Citizen Staff Writer
Crappy economy? Get used to it. You can even call it a recession, with the blessing of University of Arizona economist Marshall Vest.
Vest, well known for finding optimism when others see gloom, went right to the R word Wednesday morning when he and fellow UA economist Gerald Swanson gave the summer version of their twice yearly economic forecast to 400 local business leaders.
“Let’s start with the economy has slipped into recession,” Vest said at the Doubletree Hotel at Reid Park. “It’s a full-blown recession.”
Vest said Arizona is one of nine states in recession. The others: California, Nevada, Florida, Minnesota, Wisconsin, Tennessee, Ohio and Rhode Island.
“Housing is the biggest challenge for us,” Vest said. “We’re in the biggest decline since World War II.”
When will the declines end?
“There’s no sign of a bottom yet,” Vest said. “We will work through it. By some accounts, the credit crunch is still building. We may be halfway through. I don’t know how you can tell that.”
Beyond soaring fuel and food prices plus sinking home values and foreclosures, Swanson looks to the low value of the dollar as the top reason for why the price of oil has risen 44 percent since December.
“This is most assuredly lowering our standard of living, period,” Swanson said about the dollar.
Swanson said Americans can look forward to unemployment and inflation going up this year. He doesn’t see light at the end of the tunnel yet.
“We know something is wrong,” Swanson said. “We’re just not sure how to get out of it.”
There is good news, however. Employment in health care is growing.
“It’s a booming industry and the boomers are getting older,” Swanson said. “This is not an even recession yet. It has hit pockets and hit pockets hard.”
There have been substantial local job losses in construction, the leisure sector, professional and business services, the finance sector and manufacturing, but data shows higher levels of education are leading to better job security.
Swanson said the unemployment rate for high school dropouts is 21 percent, while for high school graduates it’s 12.9 percent, for those with some college it’s 6.9 percent and for those with bachelor’s degrees or higher it’s 3.1 percent.
Still, consumer spending is down across the board.
“We have a rather strange economy,” Swanson said. “The new mantra is ‘Honey, what’s for dinner?’ ‘Whatever is on sale.’ ”
Vest said the crux of the recession is based on the longest span of consumer liabilities growing faster than assets. People have outspent their assets every year since 1998, a longer span than similar periods during the Depression, World War II and the late 1940s.
“Consumers have been running a deficit for the past decade, spending more than they earn and selling off assets,” Vest said. “The recent string of dissaving is really unprecedented.”
Swanson’s take: “Think of it as a correction of our excesses.”
Tip No. 1: Pay off your credit cards.
“Get your house in order,” Swanson said. “We have to start the correction.”
Recession by the numbers
• Arizona: No. 4 behind Nevada, California and Florida
• Filings statewide in March: 9,199, up 106 percent from March 2007
• Tucson homes in foreclosure: 4,400
• Despite the drop in housing values, they still are 65 percent to 80 percent higher than five years ago.
• Tucson jobs lost in past 12 months: 5,300, 1.2 percent of work force
• Financial services: 2,100 jobs lost (many from First Magnus)
• Construction: 2,000 jobs lost
• Leisure (hotels and tourism): 800 jobs lost
• Raytheon Missile Systems: 1,300 jobs added, up to 12,500 employees
• Government: 700 jobs added
• Educational and health services: 400 jobs added
• Mining: 300 jobs added
Back to bad news:
• Retail sales: down 6.5 percent in past year
• Auto sales: down 20 percent in past year
• Restaurants and bars: down 5 percent in past year
What does a weak dollar mean?
• December 2002: $1 = 1 Euro
• Barrel of oil: $25
• Now: 1 Euro = $1.54
• Barrel of oil: $122
Sources: UA economists Marshall Vest and Gerald Swanson