Economists weigh in on the state’s economic well-being

Arizona has seen steady economic growth since 2015, and economists are hopeful this trend will follow into the new year.

Dennis Hoffman, the director for Arizona State University’s Seidman Research Institute, says 2017 brought healthy growth nationally in everything from equities to labor markets. Similarly, Arizona’s economy has been steadily growing for the past four years.

Jim Rounds, president of Rounds Consulting Group, says Arizona is taking the right approach to marketing, regulatory reform and economic development reform, which is manifested in the state’s strong economy.

Debra Roubik, an economist for VisionEcon, says that while the economy is fine, there are warning signs to look out for. Some of these signs include low productivity and low participation in the labor force, which could mean trouble in the state’s ability to sustain growth.

Transcript:

COMING UP NEXT ON THIS SPECIAL EDITION OF" "ARIZONA HORIZON," OUR ANNUAL YEAR-END LOOK AT THE ECONOMY WITH ANALYSIS OF WHAT HAPPENED IN 2017 AND A LOOK AT WHAT'S NEXT IN THE WORLD OF FINANCE AND COMMERCE.

IT'S OUR ECONOMIC ROUNDTABLE, NEXT, ON ARIZONA HORIZON. "ARIZONA HORIZON" IS MADE POSSIBLE BY CONTRIBUTIONS FROM THE FRIENDS OF ARIZONA PBS, MEMBERS OF YOUR PBS STATION. THANK YOU.

TED SIMONS: GOOD EVENING AND WELCOME TO THIS SPECIAL EDITION OF "ARIZONA HORIZON." I'M TED SIMONS. EACH YEAR WE ASK THREE LOCAL ECONOMISTS TO JOIN US FOR AN ASSESSMENT OF THE STATE'S ECONOMIC ISSUES, WITH AN EYE FOR WHERE THE ECONOMY IS LIKELY TO GO FROM HERE. JOINING US TONIGHT FOR OUR ANNUAL ROUNDTABLE, DENNIS HOFFMAN, DIRECTOR OF THE SEIDMAN RESEARCH INSTITUTE AT ASU'S W.P. CAREY SCHOOL OF BUSINESS; JIM ROUNDS, AN ECONOMIST AND PRESIDENT OF ROUNDS CONSULTING GROUP; AND DEBRA ROUBIK, AN ECONOMIST AT VISION-ECON.

TED SIMONS: ALL RIGHT, DENNIS, WE START WITH YOU AND GO AROUND THE TABLE HERE. AN ASSESSMENT OF 2017.

DENNIS HOFFMAN: 2017, ANOTHER SOLID YEAR, GROWTH YEAR NATIONALLY. THE TREND CONTINUES, 15, 16, 17. THAT'S EVERYTHING FROM EQUITIES TO LABOR MARKETS TO THE PACE OF SALES, THE GDP GROWTH SOLID, IT LOOKS LIKE. WE MAY ACTUALLY HAVE THREE QUARTERS END OF 2017 THAT ARE IN THE THREE-ISH RANGE WHICH IS -- THAT'S REALLY ROBUST COMPARED TO WHERE WE HAVE BEEN, AND WHEREAS INSPIRATIONALLY WE THINK WE CAN SUSTAIN. THAT'S WHAT IT'S LOOKING LIKE NATIONALLY. ARIZONA, I THINK A SOLID YEAR. THERE ARE INDICATORS OUT THERE THAT ARE WEAK. WE TALK ABOUT THESE IN THE EMPLOYMENT SECTOR IN A MINUTE. I THINK THEY ARE WRONG. WE HAVE WITHHOLDING GROWTH, RETAIL SALES GROWTH, SIGNS OF LIFE IN CONSTRUCTION. WE HAVE SOME DATA THAT SAYS THE LABOR MARKET IS WHITE HOT EVEN IN ARIZONA.

TED SIMONS: THAT SOUNDS POSITIVE. YOU SEE THE SAME THING FOR 2017?

JIM ROUNDS: YEAH, WE HAVE TO BENCHMARK WHAT WE HAVE SEEN OVER THE LAST FEW YEARS. IN THE PAST, WE WOULD LOOK AT THIS EXPANSION, STATE REVENUE 7%, NOW 4 TO 5, IT'S JUST A DIFFERENT EXPANSION, BUT LIKE DENNIS SAID, COMPARED TO WHERE WE HAVE BEEN, WE ARE DOING WELL. IT'S THE NATURE OF THE EXPANSION. THE NEXT EXPANSION MAY BE MORE NORMAL FOR ARIZONA ON HISTORICAL STANDARDS. WHAT TURNED ME AROUND THIS YEAR, I HAVE BEEN A PROPONENT OF GOVERNMENT DOING BARE MINIMUM. WE ARE DOING GREAT THINGS IN TERMS OF MARKETING, ECONOMIC REFORM, PERFORMANCE REFORM. WE ARE DOING THE RIGHT THING FOR THE LAST FEW YEARS, AND WE MOVED THE NEEDLE MORE THAN I WOULD HAVE CONCEDED A FEW YEARS AGO.

