Phoenix’s unemployment continued to drop in the second quarter, down to 7.2 percent. This puts the area’s unemployment rate well-below the July national rate of 8.3 percent. Payroll job growth in Phoenix has also been outpacing the nation, expected to grow at a 2.7 percent annual clip in 2012, compared to 1.4 percent nationally. Phoenix is well-situated to gain an employment boost from a mix of short-term and longer-term investments by major corporations in the area. Manufacturers Raytheon Missile Systems and Honeywell International Inc. together recently received over half a billion dollars in government contracts to build high-tech military equipment and machinery. In addition to building a new $5 billion chip facility in Chandler, which will be the most advanced high-volume semiconductor manufacturing site in the world, Intel has begun construction on a $300 million R&D facility in Chandler. Although high tech manufacturing is fueling growth in the Phoenix job market, the area’s exposure to manufacturers of military equipment leaves it vulnerable to drag from expected federal government spending cuts associated with the Fiscal Cliff in early 2013.
Nominal income growth in Phoenix, fueled by a recovering labor market, kept pace with national growth in 2011, rising at a 5.3 percent annual rate, versus 5.1 percent nationally. This pattern should hold in 2012, as large corporations continue to invest locally.
The housing market has become less of a drag on the local economy, with home prices declining just 1.4 percent annually in the first quarter of 2012, and expected to turn positive in the second half of 2012. Housing starts are off of their recession lows, now at the highest level since the third quarter of 2008. Most of the uptick in starts can be attributed to a boom in single-family construction. Credit quality for businesses and individuals has been improving slowly but remains historically high.
Click here for the complete 2012Q3 Phoenix Regional Economic Update: Phoenix2012Q3.