After losing more than 3,000 nonfarm payroll jobs in 2015Q2, the Phoenix economy added about 13,800 such jobs in the third quarter of 2015. In the meantime, the metropolitan area lost hundreds of construction jobs. The services providing sector added 12,300 jobs in the third quarter, followed by 1,830 in the government sector. Despite the moderate job gain, the unemployment rate in the metro area ticked up gradually from 5.0 percent in June 2015 to 5.3 percent in September. The uptick in the unemployment rate occurred despite the decline in the labor force in 2015Q3. Although there is some upside for construction jobs including Grand Canyon Education Inc’s $400 million construction project in 2016, we expect Phoenix area job growth to remain soft around 2.0 percent in 2016 and 2017.
The Phoenix area real estate market is still hot, with total housing starts growing by 32.6 percent year-over-year in 2015Q3. Both single and multifamily housing starts grew robustly in 2015Q3. Home price growth has been steady around six percent in the first half of 2015, after unsustainable double-digit growth in 2013 and the first quarter of 2014. As rents in Phoenix ramped up, construction of multifamily apartment complexes strengthened, increasing the supply of apartments. Home price growth is expected to be around four to five percent in 2016 and 2017 in Phoenix.
Real GDP in the Phoenix metropolitan area grew by 1.8 percent in 2014, well below the average for all U.S. metro areas of 2.3 percent, and above the state of Arizona’s 1.4 percent. Consumer spending is expected to boost the area’s GDP in 2015, supported partly by lower energy prices. However, investment spending may be a drag to the region’s GDP as construction and manufacturing activities have been subdued for most of 2015 compared to the previous year.
Click here for the complete Phoenix Regional Economic Update: Phoenix 2015Q4.