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Analyst: Tucson's economy should grow faster over next 2 years

Tucson's economy has been gaining momentum and is expected to grow even faster over the next two years, especially if some of president-elect Donald Trump's proposals are enacted, a University of Arizona economist said Friday.

George Hammond, director of the UA's Economic and Business Research Center, predicted that the number of jobs in Tucson will grow about 1.4 percent this year and that the growth will accelerate to about two percent in 2017 and 2018. Jobs grew only .6 percent in 2015.

But Trump's proposal for $550 billion to $1 trillion to improve the nation's infrastructure, such as highways, bridges and airports, as well his plans to improve border security, could accelerate Tucson's job growth even more, Hammond said, a speech to about 500 people at the UA's Eller College of Management annual Economic Outlook lunch at Westin La Paloma Resort.

"More defense spending, more spending on border security means more jobs in Tucson. That will help boost economic growth," he said afterward.

Anthony Chan, chief economist for Chase Bank, predicted that the nation's gross national product will grow to 2 percent in 2017 from about 1.6 percent in 2016 due to several Trump initiatives — lower U.S. personal and corporate tax rates, increased infrastructure spending and a 70 percent reduction in federal government regulations. 

But Chan conceded he isn't sure how Trump can eliminate the promised 70 percent of federal regulations and joked "I don't know if he is using Wite-Out."

He also said that while Trump has predicted his efforts can boost the nation's gross national product by four percent, Chan contends it will be in the nature of two to three percent growth. "But that's good enough. That's exciting," he said.

Hammond predicted the Tucson area will add about 5,300 new jobs this year, 7,100 in 2017 and 7,600 in 2018. This year's growth would be the fastest in four years and if the projections for the next two years becomes reality, that would be the fastest pace in 10 years, since before the Great Recession began.

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Federal spending cutbacks that reduced local defense and other federal jobs over the past few years are pretty much over, he said.

 Most new jobs over the next three years will be in the health services and private education field — particularly for medical personnel serving the aging baby boomers — as well as leisure and hospitality;  professional and business services and trade, transportation and utilities, a broad category that includes mostly retail workers, Hammond said.

Recent announcements about new jobs coming to Raytheon and Vector Space Systems indicate that manufacturing jobs will grow. That is good news, Hammond said, because they are high paying.

But low copper prices will continue to drag down mining jobs, which posted the largest losses over the year in the third quarter.

Income

Before the recession, Arizona's average income grew about four percent a year but since the recession ended in 2009, it has been growing only about 2.5 percent a year, Hammond said. Wages in Tucson averaged $38,561 in 2015, almost 20 percent below the national average.

"We are still waiting for wage growth to catch fire," he said.

He disputed the notion that wages are lower because Tucson and Arizona have a larger proportion of low-income jobs. Research shows that Arizona wages are lower than national averages in every field, he said.  

"Virtually every occupation in the state pays less than the national average," he said.

That apparently is because Arizona is an attractive place to come to. "Arizona is frequently a destination of choice," he said.

One troubling sign is that younger generations have fewer college graduates. While lost 33 percent of those 65 and over have four-year degrees in Arizona, only 30 percent of 35 to 44 year olds do. Among those 25 to 34, only 26 percent have degrees.

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And only 14 percent of Hispanics have degrees, compared to 27 percent for non-Hispanics. Since Hispanic populations are expected to grow, states that make sure those residents get college degrees will be more successful, Hammond said.

Housing

The Federal Housing Finance Administration reported that Tucson's house prices grew by 5.9 percent over the year in the second quarter of 2016, slightly faster than the national rate of 5.4 percent. But Tucson house prices are still 23.4 percent below their re-recession peak in the mid 2000s.

Construction of new homes in metro Tucson started strong at the beginning of the year but have softened, Hammond said. The number of new-home permits is expected to finish this year only slightly ahead of 2015 because of slow population growth.

But the economist predicted they will pick up in 2017, maxing out at about 4,000.

Exports

This year brought a stronger dollar compared with foreign currencies, and that has hurt exports. Arizona exports this year have fallen 10 percent to Mexico and about 11 percent to Canada and Europe. 

