Experts Predict Stronger Growth Ahead for Tucson Economy

TUCSON, Ariz. – June 3, 2015 – Tucson’s economic growth is expected to outpace the national economy by 2017. That was a key message during today’s University of Arizona Eller College of Management 2015 Mid-Year Economic Update Breakfast at the Westin La Paloma Resort in Tucson.

More than 330 people attended the event to hear presenters George W. Hammond, Ph.D., director and research professor at UA Eller’s Economic and Business Research Center, and Roberto Coronado, Ph.D., assistant vice president and senior economist at the Federal Reserve Bank of Dallas, El Paso branch, give a mid-year assessment of economic conditions relating to job growth, the housing sector, gas prices, economic relations with Mexico and more.

Hammond, who predicted in December 2014 that Tucson’s job growth will gradually improve by 2016, said job growth is predicted to accelerate from 0.5 percent last year to 0.9 percent this year, and rise again to 1.4 percent in 2016. Job growth is expected to continue in 2017, helping to fuel Tucson’s economy as it outpaces the national economy.

“Tucson’s employment was up 4,000 jobs over the year in April and it is forecasted to add 3,400 jobs this year and 5,200 jobs in 2016,” Hammond said. “Most of the new jobs will be gained in the service sectors, such as health services, trade, leisure and hospitality, and professional and business services.”

Coronado’s visit to Tucson marked the first time he participated in a UA event. His presentation focused on Mexico, with a special emphasis on the border economy.

“After a strong recovery from the so-called Great Recession, Mexico’s economy entered a soft patch since the second half of 2013,” Coronado said. “Mexico’s economy has been gaining momentum since the second half of 2014, but growth has been moderate at best.”

U.S.-Mexico trade flows reached record high levels in 2014 at more than $530 billion, representing exports plus imports. “Automotive is the top trading sector as Mexico has made significant inroads into the North American auto manufacturing industry,” he said.

Other key topics covered at the June 3 breakfast included:

• Arizona Exports: State exports to Mexico rose by 22.2 percent in 2014. However, the recent appreciation of the U.S. dollar versus the peso will slow state export growth in 2016. The dollar/peso exchange rate is up by 16.3 percent from April 2014.

• Gas Prices: Low gas prices are increasing the funds available to households to spend and save. If prices remain $1 per gallon below 2014 levels, it could free up $368 per person in Tucson. Preliminary indications suggest that U.S. households are choosing to save, rather than spend, a significant portion of those funds.

• Fiscal Drag: Federal fiscal drag has diminished, but continues to weigh on the local economy. It is now joined by fiscal drag from the state and local sector.

• Mexico’s Structural Reforms: Mexico has been working on structural reforms since the 1980s.  This process accelerated since 2012 as Mexico has engaged in an aggressive structural reform agenda. Macroeconomic stability has been achieved mostly due to three factors: central bank independence; fiscal discipline; and openness to trade.  In spite of this, per capita income growth remains weak.   Therefore, the new reforms are needed to spur growth.

During the presentation, Hammond also shared updates regarding the Arizona-Mexico Economic Indicators website, azmex.eller.arizona.edu, which was launched in December 2014. Generous support from the Arizona-Mexico Commission, the Arizona Commerce Authority, the Arizona Department of Transportation, and the Arizona Office of Tourism now allows Eller's Economic and Business Research Center to provide the latest data benchmarking important economic relationships between Arizona and Mexico.

Arizona-Mexico Economic Indicators focuses on Arizona’s trade with Mexico, assessment of the role of Arizona’s border ports of entry (BPOE) in the U.S.-Mexico border region, and monitoring key indicators of Mexico’s economy. Six major sections capture the dynamics of Arizona’s trade and competitiveness: Arizona Trade, Border Crossings by Border Port of Entry, Commodity Flows by Border Port of Entry, the Economy, Foreign Direct Investment (FDI), and Population.

As the presentation came to a close, Hammond was optimistic about the future.

“Overall, Tucson will benefit during the next few years from faster U.S. growth, which will contribute to increased residential mobility across the nation and improved population gains locally,” he said. “The addition of more residents will boost housing and related sectors, which have lagged since the end of the recession.”

For more information or to view Dr. Hammond’s slide presentation, visit Eller’s Economic and Business Research website, ebr.eller.arizona.edu.

The Economic and Business Research Center at the UA Eller College of Management provides the Arizona community of business and public-sector decision makers with applied research and information on economic, demographic, and business trends in Arizona.