Financial forecasters are optimistic about the state and local economic outlook for the next year.
The economics department at the W. P. Carey School of Business, in conjunction with global financial services firm JPMorgan Chase, hosted the 47th annual Economic Forecast Luncheon Wednesday at the Phoenix Convention Center.
The group of forecasters presented a highly optimistic view of the Arizona economy for 2011, highlighted by continuing improvement in most economic indicators — which include the job market, retail sales and investments.
The only negative outlook was for the housing market, which grew very little during 2010 and is expected to remain stagnant for the next few years.
ASU economic research professor, Lee McPheters, predicted that after retail sales growth of only 1 percent in Arizona in 2010, 2011 could see retail sales grow as high as 6 percent for the state.
“2011 is going to be the best year for the Arizona economy in a long time,” McPheters said.
McPheters also expects the Arizona economy to add 48,000 jobs in 2011, after job losses in the last two years. Though he predicts that jobs will be added, he still predicts that unemployment will remain above 9 percent for the state.
This will make positive growth modest, but still slow, and though McPheters is optimistic that 2011 will be a good year for the economy, he still thinks a full recovery will take a few years.
The national economy will closely mirror the local economy’s promising growth in 2011, Joel Naroff predicted.
Naroff, a financial forecaster who has won awards for his accuracy from MSNBC and Bloomberg Business News, said growth will be better than some are expecting in 2011.
“We’re looking at a turning economy,” Naroff said.
Naroff said the private sector added more than 1.1 million jobs in 2010, and this could lead to above average growths of gross domestic product, as high as 5 percent in the second half of 2011.
He also said that growth beyond 2011 will taper off to a bit closer to the average, preventing the drastic fluctuations that marked the previous decades. Naroff said that drastic ups-and-downs or “bubbles” are not going to be very present in the recovery effort.
“We were never going to have a ‘V-shaped’ recovery,” Naroff said.
Elliott Pollack, CEO of Scottsdale-based real estate consulting firm Elliott D. Pollack and Company, echoed these sentiments, and predicted that the housing market will also have to wait a few years before improving.
Excess supply of single-family homes in the Arizona area is estimated to be 50,000 to 70,000, Pollack said. He expects the supply will continue to outweigh the demand for houses until at least 2014.
Pollack said that half of the homes in Arizona still have negative equity, or are valued below the outstanding balance on the loan that was used to purchase them.
“People are underwater in their homes,” Pollack said.
Pollack, like McPheters and Naroff, believes that time will be an important factor in a full recovery, saying there will not be huge booms in growth any time soon.
“It’s going to take time,” Pollack said. “There is no quick fix.”
JPMorgan Chase’s senior economist James Glassman also presented, forecasting a positive outlook for the financial sector. Glassman said that demand in 2011 could be strong, since households that have limited their spending in previous years could be making large purchases in 2011.
“There’s a real recovery taking place,” Glassman said. “I think there’s reason to be quite optimistic about the upcoming decade.”
Reach the reporter at Michael.reppenhagen@asu.edu
