASU’s Western Blue Chip forecast.