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Report: Tucson lags behind Phx in economic recovery

City unlikely to ever rival larger neighbor, economist says

TUCSON – As chief operating officer of the Tucson Metro Chamber, Bill Holmes promotes this city as an attractive place to do business.

Among the selling points: a university that produces large numbers of graduates in the hard sciences and math, the presence of a leading aerospace firm and an emerging downtown that will soon feature a modern streetcar.

“We have a wonderful airport here, a beautiful airport,” he said.

But it can be a tough sell. Tucson International Airport, for example, lacks the non-stop flights and lower fares of Phoenix Sky Harbor International Airport. Many of those college graduates wind up leaving for jobs elsewhere because Tucson lacks the breadth of industries that larger metropolitan areas have.

After years of recession, the economy here remains sluggish.

“We’re not on an all-right track,” Holmes said. “Employment is the lagging indicator. Businesses are sitting on a lot of money, and it’s that vicious cycle. Until people start spending more the businesses aren’t going to start hiring more.”

A recent report by the Brookings Institution found that the Tucson metropolitan area trails the Phoenix metropolitan area in economic recovery.

It rated the recovery of 100 metropolitan areas around the U.S. in groups of 20. Phoenix ranked in the highest-performing group of 20; Tucson was in the second to last group of 20.

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The report took into account changes in employment, unemployment, output and home prices.

Kenan Fikri, the report’s co-author, said the Phoenix area has benefited from growth in the health care and education sectors.

“The big distinction between Phoenix and Tucson is that Phoenix has a growth sector and Tucson does not,” he said.

Robert Medler, vice president of government affairs for the Tucson Metro Chamber, said the Valley of the Sun has the inherent advantages of a megapolitan area, such as a diversity of industries and jobs associated with them. Tucson, meanwhile, is particularly strong in aerospace and military.

“The tipping point for the wealth and the job creation that comes with that wealth, it’s already there in Phoenix, in Houston, in D.C., in Boston, in New York, in Los Angeles ...,” Medler said. “They already have enough broad base in their economy to where when things are going to turn around and pick up, they’re going to grow a lot quicker because they already have all of the components.”

The Brookings Institution report said that a 4.9 percent increase in housing prices from the trough in the second quarter of 2011 helped elevate the Phoenix area. Housing prices in the Tucson rose 1.5 percent in that period.

Employment in Phoenix rose 2.4 percent from the trough in the third quarter of 2010, while employment in Tucson rose 1.5 percent during that period.

Marshall Vest, an economist at the University of Arizona’s Eller College of Management, said it’s unlikely that the Tucson area’s economy will ever rival that of Phoenix.

“In the long term, Tucson grows more slowly than Phoenix,” Vest said. “If you look at the long-term average, Tucson grows at about two–thirds of the rate Phoenix grows.”

Calling it a good sign that both metropolitan areas are adding jobs, Vest said he expects job growth to increase as the recovery continues. But he doesn’t expect Arizona’s economy to be back to where it was before the recession until 2015 or 2016.

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“There’s still a lot of growth on Arizona’s horizon,” he said.

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1770 comments
Apr 6, 2012, 1:24 pm
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@Mary Davis

I thank you for your post Ms. Davis, but based on the first-hand observations and experiences of Bret Linden, which in my mind trumps any other sources…the last time I flew somewhere it was so much cheaper to fly out of Phoenix rather than Tucson…and that was even considering the gas back and forth, and the money to park my car at the airport for a week. And, in case your wondering…I was headed to Atlanta, which I understand is our nation’s busiest airport.

To be fair, I don’t blame the TIA for this, I blame the airlines. Their business models are getting more and more crazy and less and less logical with each passing year. But, whatever the cause, facts are facts, and in most cases it really is cheaper to fly out of Phoenix than it is Tucson. Not nearly as convenient I’ll grant you…but cheaper.

But, if you wish to cite population numbers as the cause, then that goes back to what I was saying…idiots who run this town, combined with the even dumber idiots that keep rubber-stamping them back in, prevent growth and prosperity in this town. If you want to blame them I won’t argue with you.

3
2 comments
Apr 6, 2012, 11:33 am
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Correction in my latest post:  PHX serves a market of 20 million passengers annually—that is inferred but wanted to clarify. Thank you for the opportunity to post and help educate your readers!

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2 comments
Apr 6, 2012, 11:02 am
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I am the senior director of business development and marketing for the Tucson Airport Authority, which manages the Tucson International Airport and Ryan Airfield. I wanted to comment on the unrealistic comparisons to TIA vs. PHX and offer some points for consideration.

Fares between PHX & TIA
There remains a perception that it is “cheaper” to fly out of Sky Harbor vs. TIA. In fact, there have been two comparison reports done in just the last year that show differently. Last summer the Wall Street Journal compared fares at the country’s top 100 airports. In that analysis, the difference in fares to comparable destinations was just $23 on average—less than a tank of gas. Closer to home, Inside Tucson Business, which has conducted an annual study of fares to the top 12 destinations shared by both airports, in fact found the average fare to be $1 less in Tucson—making us cheaper on average than Phoenix.

There are factors that play into fares that go beyond the information you are citing. Airlines have dramatically changed their operations models, reducing capacity to increase load factors and profitability. Our customers tell us they are finding more competitive pricing when they book ahead. Price points increase when all of the lower seats are sold; when travel is booked last minute; and whether or not travel is nonstop or connecting. Of course there will always be more options—PHX serves a market area of more than 20 million people. It isn’t even possible to compare the markets with any logic.

Mid-size airports across the country have had service decimated due to high fuel prices, mergers of airlines, etc. Tucson has fared much better than other airports of like size and markets, retaining service and even adding such seasonal nonstop service such as the Southwest to BWI flight earlier this year. This is not an easy feat when you understand that we are the ONLY mid-sized airport in the country that is 110 miles from a large, top 5 hub served by two low fare carriers, Southwest and US Airways.

Airlines are moving back to the hub and spoke service model and connecting flights will become more and more the norm, and it will be more costly to fly nonstop for all. TIA flies to 15 of the nation’s 30 major hubs, and we continue to work with the airlines to meet our community’s air service needs. We’ve been working much more closely with the private sector to identify high demand routes, and have reached out to many community groups in Tucson through our Working Together program.

Air service is a community asset and as such relies on the community to help support the airport. TAA staff can secure the service; if the public doesn’t fly on the planes the airlines will take their aircraft to more profitable communities. Every ticket purchased out of PHX makes it harder to justify airlines coming to Tucson.

If anyone is interested in learning more or would like to help our staff identify air service needs, I encourage you to give us a call.

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Although Tucson ranked among the second-weakest 20 metros in the nation in terms of economic recovery performance, the city still had four consecutive quarters of job growth in 2011.

Tucson’s economy recovery

  • Change in employment since economic peak (2007, first quarter): minus 7.3 percent
  • Change in employment since trough of the recession (2010, third quarter): 1.5 percent
  • Change in housing prices since economic peak (2006, fourth quarter): minus 42.8 percent
  • Change in housing prices from trough of recession (2011, third quarter): 1.5 percent
  • Change in gross metropolitan product from the economic peak (2007, third quarter): minus 4.3 percent
  • Change in gross metropolitan product from trough of recession (2011, third quarter): 1.3 percent

Source: Brookings Institution Metropolitan Policy Program