TIM SIMONS: INTERESTING. DEBRA, WE ARE SEEING A LOT OF POSITIVE STUFF. YOU ONBOARD?

DEBRA ROUBIK: I THINK WE ARE OKAY. I LOOK AT PRODUCTIVITY IN THE LABOR MARKET. WE HAD A GOOD WEEK. THE FIRST TWO QUARTERS HORRIBLE. I LOOK AT WHAT’S HAPPENING IN THE LABOR MARKET, PARTICIPANTS ARE WAY DOWN. IF YOU TEACH ECON, YOU KNOW THERE IS A SPENDING MULTIPLIER. THAT'S BASED UPON -- PEOPLE GOING OUT AND SPENDING THEIR MONEY. IF THERE IS NO LABOR FORCE PARTICIPATION, THE NUMBER IS GOING TO BE HIT. SO I'M A LITTLE LESS POSITIVE BECAUSE I'M WORRIED ABOUT THOSE DEVELOPMENTS THAT ARE OCCURRING. I'M WORRIED A LITTLE BIT ABOUT THE 1.2% GROWTH IN EMPLOYMENT THAT WE HAD IN OCTOBER. WE HAVE A NOVEMBER NUMBER COMING UP SOON. THAT CONCERNS ME AS WELL BECAUSE I DON'T THINK I HAVE THE VENTURE CAPITAL TO SUSTAIN GROWTH.

TED SIMONS: WHAT DO YOU SAY TO THAT?

DENNIS HOFFMAN: YOU WANT A DEBATE HERE.

TED SIMONS: LET US HEAR YOUR THOUGHTS.

DENNIS HOFFMAN: VERY GOOD POINTS. I WANT TO ADD CLARITY. ARIZONA LABOR PARTICIPATION FORCE LAGS THE NATION. NOT JUST BECAUSE WE HAVE ELDERLY FOLKS, IT LAGS ALL AGE GROUPS. THAT IS A SKILL ISSUE. WE HAVE STRUGGLED WITH THAT FOR YEARS. I THINK IT IS STEADILY IMPROVING. IN TERMS OF THE LABOR MARKET STATISTICS AND DEBRA HIT ON SOMETHING I TRIED TO ELUDE TO AS WELL. THERE ARE MONTHLY EMPLOYMENT REPORTS AND QUARTERLY EMPLOYMENT REPORTS. THE QUARTERLIES COME OUT WITH A SIX-MONTH LAG. THE MONTHLIES HAVE BEEN LAGGING QUARTERLIES IN TERMS OF NUMBERS. I KNOW PEOPLE'S EYES ARE GLAZING OVER. I GET IT, TED, BUT IT IS AN IMPORTANT ISSUE BECAUSE IF THE MONTHLIES ARE RIGHT, DEBRA'S RIGHT, GROWTH IS 1.2%. IF THE QUARTERLIES ARE RIGHT, EMPLOYMENT IS IN THE 2%. I THINK WE RE-BENCH IN MARCH AND WE FINISH NORTH OF TWO FOR THE YEAR, CREATING 10,000 MAYBE 20,000 JOBS FOR THE STATE MORE THAN THE MONTHLY DATA SUGGESTS. IN FAIRNESS TO HER POINT, IF THE DATA WE SEE NOW ARE CORRECT, THIS ECONOMY IS SPUTTERING. BUT, IF IT IS SPUTTERING, WHERE IS THE MONEY IN WITHHOLDING COMING FROM? ITS GROWING 6% YEAR ON YEAR, RETAIL IS SURGING, CONSTRUCTION IS SURGING. I THINK THE MONTHLY EMPLOYMENT NUMBERS ARE WRONG.

TED SIMONS: WE’VE GOT A SPUTTERING AND A SURGING. WHAT DO WE HAVE FOR YOU?

