Valley’s Job Market, Population will Grow in 2018

Article originally posted on Phoenix Business Journal on January 22, 2018

2018 is expected to bring healthy growth to the Valley with single-family home construction rising, job growth and an increasing population.

“Basically, 2018 is going to be a pretty decent year, and my guess is most of 2019 will be as well,” said economist Elliott Pollack, CEO of Elliott D. Pollack and Co., an economic and real estate consulting firm in Scottsdale. “Greater Phoenix is going to be growing more rapidly than anyplace else in the state. We will probably grow in the area of 2.5 to 3 percent in 2018 in terms of employment; we will probably grow about 1.8 percent in terms of population; and the jobs will be well diversified with not only leisure-hospitality, education and health services, but also manufacturing and in construction.”

Pollack delivered his economic outlook forecast to the Business & Professionals Division: Real Estate & Finance of the Jewish Federation of Greater Phoenix on Jan. 18. In an interview before his presentation, Pollack said that not all areas of the state will see similar improvements. Tucson and non-metro areas continue to lag behind.

“You have places like Flagstaff that is doing OK,” he said. “Greenlee County added a bunch of employees, but essentially most of the state has not done very well in this cycle, and that has to do with the their economic base, which has to do with either government, tourism or mining for the non-metro areas.”

Pollack’s economic forecast generally mirrors that of Lee McPheters, research professor of economics in the W. P. Carey School of Business and director of the school’s JPMorgan Chase Economic Outlook Center. He presented his economic outlook for Arizona in November. While Pollack and McPheters anticipate various degrees of improvement, they agree that economic growth, at least in the Valley will strengthen in 2018.

“We expect steady, sustainable but not spectacular growth — certainly better than most places,” McPheters said during his forecast.

Indeed, Pollack said the Valley was the only place in the state that has so far created more jobs since the end of the recession than it lost during the recession.

“It’s doing well from that standpoint,” he added. “Job growth right now is showing year-over-year at about 2.2 percent. That will be revised in February and I expect that to go up. I think we’re doing better than the numbers initially said and it’s really across the board. It’s in manufacturing, it’s in construction and it’s in areas where most of  the jobs are now created — education, health services, leisure and hospitality, and financial services.”

For Arizona and the Valley in particular, this lengthy economic recovery cycle has been almost unprecedented, as the greater Phoenix economy has traditionally recovered quickly from past downturns. But, Pollack said, the severity of the national recession changed one key component of the Valley’s economy.

“(Before the recession) Arizona captured 10 percent of everybody who moved in the country,” he said. “At the bottom of the recession, there were fewer people moving and we only captured 2 percent. We’re now capturing 5 percent to 6 percent, which is a reasonable number, but there are fewer people moving.”

Because of overbuilding before the recession, the Valley was one of the states at ground zero when the housing market collapsed. Pollack said that excess inventory has finally been absorbed and home building is now more modest.

“We were building 60,000 houses, when the market really only needed 35,000,” Pollack said. “Housing is doing well and 20,000-21,000 units will be built this year — about 10 percent more than last year — and there is nothing that’s being built that isn’t demanded.”

He said that demand for single-family housing likely will grow as more millennials begin to enter the economy, marry and have children. Until then, the multi-family housing market is going strong, not only because of millennials, but also as a result of baby boomers who have downsized.

Nationally, Pollack expects the nation’s economy to have its best year, despite the lateness of the recovery cycle.

“We’ve got the stimulus from the tax cut and there will probably be some stimulus from some infrastructure money being spent,” he said. “We’re going to have a stronger economy, somewhat higher inflation and larger deficits, but basically the outlook is quite good.”