Experts say 2 more years until full economic recovery in Arizona


December 4, 2014

We can expect our economic recovery to take about another two years in Arizona. That’s what experts said Dec. 3 at the 51st annual Economic Forecast Luncheon co-sponsored by Arizona State University’s W. P. Carey School of Business and JPMorgan Chase.

About 750 people attended the event at the Phoenix Convention Center. Key experts delivered a comprehensive overview of what’s happening in the state and national economies, as well as the stock market and housing market. One main message was that Arizona is now growing at a faster rate than the nation, but we still have some distance to go. Research Professor Lee McPheters Download Full Image

“As of May, the United States finished gaining back 100 percent of its jobs lost in the recession, but in Arizona alone, we’re only 69 percent of the way there,” explained research professor Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business. “We expect to regain that last 96,400 jobs in the next year and a half.”

So far this year, Arizona has experienced 2 percent job growth, while our state’s 30-year average is a much higher 4.2 percent. Still, this rate was good enough to rank Arizona as the No. 12 state for job growth as of October. Arizona ranked No. 13 in personal-income growth by midyear. McPheters believes the state will speed up from here.

Among his Arizona predictions for 2015:

Employment growth could rise from an expected 2.2 percent this year to 2.5 percent next year.
Personal-income growth could jump from 4 percent this year to 4.5 percent in 2015.
Population growth could go up from 1.4 percent in 2014 to 1.5 percent next year.

McPheters added Arizona is doing particularly well in creating jobs in finance/insurance and health care. The state is lagging in manufacturing and construction. Arizona unemployment has dropped from 7.8 percent last year to 6.8 percent this year. However, we continue to recover much more slowly than from past economic downturns, and we continue to face risks from ineffective growth policies at the national level.

John Lonski, chief capital markets economist of Moody’s Analytics, addressed the national economy by saying that we can expect more subpar growth in 2015.

“We expect U.S. real GDP (gross domestic product) growth to rise from an expected 2.2 percent this year to about 2.8 percent next year,” said Lonski. “We also anticipate the national unemployment rate may drop from 5.8 percent this October to 5.4 percent by the end of 2015.”

In addition, Lonski predicts U.S. wage and salary income should grow by about 4.5 percent next year. He believes industrial capacity will be more fully utilized. He said the housing collapse, tightening of fiscal policy, and insufficient new product development have been contributing to America’s economic struggle. However, he expects the next major wave of technological innovation to supply stronger-than-expected growth, whether it’s self-driving autos or robotics.

“We’re also experiencing some big changes because of a population shift,” Lonski added. “Only about 1.5 percent of the jobs added post-recession have gone to those ages 16 to 54, while those ages 55 and older gained 20.9 percent. This shift has prompted less spending and more saving, especially by those closer to retirement.”

Lonski also expects the budget deficit to go up, after bottoming out at 2.6 percent of GDP in 2015. That’s because of increased spending on retiring baby boomers, as well as the still-unknown costs of the Affordable Care Act. Decreased defense spending should moderate some of the increases.

James Glassman, managing director and senior economist for JPMorgan Chase & Co., covered the financial markets. He said that, despite the recent rise in stock prices, they are still fairly valued. He added household net worth is back in record territory.

“Credit conditions are improving, and rising vehicle sales prove it,” said Glassman. “Also, we’re seeing some improvements in the housing industry, since builders addressed their previous speculative overbuilding by underbuilding in recent years. Rising home prices are helping to drain the number of ‘underwater’ mortgages.”

Glassman notes the energy sector is also humming along. He expects interest rates to go up next year as the economy continues to improve.

Elliott D. Pollack, chief executive officer of Scottsdale-based economic consulting firm Elliott D. Pollack and Company, covered the Arizona housing market. He repeated that the state has recently experienced a significant slowdown in population flows and only a modest recovery from the sharp downturn in our housing market.

Pollack said there are a few positives, such as slow acceleration of the local economy, decent home affordability, low mortgage rates, a slight loosening of lending standards, and the movement of many all-cash investors to other bargain areas of the country. These factors create more opportunity for local buyers who need financing.

“However, we still see several negatives that outweigh those positives, including relatively sluggish employment growth, fewer people moving, millennials delaying home purchases, many people still waiting out their required seven years in the credit ‘penalty box’ after foreclosures, and overall difficulty in getting home loans,” explained Pollack. “Full recovery is still years away.”

Pollack said more people who have been renting may jump back into the housing market over the next several years as conditions improve. Meantime, apartment construction is up. Pollack believes the Valley won’t see any significant office construction – except in select submarkets like Tempe – until at least 2017.

More details and analysis from the event, including the presentation slides, are available from the business school’s “Research and Ideas” website at research.wpcarey.asu.edu.

Crow announces pledge to increase graduation rates at national forum


December 4, 2014

Arizona State University President Michael M. Crow on Thursday announced a pledge by the University Innovation Alliance to graduate 68,000 more students from 11 member institutions in the next decade.

Speaking at a national education forum convened by the White House, Crow said universities working together could change the culture and dynamics of higher education, and create new avenues for graduates from all economic and cultural backgrounds. people sitting on a stage Download Full Image

“We think that we can do that by innovating together, dramatically, and that’s what we’re excited about,” Crow, who chairs the alliance, said at Thursday’s White House event.

Crow made the announcement at the second College Opportunity Day of Action in Washington, D.C.

Hosted by President Barack Obama, Vice President Joe Biden and First Lady Michelle Obama, the event expanded upon commitments made by more than 140 college presidents in January 2014 at the first such event.

Crow represented the University Innovation Alliance in the day’s first panel discussion.

The organization was formed in the fall of 2014 by 11 public research universities, including ASU. The UIA members collaborate on ways to produce more graduates, produce more graduates from lower socioeconomic status families, lower the cost of higher education, and share their findings with one another.

“We believe that we can produce fantastically capable college graduates from all family backgrounds at scale at a lower cost by innovating together,” Crow said.

Crow shared the stage with Freeman Hrabowski, president of the University of Maryland, Baltimore County; Gov. Bill Haslam, Republican, of Tennessee; Sebastian Thrun, CEO and co-founder of Udacity; and Candace Thille, assistant professor in the Stanford School of Education. The panel was moderated by Cecilia Munoz, director of the White House Domestic Policy Council.

Both Crow and Hrabowski agreed that an important part of enabling student success is changing the attitude and the culture of higher education as we know it.

“We must change the systems, the methodologies, the culture and the dynamics,” said Crow.

Addressing the conference, President Obama praised the attendees attention to issues surrounding access to and graduation from institutions of higher education.

“All we did was ask a simple question: What can we do collectively to create more success stories…” President Obama said. “You collectively have responded to give more of our students a chance.”

Crow also announced Thursday that the four-year graduation rate at ASU has seen an increase of 20 percentage points between 2002 and 2010, with the most dramatic increase occurring after the introduction of a system called eAdvisor, which allows students to plot their progress toward a degree in real time.

“(That is) largely derivative of a highly innovative faculty willing to innovate in dramatic ways with the injection of technological tools that allow them to operate in ways that even they couldn’t imagine,” Crow said.

Since then, ASU has made many other investments to boost graduation rates, including the hiring of hundreds of tutors, the creation of focused learning communities on campus, the introduction of adaptive learning platforms and a “retention dashboard” that signals to administrators when a student needs additional support.

That collection of tools has had a significant impact on the success of students.

“It’s really unbelievable to see the outcomes,” Crow said.

Emma Greguska

Reporter, ASU Now

(480) 965-9657