By Craig McDermott, cross-posted from Random Musings
…as if those of us who live here haven't figured that out already.
Brookings Mountain West, a partnership between the Brookings Institute, a Washington D.C. think tank, and the University of Nevada – Las Vegas (UNLV), today released its quarterly Mountain Monitor, tracking and evaluating economic data for the Intermountain West area (Arizona, Colorado, Idaho, Nevada, New Mexico, and Utah).
The latest Monitor covers the fourth quarter of 2010.
Based on their research, it's evident that the pre-bubbleburst growth fueled by the economic focus on home construction is now inhibiting the recovery of the Mountain West metro areas, particularly Las Vegas, Boise, and, of course, Phoenix.
From the Monitor –
The severest downturns foreshadowed the weakest recoveries in the Mountain Region. Reflecting the structural nature of a recession whose origins lay in an inflated housing bubble, the boomtown metros that fell the hardest are finding it the most difficult to turn around. In this category fall Boise, Las Vegas, Phoenix, and, to a lesser extent, Tucson. On the other hand, Albuquerque, which stood apart with a temperate pre-recession housing boom and a well-educated, public sector-oriented workforce, weathered the mildest recession in the region.
The data shows that while metro Phoenix is among the leaders when it comes to job growth, ranking 7th nationally out of the top 100 metro areas in new jobs created (+1.5%) since its trough (Q3 2009) and 3rd nationally in growth between the Q3 and Q4 2010 (+0.7%), it ranks 87th nationally relative to its employment peak (Q3 2007), down 10.6% (national average: -5.3%; largest 100 metro areas average: -6.3%).
This chart, from Brookings Mountain West, charts the relative employment numbers for the Phoenix area over the course of four recent recessions, with 100% indicating the employment level at the beginning of the recessions. Historically, 12 quarters (three years) after the start of a recession, we are well into a period of sustained net employment growth.
Not so this time around.
Phoenix' Gross Metropolitan Product, or GMP, a measure of the area's economic activity, is still down significantly from its peak, and GMP growth here is lagging that of most of the other metro areas. There may be a few new jobs here, but they aren't translating into a stronger economy.
While metro Phoenix ranked 7th in terms of shrinking the number of bank or lender-owned properties (aka – foreclosure inventory), it's still 98th nationally in terms the total proportion of such properties (meaning that only 2 out of the top 100 metro areas have a larger proportion of their properties owned by financial institutions. Simply put, we have a large excess housing capacity but as yet, we don't have the economic growth needed to absorb that excess.
That's an economic reality that's reflected in the fact that home prices here are still plummeting.
Given that so much of Phoenix' past (and current) economic growth scheme was based building homes for new residents and that we don't have the sort of employment base to attract people who are young enough that they don't spend their days golfing, it looks as if the economic recovery here will be slow, intermittent, and protracted.
Other data (from the Phoenix snapshot from Brookings) -
Phoenix Rank* 100-metro average U.S. average
Unemployment rate 8.4 % 46 9.1 % 9.1 %
Three-year percentage point change in unemployment rate
4.5 points 67 4.5 points 4.3 points
One-year percentage point change in unemployment rate
0.1 points 76 -0.4 points -0.6 points
Gross metropolitan product (GMP is defined as the market value of all final goods and services produced within a metropolitan area in a given period of time)
Change in GMP from peak
(2007Q4) -3.0 % 84 0.9 % 1.5 %
Change in GMP from trough
(2009Q3) 4.1 % 65 4.2 % 6.6 %
One-quarter change in GMP 0.4 % 86 0.8 % 0.8 %
Change in housing prices from peak
(2006Q4) -48.2 % 92 -23.6 % -18.5 %
Change in housing prices from trough
(2010Q4) 0.0 % 47 0.0 % 0.0 %
One-year change in housing prices
-10.6 % 98 -3.4 % -3.0 %
One-quarter change in housing prices
-4.0 % 100 -1.2 % -1.2 %
Real estate owned properties (REOs) (Bank or other financial institution owned)
REOs per 1,000 mortgageable properties
14.84 98 5.19 4.23
One-quarter change in REOs per 1,000 mortgageable properties
-1.31 7 -0.39 -0.33
* – Rank is out of the top 100 metro areas. A rank of "1" indicates the strongest performance in a given category; a rank of "100" indicates the weakest performance in a given category.
Phoenix' snapshot page can be found here; Tucson's here; snapshots for other metro areas can be found here.
A powerpoint presentation on Arizona's economic recovery from the Arizona Legislature's Joint Legislative Budget Committee (JLBC) is here. While it tracks different data than Brookings does, and there aren't any comparisons with other states/metro areas, the conclusion from looking at JLBC's report is similar to the conclusion based on the "Mountain Monitor" – while there are glimmers of economic life here (slightly increased employment [Brookings], increased sales tax revenue [JLBC]), Arizona's recovery is a weak one so far.