Last week, I attended the annual SRP Economic Forecast at the Arizona Biltmore resort in Phoenix. There were two keynote speakers – Lee McPheters, who looked at the forecast from an Arizona perspective and Don Reynolds who came at it from a national and international perspective. There were a lot of great points made and I wanted to share some of the highlights.
Lee McPheters, among many other things, is the Director of the JPMorgan Chase Economic Outlook Center at Arizona State University. He studies the Arizona market very carefully and here are a few of the takeaways I got from his presentation:
- Arizona mimics the national pattern of decline and recovery. So, when the nation begins to recover, Arizona can expect to see recovery.
- However, when Arizona does start to recover, we can expect it will be very strong.
- A majority of economists believe we are already in recovery mode. However, there is a disconnect between the economists and consumers. Consumers still believe we have another year or two until recovery begins.
- While there have been some indicators that Arizona is getting back on its feet, he feels it still has a way to go and more bad news is coming. Arizona still faces unemployment and job creation issues as well as a new wave of foreclosures and loan resets.
- The year 2009 is the year of bottoming out. We will see some impact as well into 2010, but to a lesser extent.
- Mr. McPheters anticipates we will see things getting back on track in 2011 and beyond, but it will not be until 2014 when we will see low unemployment again.
- Three things that Arizona has going for it is a strong rate of in-migration, housing is now affordable again and that once recovery starts, it should be relatively rapid.
Don Reynolds, the founder of 21st Century Forecasting, also gave an enlightening presentation. Here are a few of his takeaways:
- We are now operating under a “new normal.” Things have changed and the impact is going to be around for a while.
- Mr. Reynolds believes we are in a recovery mode and better off than we were a year ago. However, we can expect to see deflation in the shorter-term followed by significant inflation.
- China, India and Brazil are poised for great growth.
- The housing picture is a mixed bag. On one hand, homes are a lot more affordable now, but on the other hand, a significant number of homes are underwater and we have $2 trillion in ARM resets coming.
- Economic recovery will be led by corporations, not consumers. Once corporate recovery is more widespread, consumer confidence will follow.
- Mr. Reynolds predicts that a year from now, we will see an improvement in unemployment and economic growth.
While today’s session had a lot of food for thought and some sobering news, there were also quite a few glimmers of positive news. It should be interesting to see how the next year plays out at a local level as well as national and international levels.
