Tucson's economy is no longer "bouncing along the bottom" and as 2011 comes to a close there are signs the recovery is accelerating locally, according to economist Marshall Vest, director of the Economic and Business Research Center at the University of Arizona.
But he warned the more than 600 people attending his annual economic forecast luncheon Dec. 9 at the Westin La Paloma Resort and Spa that the recovery is still very fragile and facing headwinds.
Vest's colleague, Gerald Swanson, professor of economics, commented the recession had caused a change in terminology noting that economists never before had referred to 2 percent as "growth."
Tucson and Arizona have been hit harder than most regions in the U.S. by the recession and many other places are already on the road to recovery, Vest said.
While 2011 will go down as an "unremarkable" year economically, it's at least showing signs of improvement and that should continue into 2012, Vest said.
He cautioned there is a lot of ground to make up, but he expects the Tucson job market to recover all of the jobs lost during the recession by 2015.
Three factors could interfere with the forecast:
• Continued distress in the housing market, which has been altered by the recession as younger buyers no longer view home ownership as a worthy investment.
In response to this Vest said developers are now building projects for the rental market. Also, the growth in construction jobs is in specialized areas such as remodeling and fixing up homes that have been foreclosed.
• Lack of mobility, which is holding down in-migration to Tucson. Nationwide, the mobility rate is down to 11.6 percent, the lowest it has been since tracking of it was started in 1948.
• The public sector, which typically lags economic trends, will continue to be a drag on the recovery.
Still, there are enough signals for Vest to issue his positive outlook for Tucson.
• Private sector wages were up 5.7 percent in the first quarter of this year.
• Employment was up 1.9 percent year-over-year in September, adding a total of 6,800 jobs, all in the private sector. Two-thirds of those jobs were in professional and businesses services which includes high-paying positions in biotech industries. By 2015, Vest said he anticipates the Tucson region will recover the 35,000 jobs that have been lost in the recession.
• Consumers are spending money, with retail sales up 9.1 percent year-over-year in October. Vest said much of that was due to pent-up demand and came in the areas of auto sales and grocery store "soft-goods." He said he expects the pace of sales growth to slow. Restaurant and bar sales have fully recovered, he said.
• In the housing market, affordability is at record levels and demand is growing. Although Vest said he anticipates home prices will continue to drop for a few more months, Vest said inventories are lean, down to a five-month supply in the Tucson market, investor demand is coming back and foreclosure notices are down 15 percent, though still at very high levels.
Contact reporter David Hatfield at firstname.lastname@example.org or (520) 295-4237.