JIM ROUNDS: DENNIS' GOVERNMENT IS MORE CHARISMATIC IN THE PRIVATE SECTOR. DENNIS IS RIGHT, THOUGH. ECONOMICS SOUNDS COMPLICATED, BUT IT REALLY IS NOT. YOU ARE TRYING TO TELL A STORY. WHEN YOU LOOK AT THE DATA YOU LOOK AT, HUNDREDS OF DATA POINTS DOING ANALYSIS. ARE THINGS MAKING SENSE? ALL OF THE ECONOMIC DATA POINTS ARE SHOWING A STRONG ECONOMY. THEN WE HAVE AN OUTLIER EMPLOYMENT NUMBER. WHAT THAT TELLS ME, SOMETHING IS MESSED UP WITH THE EMPLOYMENT NUMBERS. THAT IS NOT HOW ECONOMICS WORKS. ALL OF THIS STUFF IS INTERTWINED. I THINK WE ARE GOING TO GET A POSITIVE SURPRISE IN TERMS OF REVISIONS LATER. I THINK WE ARE DOING BETTER THAN PEOPLE ARE POINTING OUT. AND I STILL THINK ARIZONA IS A TOP FIVE STATE FOR MOST ECONOMIC INDICATORS I THINK WE ARE CLOSER TO BEING THAT THAN WE SEE IN SOME REVISIONS. WE MAY BE A YEAR OFF. WE ARE DOING MUCH BETTER THAN PEOPLE THOUGHT AFTER THE LAST DOWNTURN.

TED SIMONS: LET’S FOCUS ON EMPLOYMENT SINCE WE ARE SORT OF VEERING TOWARD THAT. AS FAR AS THE EMPLOYMENT PICTURE IS CONCERNED, ASIDE FROM THE MONTHLY OR QUARTERLY NUMBERS, WHICH MAY MEAN THIS AND COULD MEAN THAT, THE SECTORS THAT ARE LOOKING GOOD, THE SECTORS NOT SO HOT. WHAT ARE YOU SEEING?

DEBRA ROUBIK: THE SECTORS LOOKING GOOD THIS YEAR WERE CONSTRUCTION AND ANYTHING IN FIRE, FINANCE, REAL ESTATE, ANYTHING RELATED TO THAT. THIS YEAR WE GOT A BIT OF -- NOT THE SAME FOR SPECIAL TRADES ARE SLOWER. SPECIAL TRADES ARE LIKE CONSTRUCTION-RELATED. THEY ARE RUNNING SLOWER AS WELL. AGAIN, MY CONCERN IS, YOU HAVE A DIFFERENT ECONOMY. WE ARE FORGETTING THAT THIS IS A DIFFERENT ECONOMY. VENTURE CAPITAL IS A BIG DEAL. WE ARE NOT SUPPORTING OUR SMALL BUSINESSES IN ARIZONA. I AM CONCERNED ABOUT THAT. I WORK WITH THEM EVERY DAY. I SEE IT. THEY ARE CASH STRAPPED. THE BANKS ARE NOT LENDING. MONEY VELOCITY IS DOWN. THAT MEANS THE SPEED AT WHICH MONEY IS TURNING OVER, WHICH MEANS BANKS ARE NOT LENDING. WE HAVE 99% SMALL BUSINESS OWNERS HERE, AND THEY ARE STRAPPED. THEY ARE STRAPPED.

TED SIMONS: ARE THEY STRAPPED ENOUGH, JIM, TO WHERE THEY ARE NOT HIRING? ARE THEY STRAPPED ENOUGH TO WHEN THEY ARE HIRING THE WAGES ARE NOT WHAT THEY SHOULD BE? WHAT ARE YOU SEEING?

JIM ROUNDS: THEY ARE HAVING A HARD TIME FINDING SKILLED LABOR. BASIC ECONOMICS WOULD SUGGEST THAT YOU SHOULD EXPECT TO SEE WAGES BALANCE OUT. WE HAVE SEEN THAT IN CONSTRUCTION, IN FACT, THAT’S WHY EVEN THOUGH PRICES ARE HIGH COMPARED TO HISTORICAL STANDARDS; IT IS NOT LIKE THE LAST BOOM DRIVEN BY EASY MONEY. IT IS DRIVEN BY HIGH PRICES, BUT THE SMALL BUSINESS STUFF IS IMPORTANT. WE HAVE BEEN A GREAT STATE ON STAYING FOCUSED ON THE BIG BUSINESS TAX RECRUITMENT POLICY. I STILL WOULD LIKE TO SEE A PACKAGE ADDRESS THIS ISSUE. I WENT THROUGH THIS AS A SMALL BUSINESS OWNER. I KNOW OTHERS. WE CAN DO SOME STUFF AT THE POLICY LEVEL THAT WILL HELP THE SMALL BUSINESSES BECOME BIGGER ONES. THAT DRIVES THE ECONOMY LATER.

DEBRA ROUBIK: AMEN.

