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Arizona cities lag far behind other metro areas in economic growth

WASHINGTON – Economic growth in Arizona’s metropolitan areas was a fraction of the national growth rate for metro areas in 2010, according to figures released Tuesday by the Bureau of Economic Analysis.

Nationally, gross domestic product in metropolitan areas grew by 2.5 percent from 2009 to 2010, the most recent years for which numbers are available. But no metro area in Arizona grew more than 0.7 percent in the period, and two regions – Yuma and Prescott – actually saw GDP shrink when the numbers were adjusted for inflation.

The Phoenix–Mesa–Glendale area saw the biggest GDP growth in Arizona at 0.7 percent – but that was still only good enough to finish 267th out of 366 U.S. metro areas in the report. GDP is a measure of the value of all goods and services produced in a region.

“These numbers are no surprise, but they’re dramatic when you see them on a page and you see the economic evaporation right in front of your eyes,” said Dennis Hoffman, a professor at Arizona State University’s W.P. Carey School of Business.

The state’s struggling construction industry was one driver in the poor results: Construction revenue shrank in every city in 2010, and it fell by more than half a percent in Yuma, Phoenix and Prescott.

The decline in construction revenues was less than in 2008 or 2009, but the housing and building malaise will likely haunt Arizona’s recovery for years, Hoffman said.

“We probably have another couple to go,” he said.

Barry Broome, president and CEO of the Greater Phoenix Economic Council, said construction saw slight growth in the Valley in fiscal 2011, which started in June 2010. Still, construction will remain soft for some time, he said, and the area’s recession is not expected to end until 2014.

“We’re going to lag the national recovery because of housing,” Broome said, but gains in sectors such as health care and renewable energy should make the recovery less painful than it might have been.

In the Yuma region, which posted an Arizona-worst 1 percent decline in GDP, the economy was hit hard by drops in construction, retail and tourism. Hospitality services fell sharply as a late local casualty of the recession, said Julie Engel, president and CEO of the Greater Yuma Economic Development Corp.

Because Yuma does not have many open commercial buildings, it will be hard to attract companies that prefer the ready–to–use real estate that is available in Phoenix, Engel said.

“We have wonderful assets, but we don’t have the ready-made buildings and ready-made sites,” she said.

Although she expects the area’s GDP to grow slightly in 2011 because of a stable agricultural sector and about $150 million in construction projects at Marine Corps Air Station Yuma, she thinks the region will rebound more slowly than the rest of Arizona.

“We’re going to lag,” she said. “We were the last region to go into the recession, and we will be the last one to come out.”

Rising retail sales in Arizona this spring are cause for hope in Arizona’s economy, Hoffman said, as they indicate that people are feeling more secure in their jobs and willing to spend more.

“I wouldn’t call them strong or great or anything, but I would say they’re solid,” he said.

Slow growth and no growth

Gross domestic product growth in Arizona cities trailed much of the rest of the nation in 2010. The growth rates and where Arizona cities stood in the 366 metro areas in the nation:

All U.S. metro areas: 2.5 percent

Phoenix-Mesa-Glendale

2010 adjusted GDP: $173.4 billion
Growth from 2009: 0.7 percent
Rank: 267 out of 366

Flagstaff

2010 adjusted GDP: $4.1 billion
Growth: 0.5 percent
Rank: 281

Tucson

2010 adjusted GDP: $28.6 billion
Growth: 0.2 percent
Rank: 299

Prescott

2010 adjusted GDP: $3.9 billion
Growth: -0.5 percent
Rank: 322

Yuma

2010 adjusted GDP: $4.4 billion
Growth: -1.0 percent
U.S. Rank: 343

Source: Bureau of Economic Analysis

2 comments

  1. More signs that our Republican leadership is on the wrong track

  2. Thomas, your comment is pretty amusing, considering the fact that our blue neighbor to the west is saddled with the nation’s second-highest unemployment rate.

    The fact of the matter, as the article implies, is that this state’s economy is (was?) woefully under-diversified and over-reliant on the construction sector. As I recall, around half of valley homeowners have under-water mortgages. When more than half of our people owe the bank more than their largest and most precious asset is even worth, it’s truly a wonder we’ve seen any growth at all.

    Our state’s economic outlook will brighten substantially once the housing market is purged of this housing surplus and bad mortgages.

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