Arizona Job Growth

Aug. 23, 2012

Transcript:

Ted Simons: Arizona is growing jobs faster than most states and may be headed toward its best annual increase in job growth since 2006. That according to an analysis of federal employment data by ASU's W.P. Carey School of Business. Joining me now to talk about the number and the numbers is ASU economist Dennis Hoffman. Always good to see you.

Dennis Hoffman: Great to be here.

Ted Simons: Top 10 cities, metro areas for nonagricultural jobs, Phoenix tied for fourth with Seattle and San Diego. Surprised there at all?

Dennis Hoffman: No. We've been in the top 10 statewide for the better part of the last I don't know nine, 10 months. I think we've been in the top 10. Phoenix dominates the state so it wouldn't surprise, you know, that the metro ranks really very highly. It's a good group to be in.

Ted Simons: Phoenix numbers seem to be improving again. Will that growth -- what are we watching for here with the continued growth if there is continued growth?

Dennis Hoffman: Never buck the real estate trend, right ted? So, you know, we do have the rollercoaster. The real estate rollercoaster prevails in Arizona. It's pretty clear we've hit bottom and we're starting up. You know, the pace of expansion has yet to be determined but it's likely that Arizona will be among the top 10 job creators, say for the foreseeable future.

Ted Simons: In terms of metro regions, Phoenix ranks fourth, tied for fourth. San Francisco was number one, Houston number two, Denver number three. What are those cities doing right?

Dennis Hoffman: Well, this is really interesting. These cities are coming at this a little bit differently. And I want to go to a thesis but forward by Enrico Moretti, a professor at Berkeley who wrote a great book. It's a great read, the new geography of jobs, and he points to these high-tech cities as job creators over the next decade. And, you know, it's San Diego, it's San Francisco, it's Seattle, it's Austin, Boston, those kinds of things. So those kinds of cities are very consistent with the Moretti thesis. Now, Houston is getting tail wind from energy, clearly. Phoenix is getting tail wind because we're finally finding some, you know, footing let's say with respect to our construction industry, construction has been a horrible drag for the last five years. We're doing some other things right. I think in all fairness, the commerce authority has its act together. It's a very organized economic development strategy for the state, and I think we're seeing some positives coming from that.

Ted Simons: As far as state rankings, Arizona is number four here. North Dakota, California, Oklahoma, California ranked two as a state, we've got San Francisco ranked number one as a city and all I hear is that everyone's leaving, California, jobs are being created there more than other places. What's going on?

Dennis Hoffman: Yeah, flies in the face of that argument that we both heard that, you know that high taxes are going to be the bane of anybody. There's another example in here. Illinois' not doing great but it had a massive tax increase over the last couple of years. And it stands, it's about middle of the road or a little bit below average and Wisconsin, who was thought to be the beneficiary of a lot of these jobs that were going to flee away from this high-tax state, it's just not happening. Wisconsin's losing jobs. So California is one of Moretti's poster children frankly. It's -- despite some cost and 14 it's more costly clearly to do business in California than it is in other states, but despite that, that's where the opportunities lie. That's the opportunities in technology, the opportunities to leverage highly skilled labor. Infrastructure investments have not been bad, world-class university systems. So it's all part of the recipe.

Ted Simons: So if those are the opportunities that California -- I know medical is big in Houston as well along with the tail wind for energy, but the opportunities in Texas and Houston in particular, what are the opportunities here, what kind of jobs are we talking about here and I know you did a study regarding educational attainment in Arizona and how we're still lagging in terms of higher education.

Dennis Hoffman: If you peel back the onion a bit on our jobs, our job success and even our top 10 ranking right now, we're still not generating the high-quality jobs in sufficient numbers. You know, hey, we just need a few more Intels right? Intel is a tremendous asset for us and companies like that, there's others. The Boeings, the Ratheons, the Honeywell, provide great opportunities for the state of Arizona. The key is we're in a tight competition for jobs like that. Everybody wants jobs like that. And businesses like that are going to move where they can find skilled talent, highly educated people, sometimes, lucrative markets to sell in but most of these are export-based. They want great infrastructure in terms of communication, transportation, that kind of thing. Education is absolutely the key. So what we did is we looked at what Arizona might look like if we could raise the labor force share of college graduates, especially in this 25 to 34-year-old group, and we found we could add $9 billion to the Arizona economy.

Ted Simons: So you're saying basically the cost of doing business might be one metric but that could possibly be overshadowed by the simple quality and quantity of talent.

Dennis Hoffman: Absolutely. And I've tried to make this point on a number of forums. You know, economic development, the recipe for economic development strategy is an array of factors, and absolutely cost of doing business, regulation taxes, but skills of the workforce, the ability of a business to leverage the local workforce and generate profits is an unbelievable magnet for those businesses.

Ted Simons: The numbers on the report we were talking about, the jobs report metro areas and state rankings, sales tax revenue in Arizona up year-to-year about 5%. Retail sales up close to 7% year to year. Does this indicate happy days are here again? Individual income tax up 7.5%. Is this a return to normal? Do we start a parade or get back to where we should have been in the first place?

Dennis Hoffman: It's a little different. We're not generating jobs and quality jobs at the pace that we do under normal Arizona economic conditions. Some folks are making money. It's clear, because the tax receipts are showing that. So the interesting thing in terms of forecasting going forward, its capital gains, we really have to watch capital gains. They're highly volatile, there are signs that they are back. I have models that are screaming up in terms of capital gain generation. But it's a tough number to get a hold of. You never really see it. You see its imprint in terms of the revenues immediately but you don't really know for sure it's capital gains until two years down the road.

Ted Simons: But when you hear retail sales up this much and sales tax revenue up this much, that's a lot of consumer activity, no one's going to pooh-pooh that but again are we seeing the institutional kind of capital gains, corporate income, these sorts of things which indicate a vibrant infrastructure for economy?

Dennis Hoffman: That's right, but there's some element of stability in that Arizona consumer. People aren't going to be buying automobiles unless they're feeling relatively secure. And, you know, what we saw in say -- in, '08, '07, '08, '09, or early part of '10, nobody bought automobiles. It was a dearth of consumption of automobiles. In the last several years, they've been 27% year on year for a couple of years running. So this is very important. It's a sign that the consumer is getting their footing and they're becoming a bit more confident. You know, we talk about climbing a wall of worry here. And I think that there's some evidence that we're moving in a positive direction.

Ted Simons: I was going to say bottom line you see optimism here, what do we watch for now in the coming months?

Dennis Hoffman: Its good signs we're moving in the right direction, for long-run economic prosperity, if we want to be one of Moretti's winners as we're talking about, again I'm a university prop. I'm trying to feather my own nest here but the data are so clear. We need to attract highly skilled workers. We need to have jobs for highly skilled workers. We need to continue to train highly skilled workers. We cannot be known for low-cost and low skill if we want to maximize economic prosperity.
Ted Simons: And if low cost and low skill continues to increase and educational attainment and the high paying jobs continue to be stagnant that's not necessarily a good thing?

Dennis Hoffman: No, there's going to be winners and losers going forward. And that doesn't sound like a winning strategy to me.

Ted Simons: All right, good to have you here. Thanks for joining us.
Dennis Hoffman: Thank you, Ted.