DENNIS HOFFMAN: I DEFER TO DEBRA'S POINT IN THE STRUGGLE SMALLER BUSINESSES ARE HAVING. IF I WANT TO THINK NEGATIVELY ABOUT THIS, AND MAYBE THIS SLOW GROWTH IN EMPLOYMENT, MAYBE THERE IS TRUTH THERE, WHAT COULD BE DRIVING IT IS A SECTORAL CHANGE IN TRADE, RETAIL TRADE, WHOLESALE TRADE, AND THAT WOULD BE DRIVEN IN TURN BY THE WAY WE TRANSACT GOODS TODAY. IF YOU THINK ABOUT ARIZONA -- REMEMBER HOW OLD, I AM, TED. I CAME IN 1979 BEFORE THESE CREATURES WALKED THE PLANET. SO I SAW -- WHEN ARIZONA BOOMED, RETAIL BOOMED. TRADE BOOMED. WE ARE A POPULATION MAGNET. PEOPLE COME. THEY NEED TO BE SERVED. THEY NEED TO BE SOLD GOODS. NOW WE TRANSACT GOODS VERY DIFFERENTLY. THE DEMAND FOR RETAIL EMPLOYMENT IS JUST DIFFERENT TODAY. I THINK OUR SMALL BUSINESS SECTOR NEEDS TO BE INCREDIBLY ADAPTIVE TO CHANGES IN THAT, NICHE THEMSELVES, AND SOMEHOW BATTLE THIS BIG AMAZON MONSTER. I AM A BIG PROPONENT OF THE FACT THAT LARGE COMPANIES, EXPORT BASE ECONOMIES ARE TRUE DRIVERS OF REGIONAL ECONOMIES. THERE ARE LOTS OF LESSONS THAT SUGGEST THAT, AND WHAT FOLLOWS IS THE GROUND SWELL OF SMALL BUSINESSES THAT COME UP AS RESIDUAL TO THAT.

TED SIMONS: CAN YOU LOOK AT MEDIAN HOUSEHOLD INCOME, IT SOUNDS LIKE IT IS UP A LITTLE HERE. CAN YOU LOOK AT THE TYPES OF JOBS THAT ARE BEING OFFERED AND THAT ARE BEING TAKEN AND MAKE SENSE OF IT, AND GET A BETTER INDICATION OF WHETHER THINGS ARE GOING REALLY WELL OR KIND OF WELL?

JIM ROUNDS: WE HAVE TO BREAK FROM THE OLD MODEL. THE MOST DISAPPOINTING THING IN A LOT OF CASES IS THAT WE STILL DO THE SAME THINGS THAT WE WERE DOING TWO DECADES AGO. WE HAVE TO BE PROACTIVE IN CERTAIN AREAS AND PULL BACK IN CERTAIN AREAS. WHEN YOU GET INTO ECONOMIC INCENTIVES, TAX PACKAGES, ALL OF THESE THINGS, YOU HAVE EXPERTS IN DIFFERENT SILOS. A LOT OF EXPERTS DON'T KNOW WHAT THEY ARE TALKING ABOUT. THAT IS A TOPIC FOR A SEPARATE SHOW, BUT ALL OF THESE THINGS INTERRELATE. WE HAVE TO HAVE GOOD TAX POLICY, GOOD DEVELOPMENT POLICY, WE CAN WALK AND CHEW GUM AND PAT OUR BELLY AT THE SAME TIME, AND FOCUS ON THE BASE INDUSTRIES, IT IS NOT ROCKET SCIENCE, BUT WE NEED THE WILL TO DO IT. EDUCATION, I THINK TEACHERS CAN BE PAID MORE MONEY. THE ONE ELUDING ME IS THE PENSION REFORM. NUMBERS ARE NOT MESHING AFTER LOOKING AT IT FOR A LONG TIME. WE CAN DO IT, BUT WE NEED POLICYMAKERS THAT ARE WILLING TO BE BOLD.

TED SIMONS: REGARDING THE JOBS, HOUSEHOLD INCOME, MAYBE AN ARCHAIC WAY OF LOOKING AT THINGS, BUT WHEN YOU SEE HOUSEHOLD INCOME UP 2.3%, WHATEVER IT WAS, FOR THE YEAR, WHAT'S THAT TELLING US?

DEBRA ROUBIK: I LOOK AT AVERAGE ANNUAL WAGE, PART OF THE QUARTERLY SURVEY. YOU DON'T WANT TO INCLUDE THE RETIREES IN THERE. I WANT TO KNOW, WORKING PEOPLE, WHAT ARE THEY MAKING? I LOOK AT AVERAGE ANNUAL WAGE, 90% OF THE NATION, DROPPING LIKE A ROCK. I'M CONCERNED ABOUT THAT AS WELL. I HAVEN'T LOOKED AT U6 -

TED SIMONS: - U6 IS?

DENNIS HOFFMAN: WE ARE TALKING ABOUT DIFFERENT THINGS. WE ARE TALKING YEAR ON YEAR GROWTH FOR SIX MONTHS. THOSE NUMBERS ARE SOLID. THEY ARE NOT DROPPING FROM 2016-2017 -

DEBRA ROUBIK: - OH YEAH I KNOW, BUT AS A PERCENTAGE OF THE U.S.

