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Arizona Update & Outlook Long Road To Recovery

Arizona Update & Outlook Long Road To Recovery. ACMA Conference Sedona, Arizona February 4, 2010. Update & Outlook. Is the Recession Over? Why Consumers Worry Arizona Budget Basics Arizona Outlook. Is Recession Over?. Yes - it’s over (19%) No - not over (64%) Don’t know (17%).

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Arizona Update & Outlook Long Road To Recovery

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  1. Arizona Update & Outlook Long Road To Recovery ACMA Conference Sedona, Arizona February 4, 2010

  2. Update & Outlook • Is the Recession Over? • Why Consumers Worry • Arizona Budget Basics • Arizona Outlook

  3. Is Recession Over? • Yes - it’s over (19%) • No - not over (64%) • Don’t know (17%)

  4. Is Recession Over? • Recession is a contraction • Ends when indicators turn up • At the bottom of the cycle • When conditions are worst!

  5. But…Current Recession Longest in Post-War National Bureau of Economic Research

  6. End in Sight? Return to PreviousEmployment Peak Takes Longer (Months required for U.S. employment to recover from recession and return to previous peak before recession began)

  7. ISM Index Is Back Above 50 (Manufacturing) Institute for Supply Management, Report on Business

  8. Truck Tonnage Up Since Summer 2005 2006 2007 2008 2009 American Trucking Association

  9. Retail Sales Up After Dec. 2008 Bottom $ billions of U. S. Retail Sales 2009 sales 7% below 2008 2004 2005 2006 2007 2008 2009 U. S. Census Bureau

  10. Arizona Retail Sales Fall Since 2007(Monthly Percent Change Yr/Yr) Arizona Department of Revenue

  11. GDP Rebounds in Fourth Quarter: Expect Smaller Gains In Q1 5.7% 1.5% 2.2% -6.4% U. S. Bureau of Economic Analysis

  12. GDP: How Strong in Q4? Percent Change in Real GDP at Annual Rate 2010 2008 2009

  13. Beware the double dip GDP 1980-82 “W” Recovery 1979 1980 1981 1982 1983 1984

  14. End of stimulus may bring double dip recession

  15. Stiglitz Says U.S. Recovery May Not Be ‘Sustainable’

  16. Buy & Hold? How’s That Been For You? S & P 500 1999 & 2009

  17. 1% rise in saving cuts spending by $100 bil. Consumers Stopped Buying & Borrowing – Savings Rate Up 5.9%

  18. Why Consumer is Key • Accounts for 70% of GDP • But 2010 spending will be weak • New borrowing is down • Saving rate up as debt reduced • Will this be the “new normal?”

  19. How Long Will Deleveraging Last?

  20. Worry Meter Why Consumers Worry • Job Losses Continue • Unemployment Up • Home Values Down • No End in Sight?

  21. Why Consumers Worry Arizona consumers & businesses are in the state’s worst downturn (by far) in modern times.

  22. 7.3 Mil. U. S. Jobs Lost in Past Two Years

  23. Fewer U. S. Jobs Now than 9 Years Ago Dec. 2000 132.5 mil Jobs Dec. 2009 131.8 mil Jobs U. S. Bureau of Labor Statistics, seasonally adjusted data

  24. U.S. Job Losses Slowing 4,000 jobs added in November US Bureau of Labor Statistics, thousands of U. S. nonfarm jobs

  25. Western Job Growth Is Weak (Percent Change Dec. 2009 vs Dec. 2008) 25 26 1 44 30 22 50 49 8 38 39 41 47 28 18 Alaska #2 U. S. Bureau of Labor Statistics

  26. 123,800 Arizona Jobs Lost SectorJobs: 12 Mos. Overall Nonfarm -123,800 Construction -31,100 Government -20,500 Prof/Biz Services -19,100 Retail Trade -15,000 Manufacturing -11,200 Health Care +6,400 Arizona Dept. of Commerce, Dec. 2009 vs. Dec. 2008

  27. Two Years of Arizona Job Loss (305,000 Jobs Lost Since Dec. 2007) % Change Yr/Yr Source: Arizona Department of Commerce, not seasonally adjusted

  28. Worst Big Metro Economies Job Loss – Dec. 2009 vs Dec. 2008 – Labor Force > 1 Million W. P. Carey School of Business & U. S. Bureau Labor Statistics

  29. “Bermuda Triangle” of Economic Troubles (Phoenix – Riverside – Las Vegas)

  30. Triangle of Economic Troubles *Las Vegas labor force < 1 million Job loss, U. S. Bureau Labor Statistics, Dec. 2009 Home values from National Association Realtors, third quarter 2009 Foreclosure rate from RealtyTrac, third quarter 2009 Negative equity from First American CoreLogic, third quarter 2009

  31. AZ Unemployment Rate Below U.S. US Bureau of Labor Statistics and AZ Dept of Commerce

  32. What Factors Keep Arizona’sUnemployment Rate Lower? • Discouraged workers • Fewer hours per job • Out migration Arizona 7th Greatest in Labor Underutilization at 17.2% (US BLS)

  33. Stimulus Impact Peaks in 2010

  34. How Many Jobs Has Stimulus Created? • 305,000 Arizona jobs lost since • December, 2007 employment peak • 6,810 Arizona jobs funded by • U.S. Recovery Act (Q4 2009) • $1.1 billion received in contracts, • grants & loans Recovery.gov website

  35. Evaluating the Stimulus Has The Stimulus Helped or Hurt? Rasmussen Poll, December 2009

  36. Evaluating the Stimulus • Only 599,000 jobs created? • The Stimulus program failed! • Only 599,000 jobs created? • The funding was too small!

  37. Too Small? Not Exactly!

  38. Some States Over/Under Funded by Stimulus Act Stimulus jobs from Recovery.gov website

  39. Arizona Fiscal Woes Second to California

  40. Arizona Budget Basics

  41. Budget Basics: 3 Major Revenue Sources Decline • Sales taxes (-31%) • Individual income taxes (-36%) • Corporate income taxes (-46%) • These are 90% of General Fund Office of Strategic Planning & Budgeting, FY 2007 – FY 2010 data

  42. Arizona Retail Sales Outlook: 2009 Will be 10 – 15% Below 2008 Annual Percent Change Forecast Arizona Dept. of Revenue & W. P. Carey School

  43. Arizona Personal Income: First Decline Since Records Kept Annual Percent Change Forecast U.S. Dept. Commerce & W. P. Carey School

  44. Budget Basics: Much of Spending is Formula Based • K-12 Education • Corrections • AHCCCS & Health Care • These are 2/3 of General Fund Office of Strategic Planning & Budgeting

  45. Arizona Taxable Retail Sales and Personal Income(YR/YR Growth 1985:1-2009:2) Taxable Sales

  46. Arizona’s Future Fiscal Crisis The cumulative gap between expenditures and revenue from FY10 to FY14 is $15.4 Billion 47

  47. United StatesEconomic Forecast W. P. Carey School of Business, ASU

  48. U.S. Outlook Summary • Recession is over, pain remains • “U” shaped recovery begins • Unemployment stays near 10% • Stimulus/bailouts unpopular • but support recovery

  49. ARIZONA Economic Forecast W. P. Carey School of Business, ASU; based on data available as of Feb. 1, 2010

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