Tucson’s economic growth is expected to outpace the national economy by 2017. That was the key message at the University of Arizona Eller College of Management 2015 Mid-Year Economic Breakfast Wednesday at the Westin La Paloma Resort.
More than 300 people attended the event to hear presenters George W Hammond, Ph.D., director and research professor at UA Eller’s Economic and Business Research Center and Roberto Coronado, Ph.D., assistant vice president and senior economist at the Federal Reserve Bank of the Dallas-El Paso branch, give a mid-year assessment of economic condition related to job growth, the housing sector, gas prices, and economic relations with Mexico.
Hammond who predicted in December 2014 that Tucson’s job growth would gradually improve by 2016 said job growth is predicted to accelerate from 0.5 percent last year to 0.9 percent this year, and rise to 1.4 percent in 2016. Job growth is expected to continue in 2017, helping to fuel Tucson’s economy and begin to outpace the national average.
The Federal fiscal drag has diminished, but continues to weigh on the local economy. It is now joined by fiscal drag from the state and local sector
“Tucson’s employment was up 4,000 jobs over the year in April and it is forecasted to add 3,400 jobs this year and 5,200 jobs in 2016,” Hammond said. “Most of the new jobs will be gained in the service sectors, such as health services, trade, leisure and hospitality, and professional and business services.”
Coronado’s visit to Tucson marked the first time he participated in a UA event. His presentation focused on Mexico, with a special emphasis on the border economy.
After a strong recovery from the so-called Great Recession, Mexico’s economy entered a soft patch since the second half of 2013,” Coronado said. Mexico’s economy has been gaining momentum since the second half of 2014, but growth has been moderate at best.”
U.S.- Mexico trade flows reached record high levels in 2014 at more than $530 billion, representing exports plus imports. “Automotive is the top trading sector as Mexico has made significant inroads into the North American auto manufacturing industry,” he said.
Mexico has been working on structural reforms since the 1980s. This process accelerated since 20123 as Mexico has engaged in an aggressive structural reform agenda. Macroeconomic stability has been achieved mostly due to three factors: central bank independence; fiscal discipline; and openness to trade. In spite of this, per capita income growth remains weak. Therefore, the new reforms are needed to soru growth.
Arizona exports to Mexico rose by 22.2 percent in 2014. However, the recent appreciation of the U.S. dollar versus the peso has slowed state export growth in 2016. The dollar/peso exchange rate is up by 16.3 percent from April 2014.
Gas prices hare helping fuel the economy. Lower gas prices are increasing the funds available to households to spend and save. If prices remain $1 per gallon below 2014 levels, it could free up $368 per person in Tucson. Preliminary indications suggest the U.S. households are choosing to save, rather than spend, a significant portion of those funds.
During the presentation, Hammond also shared updates regarding the Arizona-Mexico Economic Indicators website, www.azmex.eller.arizona.edu, which was launched in December 2014. The first site of its kind to have economic indicators from both sides of the border.
Arizona-Mexico Economic Indicators focuses on Arizona’s trade with Mexico, assessment of the role of Arizona’s border ports of entry in the U.S.-Mexico border region, and monitoring key indicators of Mexico’s economy. Six major sections capture the dynamics of Arizona’s trade and competiveness: Arizona Trade, Border Crossings by Border Port of Entry, Commodity Flows by Border port of Entry, the Economy, Foreign Direct Investment, and Population.
As the presentation came to a close, Hammond was optimistic about the future.
“Overall, Tucson will benefit during the next few years from faster U.S. growth, which will contribute to increased residential mobility across the nation and improved population gains locally,” he said. “The addition of more residents will boost housing and related secots, which have lagged since the end of the recession.”
Dr Hammond’s slide presentation can be viewed by going to Eller’s Economic and Business Research website: www.ebr.eller.arizona.edu.