DENNIS HOFFMAN: DO WE LAG THE U.S. ON PERSONAL INCOME PER CAPITA, EVEN ADJUSTED FOR INFLATION? ABSOLUTELY RIGHT. WE LAG IT IN ALMOST THE ORDER OF MAGNITUDE SHE QUOTED.

TED SIMONS: ARE WE DROPPING LIKE A ROCK?

DENNIS HOFFMAN: WE ARE LOW AND NOT CLIMBING BACK FOR THE NATION.

JIM ROUNDS: YES AND NO. THE REASON I DON'T PUT A LOT OF STOCK INTO JUST THAT ONE DATA POINT, IT'S MORE LIKE PLAYING GOLF, NOT BASKETBALL. WHAT I MEAN BY THAT, I PLAY GOLF WITH A PERSON MUCH BETTER THAN MYSELF. HE'S ALWAYS GOING TO BEAT ME, BUT IF I START TAKING LESSONS, I'M DOING MORE EXERCISING, WHATEVER IT IS, I'M IMPROVING MY HANDICAP AT A FASTER RATE. THAT'S WHAT I WANT TO MEASURE. I DON'T CARE THAT WE ARE 90%. I WANT TO KNOW WHERE WE WERE 20 YEARS AGO, 10 YEARS AGO, ARE WE MOVING UP? UNFORTUNATELY, IT TAPERED OFF A BIT. I THINK WE ARE ON THE CUSP OF GETTING BETTER HOUSEHOLD INCOME LEVELS. WE HAD A DELAY, IN ADDING THE HIGHER-VALUE JOBS, AND IT STILL IS NOT A NORMAL EXPANSION. YOU ALWAYS SEE LOW VALUE JOBS ADDED FIRST. THE WAL-MART ADDS EMPLOYEES RIGHT AWAY, THEN YOU HAVE INTEL INVESTING A LITTLE LATER. BUT THEN YOU ALSO HAVE WAL-MART LAYING OFF PEOPLE RIGHT AWAY WHEN IT SLOWS, AND YOU HAVE INTEL LATER. THAT'S THE WAY IT ALWAYS WORKED. YOU GOT TO LOOK AT THOSE NUMBERS, BUT YOU ALSO HAVE TO LOOK AT OTHERS, ARE WE COMPARING OUR OWN NUMBERS AND LOOKING AT U.S. AVERAGES. YOU HAVE TO MAKE ADJUSTMENTS AND THAT'S WHERE PEOPLE FAIL.

TED SIMONS: I WANT TO MOVE ON TO REAL ESTATE NOW BECAUSE THAT HAS ALWAYS BEEN A MAJOR FACTOR IN THE ARIZONA ECONOMY. IS IT STILL A MAJOR FACTOR?

DEBRA ROUBIK: I'M GOING TO DEFER TO THE EXPERTS. I'M NOT A REAL ESTATE EXPERTS.

TED SIMONS: WITHOUT BEING AN EXPERT FROM WHERE YOU SIT?

DEBRA ROUBIK: IT'S UP FROM WHERE WE WERE. WE WERE IN THE DEPTHS -- IT WAS BAD. WE ARE UP THIS YEAR AND THE NUMBERS FROM CONSTRUCTION SHOW IT. WHEN I LOOKED AT THE CONSTRUCTION EMPLOYMENT NUMBERS FOR THIS YEAR, WE ARE HANGING AROUND 4 TO 5% GROWTH RATE. IT TELLS ME THAT WE ARE NOT OUT OF BALANCE LIKE WE WERE DURING THE LAST BOOM.

TED SIMONS: DO YOU AGREE WITH THAT, DENNIS?

DENNIS HOFFMAN: WELL I DO. I REMEMBER FOR YEARS AND YEARS HEARING ABOUT CONSTRUCTION LEADS THE ARIZONA ECONOMY, BUILDING -- WHATEVER. CONSTRUCTION RESPONDED TO OUR POPULATION MAGNETS - WE’RE PEOPLE MAGNETS HERE IN ARIZONA. PEOPLE MOVE IN THE TENS OF THOUSANDS, HUNDREDS OF THOUSANDS DURING SOME YEARS. CONSTRUCTION RESPONDING, WE HAD IN THE '80S, MIDDLE 2000S, HORRIBLY VOLATILE SWINGS IN CONSTRUCTION THAT LEFT REALLY NEGATIVE IMPRINTS ON THE ECONOMY, TWO OF THEM. THE SECOND FAR WORSE THAN THE FIRST ONE. THE STEADY PLODDING PACE OF CONSTRUCTION GROWTH IS PROBABLY NOT A BAD THING FOR ARIZONA. WE ARE ACTUALLY LAGGING SOME OF THE WESTERN STATES. DEBRA SAID IT RIGHT, 4 OR 5% CONSTRUCTION GROWTH. NEVADA, SOME OF THE OTHER STATES ARE HIGH-SINGLE DIGITS THERE. THERE ARE SIGNS OF EXCESS IN SOME OF THE OTHER STATES. NOT SO MUCH IN ARIZONA. I SEE US CONTINUING TO MOVE FORWARD.

