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Forecast for Arizona economy shows gradual gains

A state economic projection for the next two years is favorable but tempered by continued weaknesses in construction, as Arizona makes a gradual pullout from the recession.

The Department of Commerce released the forecast Thursday calling for 2.2 percent growth of nonfarm payroll through 2012. That compares with a 7.3 percent decrease in 2009.

The projected increase in employment will add 17,300 jobs in 2011 and 34,600 jobs in 2012, the department said.

The education and health services sector was expected to see the biggest increase, with 22,400 additional jobs during the two years, followed by the leisure and hospitality sector with 17,400 jobs.

Aruna Murthy, director of economic analysis, said positive factors include increased orders for manufactured goods, the impact of a weaker dollar on exports and tourism, increased military spending, small increases in consumer and small business lending, and gradual increases in consumer and business spending.

Negatives include a slowdown in the already weak real estate market, slower population growth, rising health care costs and continued budget troubles for state and local governments.

Construction shows no sign of rebounding as the homebuilding industry continues to be hampered by excess housing supply, Murthy said.

“We need to see people move, but people don’t move until they can sell their homes,” said Murthy, who could not predict the timing of a construction industry rebound.

Total nonfarm employment now stands at about 2.4 million, down from 2.6 million in 2007 and up from 2 million in 2009, the department said.

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