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2017 Economic Outlook: Optimism in the Air

Credit: VisitTucson

By Chris Flora for Inside Tucson Business

Ahead of an annual economic outlook luncheon hosted by the University of Arizona Eller College of Management, experts say there are reasons to be optimistic about the direction of the local economy.

Event speaker George Hammond, director and researcher professor at Eller’s Economic and Business Research Center, and Pat Darcy, retail division head of Tucson Realty and Trust Co., project positive change will come – albeit slowly – as 2017 approaches.

Jobs

Data from the Bureau of Labor Statistics showed a 4.2 increase in Tucson’s job growth between July 2015 and July 2016. That spike was good enough to mark Tucson as third overall in job growth across the nation, and Hammond said there is more good news to come.

He said in the past, growth has been slowed because of reductions in federal spending that in many cases directly impact the Tucson job economy. As those cuts are now beginning to wear off, more positions will likely present themselves.

Furthermore, the Tucson region has continued attracting big employers that offer big salaries, including many in the aerospace and biotech industries. Caterpillar Inc., which specializes in product production for the construction and mining industries, announced earlier this year it would be locating its regional headquarters in Tucson, bringing in hundreds of high-paying jobs and an estimated economic impact of $600M.

Still, questions loom of what will become of small businesses in the years to come following the passing of Proposition 206, which set a schedule of incremental minimum wage increases from $10 per hour in 2017 to $12 per hour by 2020.

One consideration often debated is that the minimum wage hike will incentivize employers to hire less and explore technological automation more. Hammond says minimum wage increases aren’t necessarily to blame for that.

“This process of automation is going on in almost all sectors, and that will happen whether we raise the minimum wage or not,” he said.

Housing

Local housing will likely continue its slow crawl back into recovery nearly a decade after the 2008 recession.

While gradual improvements are expected, Hammond said there is still some groaning from builders for the lack of developable land, particularly in areas highly sought out by buyers.

Retail Development

According to Darcy, retail developments show promise in 2017, even more so than in 2016, which was an up year. Some of the areas of biggest promise include additional grocery stores. As the housing market continues its slow but upward trend, Darcy says he expects retail to follow suit.

“Obviously new housing comes with retail following,” he said.

Darcy said the restaurant scene is also picking up – though he points out Tucson is already saturated with such.

One change from past trends means new construction, Darcy says. Developers wishing to utilize older retail spaces are now preferring to demolish and rebuild, which could give Tucson a more vibrant and modern feel.

Stock Market

On the national level, caution may also play a role in determining the stock market’s wellbeing. In the days following the 2016 presidential results, the market waivered greatly, first plummeting and then soaring. But, for the most part, Hammond expects many to play the waiting game as the new Washington D.C. administration takes office.

Very likely this means that businesses will hold off on investment spending until a clearer picture is formed.

Hammond, alongside Anthony Chan, Chase chief economist, will share more in-depth predictions regarding Arizona and the nation’s economic health for 2017 and 2018 during the UA Eller luncheon.

Read more at Inside Tucson Business.

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