TED SIMONS: HOUSING SUPPLY IN ARIZONA. WE HEAR IT AT THE VALLEY. FIRST OF ALL, WE SAY ARIZONA, THOUGH IT SEEMS AS THOUGH THE VALLEY IS DIFFERENT THAN THE REST OF THE STATE WHEN IT COMES TO REAL ESTATE.
JIM ROUNDS: WITH EVERYTHING: THE ECONOMIC RECOVERY, TUCSON HAS CERTAIN ISSUES, UMA, OTHER PARTS OF THE STATE. MOST OF THE GROWTH HAS BEEN IN THE PHOENIX AREA. WHEN YOU LOOK AT REAL ESTATE, I RESPECTFULLY DISAGREE ON A COUPLE OF POINTS. EVEN OUR ECONOMIC DEVELOPING FRIENDS ARE STARING TO FOCUS ON SHORTAGES AND CONSTRUCTION WAGE DEPRECIATION. AND THE WAY ECONOMICS WORKS IS IF YOU HAVE A SHORTAGE, PAY A COUPLE MORE BUCKS AN HOUR AND IT WORKS. BUT WHEN COSTS GO UP TO THE POINT YOU CAN'T BUILD A HOUSE THEN YOU HAVE SHORTAGES AND MORE DEMAND FOR MULTI-FAMILY. WHEN WE WENT THROUGH THAT LAST DOWNTURN, WE ALL THAT EXTRA DEMAND AND PRICES WENT UP TO EXACTLY WHERE THEY ARE NOW BECAUSE OF EASY MONEY. NOW IT'S BECAUSE OF COSTS. WE HAVE TO DO A BETTER WITH JOB FIGURING OUT HOW TO GET THE RIGHT EMPLOYEES, WE ARE DOING BETTER ON IMMIGRATION ISSUES COMPARED TO A FEW YEARS AGO. FANTASTIC IMPROVEMENT. HOW DO WE DISPOSE OF THE PRICE LANDS. ALL OF THESE THINGS PUSH PRICES UP. YOU HIT A THRESHOLD WHERE YOU JUST STOP BUILDING. THAT'S THE WAY REAL ESTATE WORKS. AND SO THERE ARE SOME IMBALANCES BUT I AM CONVINCED THOUGH THAT WE ARE GOING TO BE BACK INTO BALANCE AFTER MAYBE A MILD DOWNTURN FOR A FEW YEARS AND THEN WE WILL HAVE A NORMAL EXPANSION. PEOPLE ARE HAVING PROBLEMS FINDING LABOR IN THOSE AREAS. IN OTHER AREAS, YES, BUT CONSTRUCTION IS A PROBLEM.

TED SIMONS: DOES THAT CONSTRUCTION IMPACT HOME PRICES, HOUSING AFFORDABILITY, THOSE SORTS OF THINGS.

DENNIS HOFFMAN: WELL CERTAINLY COSTS. WE COMPLAIN BECAUSE WE HAVE A SHORTAGE OF LABOR IN CONSTRUCTION. THAT'S A SELF-INFLICTED WOUND AS FAR AS I'M CONCERNED. WE HAVE THE TOUGHEST EMPLOYER SANCTIONS LEGISLATION, WE LED THE NATION IN EMPLOYER SANCTIONS. WE ARE THE POSTER CHILD FOR THAT. WE ARE THE TOUGHEST E-VERIFY OF ANY BORDER STATE. PEOPLE POINT TO THE TEXAS MIRACLE. WELL SO MUCH OF THE PRODUCTIVE LABOR FORCE THAT WORKED HERE WENT TO TEXAS. THAT'S NOT A MIRACLE IT’S JUST PRODUCTIVITY.

DEBRA ROUBIK: WHAT ABOUT THOSE THAT DON'T WANT TO GET INTO CONSTRUCTION. WE HAVE MILLENNIALS GOING INTO OTHER FIELDS.

DENNIS HOFFMAN: I DIDN'T COME HERE TO GO INTO CONSTRUCTION, WE JUST FILL THOSE CONSTRUCTION JOBS DIFFERENTLY.

TED SIMONS: WHAT ABOUT MILLENNIALS NOT BUYING HOMES. THEY ARE CONTINUING TO RENT IF THEY LEAVE THEIR HOME.

