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Governance and Social Responsibility : On the Road to Recovery: Arizona's Economic Outlook 2012-2013

February 2012

By Marshall J. Vest
Economic and Business Research Center Director

Arizona’s economy improved modestly during 2011. Data show that recovery has begun, but the pace was painfully slow. Recent revisions to aggregate measures suggest that growth may be accelerating as 2011 comes to an end, and we expect the pace to quicken as 2012 unfolds. However, remaining imbalances in real estate, depressed population mobility, and severe budget constrains in the public sector will continue to restrain the pace of recovery. It will take another 2-3 years to repair all the damage suffered during the Great Recession.

2011 will go into the economic history books as another forgettable year, as progress continued to be held back by strong headwinds. Hangover from the financial crisis restrained credit growth in the U.S., and the Eurozone’s sovereign debt and banking crisis is its most recent manifestation. Housing continued to languish under the burden of distressed sales and falling prices, and population mobility continued near record lows.  Lack of confidence in the ability of governments to set good policies was highlighted by Congress’s debacle on resetting the debt ceiling and recent failure of the Congressional “Super Committee” to reach an agreement to reduce the federal budget deficit. With confidence stuck at recession levels, spending and hiring remained restrained.

The good news is that all the aggregate indicators of economic activity for Arizona are (finally) improving.  Personal income, wages, and employment are growing at increasingly faster rates.  Measures of spending are surprisingly robust.  Unemployment is declining as are bankruptcies and residential foreclosures.  The Arizona economy is no longer bouncing along the bottom.  Recovery is now underway.
  

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