Here’s why Arizona will avoid recession this year and next

Sourced By: AZ Big Media 

he state's diversified economy has positioned itself so that Arizona will avoid recession this year and next, according the Economic and Business Research Center.

The Arizona economy continued to churn out solid gains through the first half of 2023. Jobs, wages, and sales all increased, although at a somewhat slower pace than earlier in the pandemic recovery, and the unemployment rate remained very low. Arizona jobs were essentially back on their pre-pandemic trend, if we take that trend to be EBRC forecasts generated just before the pandemic began. Phoenix inflation, although it remained above the nation, decelerated significantly, thanks to slower gains in house prices and outright price declines in commodities. Housing affordability, however, has dropped precipitously from pre-pandemic levels.

The outlook calls for the U.S. economy to achieve a “soft landing” and the nation and Arizona will avoid recession this year and next. That sets the stage for continued solid gains in Arizona, Phoenix, and Tucson. In addition, the state is expected to far outpace national growth during the next 30 years, with Phoenix leading the way. Even so, state growth is forecast to decelerate significantly compared to average growth rates during the prior 30 years (1992-2022).

Arizona Recent Developments

Jobs in Arizona and Phoenix were back on their pre-pandemic trend in 2023, at least if we take that trend to be EBRC forecasts generated in January 2020. Keep in mind that those forecasts were already calling for state economic growth to decelerate significantly in coming years, driven by the aging of the baby boom generation. In contrast, Tucson jobs remained far below their pre-pandemic trend, primarily due to sub-par performance in private education and health services and professional and business services.

Inflation, measured by the all-items Consumer Price Index for All Urban Consumers (CPIU), in the Phoenix MSA decelerated in June to 4.4% over the year. That was down from a peak of 13.0% in August 2022 but still above the nation at 3.0% (Exhibit 1). The national rate peaked at 9.1% in June 2022.

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