JIM ROUNDS: THERE IS ALWAYS MILLENNIAL BASHING. I'M SYMPATHETIC BECAUSE THEY INHERITED A ROUGH ECONOMY THAT HAD NOTHING TO DO WITH THEM. THEY HAVE A LOT OF DEBT, HIGH HOME PRICES. YOU HAVE TO LOOK AT MILLENNIALS DIFFERENTLY. THE MILLENNIAL IN SAN FRANCISCO OR CHICAGO IS DRAMATICALLY DIFFERENT THAN HERE. THE MILLENNIAL HERE WANTS TO GET A SINGLE FAMILY HOME EVENTUALLY. WE ARE IN A WEIRD MIX IN TERMS OF SINGLE FAMILY AND MULTIFAMILY. EVENTUALLY, THINGS WILL BALANCE BUT YOU CAN'T JUST GENERALLY APPLY CONDITIONS SAYING IT'S THEIR FAULT AND THEY’RE NOT WORKING HARD.

DEBRA ROUBIK: I DON'T MEAN IT LIKE THAT.

JIM ROUNDS: I KNOW. I FEEL THEY CAME INTO THE WORKFORCE AT A TOUGH TIME. I DON'T KNOW THAT IT WOULD BE DIFFERENT HAD I COME INTO THE WORKFORCE AT THE SAME TIME.

TED SIMONS: THAT'S UNDERSTANDING THEIR SITUATION. MY QUESTION IS WILL THEY START BUYING HOMES AS OPPOSED TO RENTING ANY TIME SOON?

JIM ROUNDS: THAT’S THE PROFILE. EVENTUALLY, BUT YOU HAVE TO BE ABLE TO GET FINANCING AND ALL THE OTHER THINGS DEBRA TALKED ABOUT.

DEBRA ROUBIK: AS ECONOMISTS WE ALL STUDY THE AGE CYCLES. AND WE HAVE TO WATCH THE AGE CYCLES, AND WATCH THE SPENDING PATTERNS FOR DIFFERENT AGE BRACKETS. EVENTUALLY, THEY WILL. MY CONCERN, I WORK WITH BUSINESSES DAY IN AND DAY OUT. GO TO THE ARIZONA TOOL ORGANIZATION AND THEY'LL SAY WE CAN'T GET KIDS TO TAKE A MANUFACTURING JOB TO WORK WITH A C & C MACHINE. THEY DON'T WANT TO.

DENNIS HOFFMAN: MY PROBLEM IS THAT 20 YEARS AGO, DID THE YOUNG DOMESTIC KIDS TAKE THOSE JOBS? MY CONJECTURE IS, NOPE.

JIM ROUNDS: I BAGGED GROCERIES. I PUSHED CART DOWN ROADS WHEN IT WAS 120 OUT. PEOPLE DO WHAT THEY NEED TO DO. I'M EASIER ON THE MILLENNIALS. I FEEL WHEN YOU COME INTO THE WORKFORCE WHEN IT'S THIS TOUGH, IT'S DIFFERENT. I'M NOT SEEING A SHORTAGE OF PEOPLE THAT WANT TO WORK HARD. I SEE THE POSITION SOME ARE TAKING.

TED SIMONS: RETAIL SALES, WHAT ARE PEOPLE BUYING? ARE THEY BUYING? IS IT AN ENCOURAGING SIGN?

DENNIS HOFFMAN: I THINK THERE IS A TON OF SPENDING. MORE DIFFICULT TO MEASURE THESE DAYS THAN IT WAS HISTORICALLY. REMEMBER THE WAY YOU MEASURE RETAIL SALES HISTORICALLY. YOU MEASURE IT THROUGH TAX RECEIPTS. MERCHANTS SEND IN THEIR TAXES AND YOU DIVIDE THROUGH BY THE TAX RATE. THAT'S THE VOLUME OF RETAIL SALES THAT MONTH. WHEN YOU HAVE SO MANY TRANSACTIONS ELECTRONICALLY, AND YOU HAVE THE RATE OF ELECTRONIC TRANSACTIONS INCREASING SO DRAMATICALLY, SOME OF THOSE WE ARE COUNTING, MAJOR BRICK AND MORTAR WERE COUNTING, WE’RE COUNTING THE MAJOR DELIVERY OF ONLINE SALES PAYING TAXES IN ARIZONA. WE ARE GETTING SOME OF THAT BUT NOT ALL. WITH EACH INCREASING MONTH, WE BITE OFF MORE OF THIS ELECTRONICALLY AND IT'S TOUGH TO KEEP TRACK OF. I THINK THE SHEER VOLUME OF SALES IS VERY ROBUST. GETTING BACK TO MILLENNIALS, THEY DON'T WANT AS MANY THINGS AS THEY WANT EXPERIENCES. THAT'S THE STEREOTYPE. THEY ARE TAKING TRIPS, GOING TO RESTAURANTS, THAT KIND OF THING.

