The Prescott area’s allure for inward migration from other parts of Arizona and the nation has fueled the fastest growing labor market in the state for 2016, according Lee McPheters, research professor of economics at Arizona State University’s W. P. Carey School of Business.
Generating overall job growth at more than five percent for the year, the Prescott Metropolitan Statistical Area has doubled Arizona’s performance and tripled that of the country, an achievement he says is “all due to people and businesses moving to Prescott.”
McPheters identified that trend as “the main driver of growth” for the area economy, describing a net population increase of 10,000 from 2010 to 2015. During that period, 14,000 new residents offset the circumstance of deaths surpassing births by nearly 4,000.
Marketers and economists would credit the very favorable Prescott image for the population inflow, he explained. “The consensus would be that the ‘Prescott brand’ is based on quality of life, excellent climate, reasonable cost of living and overall vibrant community with social and cultural activities, good public services and so forth. All of that must be protected and continually improved, because other areas are competing for these same relocating residents and businesses.”
Business services, retail trade, health care and tourism/visitor-related jobs provided the highest growth, McPheters continued, with more of the same expected for the coming year.
However, “overall growth is expected to be lower in 2017 because we are getting closer to full employment and we are beginning to see labor shortages, especially in construction.”
The Carey School’s forecast for economic growth next year in the Prescott area suggests job creation of at least 3.5 percent (more than 2,000 new jobs), population growth of 1.5 percent (about the same as the state) and single family (housing) permits continuing to increase (there were 1,300 in 2016 and projected to be more than 1,000 in 2017).
Both McPheters and Alexandria M. Wright, director of the Yavapai College Regional Economic Development Center, emphasized the impact of the national economy on local markets.
Wright said job growth in primary sectors is predicted to slow in 2017, because of “the country’s sluggish growth in productivity and inflation over the past five years.” She characterized decreased demand for products and services as spurring the national lag, with a trickle-down effect on local economies. Her analysis anticipates manufacturing in Yavapai County growing by three percent, health care by four percent and tourism-related food and accommodation services by two percent.
“The national economy is the greatest risk to Arizona and the greater Prescott area,” McPheters stated. “If growth starts to slow or even contract [recession] at the national level, then Arizona and Prescott will follow the national business cycle, facing rising unemployment, job losses and another construction slow down.”
Causes of a national recession most likely would be “missteps by the Federal Reserve, Congress or the incoming administration,” McPheters noted. “If interest rates are raised too quickly or tax policies are changed in some detrimental way, these changes could affect growth.”
Wright underscored several trends in the Yavapai County economy:
- Ongoing benefit from in-state tourism maintaining the tax revenue used by municipalities to fund operations.
- Low wages in the service sector failing to provide “a meaningful contribution to local economies.”
- Continued expansion of the health care industry, with the greatest population growth occurring in Prescott Valley, along with increased demand from rising retiree populations in Prescott and the Verde Valley.
- Custom manufacturing providing a strong foundation from which production-oriented industry may evolve over the coming years.
This year, the manufacturing sector in Yavapai County added 142 jobs, health care and social assistance 355 jobs, and food and accommodation 584 jobs, Wright said.
She cited “wage stagnation” as the biggest challenge to economies and one that is problematic for both employers and workers.
“Economic engines require regular growth in wages and disposable income to maintain purchases of household goods,” she explained. “These expenditures make the economic engine churn, creating increased demand for products and services, and thus, increased demand for workers. Wage stagnation is detrimental to both employers and employees, creating a situation where employees don’t feel valued and may jump from job to job for pennies more, which further generates an employee turn-over issue that then produces greater expense for the employer in training costs.
“In rural economies, good wages found in professional, technical and scientific services tend to be outsourced to consultants from outside the region. The good news is that we have experienced a 21 percent growth in jobs for this sector over the past year, with 523 jobs being added to the local economy.”
With the presidential election and the Arizona passage of Proposition 206 to incrementally increase the minimum wage to $12 by 2020, other economic impacts could occur.
“The results of the presidential election have spawned an initial panic in global markets due to the unknown future of trade agreements, similar to that provoked by Brexit,” Wright shared. “These markets will likely rebound, though at a slower pace, given the outspoken nature of the president-elect, who has vocalized his goal to reduce the inequity of global trade agreements.”
For businesses and people to weather any uncertainty ahead, Wright recommends keeping debt low and focusing on additional credentials in one’s professional sector. “The goal is to make sure your individual skills or your business product is in demand, which means ensuring that what you do is better and different than what others do. Efforts to maintain up-to-the-minute knowledge in various fields is essential to guaranteeing that you and your company remain in-demand.” QCBN
By Sue Marceau, QCBN
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