Arizona Job Gains Likely to Continue

Arizona Job Gains Likely to Continue

By Chad Graham
The Arizona Republic ~Sept. 2, 2006

Arizona will continue to add jobs at a healthy clip through 2007 but not at the gangbuster levels seen in 2005.

Economists generally agree on that point.

What they disagree on is how much the rate of job growth will slow during the next year and a half. There are simply too many unknowns about the leaky housing bubble, shaky consumer confidence and fluctuating fuel prices.

If the job-expansion rate slows too much, it could trigger layoffs, hiring freezes and stalled wages, which have been on the rise. Workers in housing-related industries, such as construction or mortgage lending, would be hit particularly hard.

Arizona economists maintain that the slowdown will be mild, down to 4.9 percent in 2006 and 4 percent in 2007, according to a recent forecast released by the Department of Economic Security.

Analysts at Moody's Economy.com expect the job-growth rate to slow to 4.5 percent in 2006 and drop to 2.5 percent in 2007.

While that is below the 5.3 percent job growth rate Arizona reached in 2005, it is above predictions for job growth at the national level, said Austin Litvak, assistant economist with the company.

The drop-off will be almost entirely because of the housing market slowdown, he added.

Litvak said that industries such as manufacturing and leisure/hospitality will continue to grow and "the expansions at Arizona State University will also help drive public sector growth."

Nationally, employment is expected to expand 1.4 percent this year and 1.1 percent in 2007, according to Global Insight, a suburban Boston company that tracks economic trends.

Economy Chugging Along

A group of reports released Friday showed effects from a continued slowdown in the housing market, but they also offered a sense that the national economy is chugging along.

As in Arizona, it's just happening at a slower rate.

The Tempe-based Institute for Supply Management said that August manufacturing activity slowed slightly to 54.5 compared with 54.7 in July. A reading of 50 or above shows expansion.

"The major concerns in manufacturing at this point are the continued upward pricing pressure that has existed for the past 13 months, and some industries are experiencing a degree of inventory buildup," Norbert Ore, chairman of the institute, said in a statement.

The number of U.S. jobs increased in August by 128,000, which was "roughly in line with the average monthly gain for the four-month period from April to July," the U.S. Labor Department said.

News out of the construction industry wasn't so comforting.

Spending in that industry for July fell 1.2 percent after a 0.4 percent rise in June, according to the U.S. Commerce Department.

Economists surveyed by Bloomberg News expected the drop to be 0.1 percent.

In Arizona

The DES forecast released this week showed that out of Arizona's 11 major industry groups, 10 should grow jobs this year and next.

The information sector, which includes publishing, will shed a little more than 1,000 positions for a total of 44,000 workers in 2007 as the "result of continuing consolidation, outsourcing and automation," according to the report.

Other findings include:

• The natural resources and mining sector is set to experience the fastest percentage growth as "industrial output across the globe, including East Asia, North America and Europe, has increased the demand for many mined non-metallic and metallic ores including copper," the report said. Still, it is a small sector, which will employ 11,500 Arizonans by 2007.

• The professional and business services industry is expected to employ 427,300 workers throughout Arizona by 2007, up from 369,000 in 2005.

• The number of workers in the trade, transportation and utilities sector in Arizona will grow to 526,100 in 2007, up from 486,700 last year.

The Arizona Business Conditions Index rose to 60.5 in August from 54.4 in July. A reading above 50 indicates growth.

"Until August, the index had been approaching the critical 50-point mark, below which a recession would be indicated," Dawn McLaren, economist with the Bank One Economic Outlook Center at Arizona State University, said in a statement.

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