TED SIMONS: ARIZONA RETAIL LANDSCAPE?

JIM ROUNDS: LIKE DENNIS I LIKE TO LOOK AT THAT INDICATOR BECAUSE IT PICKS UP A TON OF THINGS. IT PICKS UP INDIRECTLY INCOME, CONFIDENCE, A LOT OF THINGS. IT'S ON THE GROUND, HERE'S WHAT WE ARE SEEING. YOU DO A SURVEY, ARE YOU FEELING GOOD ABOUT THE ECONOMY? YEAH. YOU LOOK AT WHAT PEOPLE SPEND, AND WERE TAXED KNOW EXACTLY WHAT IS GOING ON, SO THAT'S WHY WE THINK THERE IS A DIFFERENCE BETWEEN SALES AND RETAIL. I WOULD LOVE TO APPLY THAT TO A MODERN DISCUSSION OF THE INCOME TAX CUT, FIND MONEY FOR TEACHER PAY. THERE ARE WAYS TO DO REFORM. WE HAVE TALKED ABOUT REFORM AT THE FEDERAL LEVEL. I THINK THERE IS COOL STUFF WE CAN DO IN ARIZONA OVER THE NEXT COUPLE OF YEARS. WE NEED BOLD PEOPLE. SOMETIMES YOU FIND THAT DURING A LEGISLATIVE SESSION. SOMETIMES YOU DON'T.

TED SIMONS: AND DURING ALMOST EVERY MAJOR LEGISLATIVE DISCUSSION, EDUCATION IS A MAJOR TOPIC. EDUCATION AND BUSINESS. IT SEEMS SYMBIOTIC. YOU TELL ME.

DEBRA ROUBIK: IN TERMS OF?

TED SIMONS: THE RELATIONSHIP?

DEBRA ROUBIK: OH, WELL, I DID A STUDY, GOSH ABOUT FIVE YEARS AGO THAT LOOKED AT THE DRIVERS OF STATE GROWTH. THERE IS SOMETHING CALLED THE EMPLOYMENT DIFFERENTIAL WHICH MEASURES HOW FAST WE ARE GOING COMPARED TO THE REST OF THE NATION. HIGH SCHOOL SCORES ACTUALLY HAD A SIGNIFICANT STATISTICAL RELATIONSHIP WITH HOW FAST OUR EMPLOYMENT GROWTH GREW. SO, I'M A BIG ADVOCATE OF EDUCATION. I THINK WE NEED TO RETHINK, AGAIN, LIKE I WAS SAYING WITH MANUFACTURING, WE NEED TO RETHINK HOW WE ARE DOING IT. THEY DON'T HAVE TO GET A DEGREE IN ACCOUNTING. IT COULD BE A TRADE CERTIFICATE IN CNC OR WHATEVER. EDUCATION IS BIG BECAUSE -- BUT THE PROBLEM IS, WITH THE SYSTEM WE HAVE NOW, THERE IS A LAG. BY THE TIME WE FIGURE OUT WHAT WE NEED, WE DON'T HAVE KIDS IN THE PROGRAM.

DENNIS HOFFMAN: LET ME SEE IF I CAN ENFORCE THIS A BIT. I HAD MY RANT ON IMMIGRATION. WE MADE A CHOICE IN THIS STATE. THE LABOR MARKETS CAN BE LEGAL FROM 2007 THERE ON, IT'S GOING TO BE LEGAL. THEREFORE, WE NEED TO FIND A DIFFERENT WAY. WE NEED TO EMBRACE CERTIFICATE PROGRAMS, LOCATIONAL TRAINING PROGRAMS. THERE NEEDS TO BE GREATER REWARDS FOR THAT. BUSINESSES, THOUGH, THE WAY YOU HANDLE SHORTAGES AND MARKETS IS THROUGH WAGES. BUSINESSES ARE GOING TO HAVE TO RESPOND KNOWING THAT IF THEY ARE GOING TO ENCOURAGE GREATER PARTICIPATION IN THE PURSUITS, YOU HAVE TO PAY MORE.

TED SIMONS: OKAY, WE HAVE TO STOP IT RIGHT THERE. GREAT CONVERSATION. NICE TO HAVE YOU ALL HERE. WE LOOK FORWARD TO 2018. THAT IS IT FOR NOW. I'M TED SIMONS. THANK YOU FOR JOINING US ON THIS SPECIAL EDITION OF "ARIZONA HORIZON." YOU HAVE A GREAT EVENING.