Longtime University of Arizona Eller College of Management economist George Hammond has a mixed bag of economic forecasts for the local and national economy.
Hammond, who serves as the director of the college’s Economic and Business Research Center, believes the former is on strong footing, while the latter may be in for some trouble.
“What we’re seeing in Tucson lately is actually a pretty significant acceleration in job growth,” Hammond said. “Tucson, according to the latest preliminary data, is actually growing a bit faster than the national economy.”
Hammond, who will be one of the keynote speakers at the college’s Economic Outlook Luncheon at Westin La Paloma Resort at noon on Friday, Dec. 6, expects the local economy to grow at around a 2.5 percent rate in the third quarter of 2019.
The national economy, meanwhile, is set to grow at around 1.5 percent during the same quarter, according to Hammond, showing Tucson’s strength in the face of a sluggish national economy.
“What we’re seeing is a bit of a divergence between local economic performance and the nation,” Hammond said. “The national economy is starting to decelerate. Employment growth is losing a little bit of steam and overall output growth is slowing a bit. Arizona is really holding up pretty well and Tucson looks like it’s actually gathering some momentum in 2019.”
Much of Tucson’s economic strength comes from the education, healthcare, leisure and hospitality sectors, according to Hammond, with retail, trade and utilities lagging behind in economic output.
“But one of the things that really stands out about Tucson and Arizona job growth lately is manufacturing job growth,” Hammond said. “Arizona’s manufacturing jobs are actually gathering steam these days, whereas nationally manufacturing is actually losing momentum.”
Hammond believes a large portion of the slowdown in retail and trade in the local economy stems from the growing gulf between brick and mortar stores, which are struggling, and online giants like Amazon, who continue to build facilities in the area.
“The other kind of interesting thing that’s going on in Arizona and Tucson is that overall trade transportation and utilities jobs are down over the year,” Hammond said. “Most of that is driven by weakness in retail trade. The contrast there is that we’re seeing pretty strong job growth in transportation and warehousing.
Hammond suggested that the battle between traditional brick-and-mortar retail and online retailers is playing a role in the numbers.
“Online retail is really where the growth is and we’re seeing the job growth associated with warehousing,” Hammond said. “So, jobs like Amazon and also transportation. The delivery services are likely adding jobs as well.”
The region’s steady growth should continue through the rest of 2019, according to Hammond, before an economic slowdown takes hold over the next few years.
“One of the things that’s going to be a hot topic is the odds of a recession in 2020 or 2021. The national economy has been flashing some warning signs,” he said. “The difference between long-term interest rates and short-term interest rates has turned negative, so the yield spread is turned negative. That’s generally a pretty good indicator that the national economy is about to slow or even fall into recession.”
Hammond will put the local and national economic output into greater context at the annual luncheon, alongside Jim Glassman, who serves as the managing director and head economist of commercial banking for JP Morgan Chase.
“It’s really great to see the business community, the government community and the academic community really come together to think about how the U.S., global and local economies are doing at the moment,” Hammond said. “Also, thinking about what the future may hold. It’s really a cool event that brings together people from all different walks of life here in Tucson and across Arizona.”