It may also have hurt Mexican visitation to Tucson. Mexican visitors can be difficult to track but past research shows that when the value of the peso drops, as is occurring now, the number of car passengers crossing the border tends to also fall, Hammond said.

Major Tucson economic developments in 2016


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2 comments on this story

2
537 comments
Dec 12, 2016, 1:46 pm
-0 +0

Yes, Betty was on the Republic’s business desk for a while. We’re quite pleased to have her contributing to TucsonSentinel.com now.

1
Dec 10, 2016, 10:05 am
-0 +1

Excellent article.  Having been raised in Tucson (and abandoning UA for NAU!!) I’m always gladdened to hear about solid economic growth at home.  I am hopeful that the old 5 year boom/bust routine has passed into history.  By the way, is this the self-same Betty Beard who was the ADS reporter who vanished, only to appear for years as the Republic’s best business reporter ever?  Has she surfaced again?  GREAT!

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Economic announcements

The year 2016 brought a number of announcements about company expansions and jobs in or near the Tucson region. Here are the major announcements or developments. But there is no guarantee all these jobs will come because the companies’ financial positions can change. Many of these hires will be spread over several years.

  • Lucid Motors, of Menlo Park, Calif. announced Nov. 29 that it would manufacture luxury electric autos in Casa Grande, an effort that could bring a $700 million investment by 2022 and 2,000 jobs. While most of the impact will be in the Phoenix metro area and Pinal County, north Pima County could benefit.
  • Raytheon Co., Tucson’s largest private employer, said on Nov. 18 that it intends to expand operations by almost 2,000 employees at its Missile Systems business headquarters over the next five years. The company already has about 10,000 workers and a network of more than 500 suppliers in Arizona
  • Young Tucson rocket company Vector Space Systems announced Oct. 12 that it is building a manufacturing plant and headquarters at Pima County’s tech park and plans to hire 200 over three years. The rockets will be used to launch micro satellites into space.
  • A large nationwide call-center operator that the Arizona Daily Star called Tucson’s fastest growing company in 2015, said in September that it planned to hire 1,132 and almost double its work force. C3/CustomerContactChannels has opened two call centers in Tucson since 2011.  It grew from 600 to 1,388 workers in 2015, according to a Star’s annual list of the 200 largest employers.
  • Comcast, one of the nation’s largest video, high-speed internet and phone companies, on May 5 opened its renovated 100,000-square-foot Center of Excellence customer service and call center at 4690 N. Oracle Road in Tucson. The company said in May 2015 it planned to open the center and fill it with 1,125 employees.
  • Caterpillar Inc. announced on May 3 that it would move its surface mining and technology offices to Tucson and create about 600 jobs over five years. The mining and construction equipment manufacturer company is housed temporarily in downtown Tucson while a permanent building is being built west of I-10 near Mercado San Agustin.
  • The Pima County Board of Supervisors in January agreed to spend $15 million to build a “spaceport” for World View, a company that launches high-altitude balloons or Stratollites used for research, communications, weather surveillance and eventually commercial space flights. The company plans to eventually hire 400 and to lease the county building for 20 years. However, in April, the Phoenix-based Goldwater Institute sued the county, claiming that its incentives violated a state clause in the state constitution that forbids such gifts unless they offer a public purpose. 

Other bragging points:

  • The Tucson Roadrunners, a professional hockey team, began playing at the Tucson Convention Center in 2016.
  • American Airlines began direct flights to New York City in October. And Mexican carrier Aeromar resumed  flights to Hermosillo after eight years, also in October.
  • In December 2015, Tucson was the only place in the United States to be designated a City of Gastronomy by the United Nations Educational, Scientific and Cultural Organization (UNESCO)
  • Downtown Tucson is getting its first new downtown hotel in four decades. The AC Hotel by Marriott is scheduled to open in the summer of 2017 and to employ about 200.
  • HomeGoods in the spring of 2016 began hiring 400 people for its new western distribution center that opened in June. When the company announced the center in April 2015, it said it planned to hire as many as 900.