Job growth in the Phoenix metropolitan area has outperformed the state of Arizona since the second half of 2010. The Phoenix economy contributed more than 85 percent of job growth for Arizona from mid-2014 to mid-2015. Most of the job growth (more than 88 percent) in the Phoenix area came from the services sector. The construction sector has also remained active during that time as the metropolitan area added more than 5,000 construction jobs while losing 1,800 manufacturing jobs. As a result, the unemployment rate fell to 5.1 percent by July 2015. Moving forward, we expect Phoenix’s job growth to soften a bit in the remainder of 2015 and remain around two percent in 2016 and 2017.
The Phoenix area real estate market saw a robust growth in single-family housing starts during the first half of 2015 while multifamily housing starts lost steam. The area had a higher home price appreciation rate than that of Arizona for three consecutive years from 2011, before the trend ended in the second half of 2014. Home prices grew around 5.8 percent year-over-year in the first half of 2015, after a percentage point softer growth in the prior two quarters. Home inventories for sales are tightening up in the metropolitan area with fewer listings reported recently, compared to a year ago. Tighter home supply is expected to boost prices. We forecast the area’s home prices to grow around five to six percent year-over-year in 2016 and 2017, about even with income growth.
Because of the business-friendly environment, many high-tech, health care and telecom industries have relocated to Phoenix. Recently Kiplinger ranked Arizona as the 7th most tax-friendly state in the U.S. Going forward, we see more upside for the tourism-oriented Phoenix economy to grow, bringing personal income back up to the national average.
Click here for the complete Phoenix Regional Economic Update: Phoenix_2015_q3.