The United States, Arizona, and the greater Phoenix area have all recovered from the steep but brief economic recession caused by the pandemic, and the economic outlook is good, according to the Arizona State University economist. Lee McPheters, research professor of economics and director of the JPMorgan Chase Economic Outlook Center at ASU, spoke at the annual ASU / PNC Bank Economic Forecast Luncheon sponsored by the Department of Economics at the WP Carey School of Business at the Renaissance Phoenix downtown hotel on Wednesday. ALSO READ: US Phoenix # 1 for Life Sciences Job Growth “The main message is that the US and Arizona’s economies have been hit hard by the pandemic, but we expect a strong economy by 2022,” he said. “We will replace all lost jobs by the end of 2021.” McPheters said Arizona lost more than 331,000 jobs in March and April 2020 – more than the entire Great Recession that spanned several years. “But we recovered after that, and we’ve created new jobs every month since then,” he said, noting that any jobs lost in the pandemic recession had been restored by the first quarter of 2021. “There’s a good chance that we will” We’ll have a record 3 million employment in Arizona by the end of this year. ” He expects the state to create 117,000 jobs in 2022 – the best year for job growth and the first year with more than 100,000 new jobs since 2006. “What is driving the job recovery? The service sector, ”he said. More than 80% of the new jobs came from the hospitality industry, transportation and storage, retail, professional and technology sectors, and healthcare. The Phoenix metropolitan area created 77,000 new jobs in 2021 and ranks third nationwide in employment growth in transportation / storage and work / technology, he said. “The Phoenix economy has continued to move away from reliance on real estate and is much more diverse than before,” he said. McPheters expects the glowing housing market to stabilize. In 2021, single-family home permits in Arizona rose 23%, compared to 17% nationwide. The average home price in Phoenix rose 33.3% in one year but is likely to rise at a more stable 4% to 6% in the future, he said. The average home price in Phoenix is $ 474,000, which is still less than most other metropolitan areas in the west, including Denver; Austin, Texas; Riverside, California; Provo, Utah; and Seattle. “These aren’t the same 80,000 single-family permits we saw in the housing boom in the mid-2000s, but it’s a steady, sustained trend in housing that benefits the Arizona economy,” he said. McPheters sees potential risks to Arizona in several areas: pandemic uncertainty, supply chain issues, affordable housing, and federal politics. “I think everyone would agree that we need to keep working on educational issues,” he said. “Maybe we won’t be number 1 in terms of spending philosophy, but this is a state that should be placed in the top half of education, now in the bottom.” Nationally, the economy is still recovering from the pandemic Recession but there are still vulnerabilities, said Augustine “Gus” Faucher, chief economist with PNC Financial Services Group, who spoke over lunch. In the US, employment has still declined by more than 4 million and 2% of the population has left the labor force, he said. “Before the pandemic, 63% of all adults were employed, now it’s less than 62%,” he said. “Some took early retirement. Some are worried about the health situation and are not ready to put themselves into this situation. “Some have difficulties with childcare because the virtual school and childcare are closed. And there are those who have received incentive payments or additional unemployment benefits and are unwilling to return. “I expect many of these people will gradually return to work in the next year and a half or so, but it will remain a difficult situation for people trying to recruit.” Another vulnerability is consumer spending on services such as Education, health care, financial services and travel, down 15% during the pandemic and still 2% below pre-pandemic levels. Meanwhile, consumer spending on durable goods such as home appliances and cars fell about 3% during the pandemic, but is now 20% above pre-pandemic levels, even in the absence of car stocks. Consumer spending makes up about two-thirds of the US economy. Both McPheters and Faucher downplayed the likelihood of a long-term continuation of the current surge in inflation. “Phoenix inflation exceeded 7% year-over-year, which is appalling,” said McPheters. However, he said that while the consumer price index rose 8.2%, average weekly wages rose more than 12%. “That means that despite inflation and higher prices, we still have an increase in purchasing power,” he said. Faucher said inflation is expected to rise by around 2% a year in the future. “We have had inflation below 2% a year for the past ten years,” he said. “Financial markets don’t believe the higher inflation we’ve seen lately will embed itself into the economy.” Lawrence Summers, a professor at Charles W. Eliot University and past president of Harvard University, said federal stimulus bills boosted household income, leading to inflation. “Right now we have a pretty strong economy, but it is threatened with overheating,” he said. “An overflowing bathtub is a real problem.” The Fed should raise rates over the next year to curb growth, he said. Summers, former Treasury Secretary, said some people believe the US shouldn’t be spending significant amounts given the size of the budget deficit. “I think we are a better country if we collect taxes more efficiently and support an energy transition towards a greener economy,” he said. “I think it’s crazy that the flight from Boston to Washington takes 20 minutes longer than it did 20 years ago because of the deteriorating infrastructure. “I think it is important that we make very substantial public investments in the future of our country, but I also believe that it is extremely important that we make these investments as efficiently and effectively as possible.”
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