Patrick O’Grady and Mike Sunnucks for Phoenix Business Journal
The U.S. and Arizona economies continue to face uphill climbs from the Great Recession with subpar growth this year and a more sustained recovery not expected until 2015. For those looking to 2013 to be the year of a big, booming economic recovery, it’s probably not going to happen. Next year, said presenters, likely will look a lot like this year in terms of the Arizona and national economies.
Poor consumer credit, underwater mortgages and persistent uncertainty remain barriers to more robust state and national economies.
Economists at a forecast event put on today by the Greater Phoenix Chamber of Commerce and Cox Communications also worry about the so-called federal fiscal cliff sinking the U.S. economy back into a recession.
People Can’t Get Mortgages
Scottsdale economist Elliott Pollack said there are continued barriers to the economic rebound in Arizona, especially when it comes to housing and population growth.
Pollack said 40 percent of U.S. households right now can’t qualify for mortgages, and another 24 percent have no or negative equity in their homes. That zero equity mark stands at 42 percent of Arizona mortgages, he said.
Beckie Holmes, director of marketing science at Cox Communications Arizona, said the recession and sputtering job market have also stunted housing growth, resulting in fewer new home buyers.
What will happen will depend on a lot of different factors that could propel the country incrementally forward or potentially throw it back into recession, according to Holmes.
Federal Inaction Could Push Country Back Into Recession
Unless federal lawmakers can come to a new deficit reduction deal early next year, there will be automatic tax increases, defense and social welfare cuts. The economy, deficits and how to tackle those issues are front and center in the close presidential race between Mitt Romney and Barack Obama. The Congressional Budget Office and a number of economists worry large spending cuts and tax increases would put the U.S. economy back into a recession.
Pollack said 45 percent of homes purchased in the Phoenix area are by investors. That helps meet demand from foreclosed and other homeowners who can’t get mortgages, he said.
Holmes said that the typical drivers of an economy following a recession are government spending and housing. Neither of those sectors are doing well. State and local governments have been cutting back for several years, and the federal government has signaled it will be cutting in the near future, Holmes said.
Consumers Must Spend to get Economy Moving
The biggest driver in a recovery is consumer spending, making up more than two thirds of the U.S. economy. Poor job numbers mean consumers aren’t going to be spending more. Businesses, on the other hand, are not feeling the pressure to hire and are concentrating on doing more with less.
Business expansion and formation also is still weak. In many cases, businesses are holding pat with their situation until they see some firm direction in the European and U.S. economies. Once those get settled, Holmes said businesses likely will begin making moves.