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Pollack: Phoenix economy continues to expand, boosts state picture
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The Source for Information and Analysis on the Arizona Economy and Real Estate
EDP LogoELLIOTT D. POLLACK

& Company

FOR IMMEDIATE RELEASE
July 25th 2016
 
The Monday Morning Quarterback
A quick analysis of important economic data released over the past week
The national economy, like Ol’ Man River, seems to just keep rolling along.
Slowly.
Fitfully.
But, despite its age, it moves forward.
The same is true with Arizona.  But, the growth in the state so far has mainly been in the Greater Phoenix area.  Tucson has picked up a little as well after years of anemia.  The balance of the state has been lagging.  Interestingly, the Greater Phoenix economy, which has created 86% of all the job gains in the state since the end of the Great Recession, continues to accelerate.  In fact, were it not for the sluggish national economy combined with the slowdown in population flows due to factors such as the percent of homes with mortgages still underwater or underequitied, relatively high unemployment rates, and the number of potential homeowners still in the lock out period after a foreclosure or short sale, Greater Phoenix would be having its normal mid to late cycle boom.
Employment in the Valley of the Sun is up 3.6% over a year ago.  That’s a good showing.  And while the metro area is not number one in terms of growth at the present time, it has worked its way up to 4th place year-to-date out of 32 major employment markets.  This is quite an achievement given what is going on in construction markets.  The state as a whole is, at the present time, 7th out of 50 states in terms of employment growth rate (year-to-date 2016 over year-to-date 2015).
There can be little doubt that this is the “boom” for this cycle.  Things will get stronger only if the institutional constraints created by government policy are eased.  That seems unlikely in the near term.
So, enjoy what is going on.
U.S. Snapshot:
  • Leading indicators increased 0.3% in June after a 0.2% decline in May and a 0.5% increase in April (see chart below).  Eight of the ten components were up in June.  The index is 0.7% above a year ago.
  • Privately owned housing permits in June were at a seasonally adjusted 1,153,000.  This is 1.5% above the 1,136,000 authorized in May but 13.6% below last Junes 1,334,000 (see chart below).
  • Existing single family home sales were up 3.1% over a strong June 2015.  Median prices were up 5.0% from a year ago.
Arizona Snapshot:
  • Arizona’s seasonally adjusted unemployment rate increased 2/10 of 1% from 5.6% in May to 5.8% in June.  This compares to 4.7% and 4.9% for the U.S. as a whole.  A year ago, the Arizona rate was 6.0% and the U.S. rate was 5.3%.
  • In Greater Phoenix, the unemployment rate in June was 5.4% and in Greater Tucson it was 5.8%.
  • Arizona employment in June was up 3.2% from a year ago and year to date employment in the state is up 3.0% with the largest percentage gains in educational & health services, professional & business services, trade, transportation & utilities and financial activities.  Arizona, on a year to date basis, is now ranked 7th out of 50 states.  While this is a weak showing by historic standards, it is the best the state has done since 2006.
  • Greater Phoenix continues to be the bright spot in the state.  Employment was up 3.6% in June from a year ago and year to date, the Phoenix metro area is up 3.5%.  The area now ranks as the 4th fastest growing (in percentage terms) metro area in the country out of the 32 major employment markets in the U.S.  This is also the best performance since 2006.
  • Greater Tucson was up 3.5% in June compared to a year ago and is up 3.1% year to date.  Keep in mind that the Greater Phoenix employment market is more than 5 times larger than the employment market in Greater Tucson.
  • R. L. Brown reports that June was a “boom time” month for new home activity in Metro Phoenix.  Permits were up 15.5% over a very strong June 2015.  The numbers were 1,939 permits compared to 1,679 a year ago.  Year to date 9,358 permits have been issued compared to 7,821 for the same period in 2015.  That’s a 19.7% gain.
  • Greater Tucson’s permits activity was up 28.5% from a year ago to 275 permits in June.  Year to date, 1,370 permits have been issued compared to 1,092 a year ago.  That’s a 25.5% gain.  Median resale prices in Tucson were up 7.4% from a year ago while median new home prices were up 7.3%.
  • According to Real Data, the apartment vacancy rate in Greater Phoenix increased from 7.3% a year ago to 7.6% in this year’s 2nd quarter.  The market is still tight, however, as rents increased by 8.1% over that period.
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