Ted Simons: The construction industry in Arizona is half of what it used to be five years ago. But construction employment is showing signs of improvement. I'll talk to an economist about Arizona's overall job market. But first, Mike Sauceda tells us more about the uptick in construction hiring.
Mike Sauceda: This is the sound of construction jobs being added in Arizona. A massive hail storm hit the Phoenix area last October, damaging roofs and air conditioners- a factor leading to more construction work in the Grand Canyon state. Before the hail storm, the state was pelted heavily by the housing crisis and the shadow inventory of 60,000 foreclosed homes that have not been put on the market yet. But the clouds appear to be breaking. For five straight months, Arizona has seen a slight increase in construction jobs after years of huge losses. The new jobs are putting people like Pete Dale back to work. He was without a job for a year.
Pete Dale: Nothing to do, just -- the shock used to being busy and working every day, it was a shock. Financially, it hurt. Thank God my wife still had her job and we had investments and money saved up. Financially it did hurt me a little bit. It took away from my retirement.
Mike Sauceda: Just a few weeks ago, Dale was hired as a supervisor by Lyons Roofing, a Phoenix firm. Ann Pepper said the outfit had to add 50 employees to a staff of 75 quickly after the hail storm hit.
Ann Pepper: It's not just growth, we've had the best year we've ever had. We still have work and will have work through the first quarter of 2012.
Mike Sauceda: But home remodeling and repair are also creating jobs. Rosie Romero is a long time contractor and hosts a program on home improvement broadcasting throughout Arizona.
Rosie Romero: We're seeing those folks who wanted to remodel in '06, '07, or '08 and then the economy did what it did and they caught their breath and they’ve held it for the last three, four, five years and now they're exhaling a little bit and saying, “You know what? I’m going to go ahead and do the project I've been waiting four years for, but I'm going to scale it back. I’m going to scale it down.”
Mike Sauceda: Aruna Murphy is an economist with the state of Arizona who tracks employment figures. Arizona peeked with 247,000 construction workers, a figure that's fallen by more than half, but there has been improvement.
Aruna Murthy: Since March of this year, I think for the past five months, we’ve seen a month after month in increase and a total increase of 8,200 jobs. Unless we find a long term trend in gains, I wouldn’t feel comfortable we're out of the woods.
Mike Sauceda: Murthy says among the construction subsectors, the biggest is in specialty trades. Workers who do remodeling and repair. The increase in construction employment may be small but it's welcome news to construction workers like Dale who weathered the storm of unemployment.
Pete Dale: I’m happy to be back to work.
Ted Simons: Here now to talk about the latest forecasts for the job market in Arizona is ASU economist Dennis Hoffman. Thanks for joining us.
Dennis Hoffman: Good to be here, Ted.
Ted Simons: The construction industry almost reshaping itself but in terms of gradual employment increases in the next couple years, the operative word is gradual?
Dennis Hoffman: Very gradual. Very gradual. I think the video explains it clearly, it's stabilized, let's say, over the last six months, but we lost half the sector. So we're just not losing construction jobs and gaining a handful here.
Ted Simons: Seven tenths of a percent of an increased forecast for this year. 1.2% next year, why so slow?
Dennis Hoffman: You know, this is a recovery, unlike any of the other post-war recoveries, there was a battered economy, wealth erosion unlike anything in fact worst than the '29 wealth erosion and that has really hit some of our employment growth sectors, I think, really the hardest. You know, we've not had a real construction downturn like this, or real estate turn, the '80s were flat, you know, and we thought that was as bad as it could get, but losing half of the sector is in terms of employment is just unprecedented and, you know, there's no real catalyst to get those construction jobs back. That's what we need. We need to kick-start that, and the traditional way would be to wait for in-migration. Interest rates are low, wait for folks to show up or people to move and that would help but we still have a huge inventory out there.
Ted Simons: The previous forecast in April seemed to be higher, this one is a little lower.
Dennis Hoffman: Sure.
Ted Simons: What's going on?
Dennis Hoffman: Well, we read about it a lot this summer, the gyrations on Wall Street. You know, part of it was the budget impasse in July. We had GDP numbers revised and gyrations from Europe in terms of how things are going to happen. It unsettled people. Discretionary expenditures began to change. People will be reading tomorrow, Apple finally missed on a quarter. They announced after-market and they're -- they're -- their price is off 6% after market. We'll see about tomorrow. It's clear that the economy is not as solid, I thought it was, you know, kind of a modest soft patch. I think there's a lot of concerns about the pace of the recovery right now. Fortunately, overall retail in Arizona continues to be reasonably solid in terms of Arizona.
Ted Simons: And that seems to suggest the reason that the forecast growth for leisure, hospitality and services, these sorts of things, that forecast seems to be up. Education and health services up, trade, transportation, utilities up, but again not up all that much. And everything else is down.
Dennis Hoffman: That's right. Not up near like in normal expansionary periods. You know, there's some anemic growth. The laggards are professional services and, of course, government, the outlook for state and local government is very negative in terms of any kind of job creation. My guess there will be job losses there.
Ted Simons: You mentioned in-migration. We’re not seeing a heck of a lot of that. Slower population growth in Arizona, first, how slow can it get and how long can it last?
Dennis Hoffman: Wow. Arguably, we're losing folks. If you look at the utility hookups, look at the preliminary numbers, we're certainly not gaining people and that has been as far as construction -- excuse me, as far as a job engine, it's that in-migration and filling the population growth serving positions that has really served as an underlying catalyst for growth and employment and we just simply don't have that.
Ted Simons: Reduced income and reduced wealth, also a major factor there. How does that get turned around?
Dennis Hoffman: Years. Unfortunately. Of climbing a wall of worry. We -- you know, some of the wealth in terms of equities has come back in certain sectors. People are feeling better about their 401(k) than they did in early 2009, but the housing wealth has still taken a huge hit. We've got to work through that inventory and so it's a chick and an egg. There's no demand for products because there's no jobs and there's no jobs because there's no demand for products.
Ted Simons: Yeah, also state and local budgetary constraints mentioned as a factor as far as these forecasts are concerned. How much of a factor?
Dennis Hoffman: I think it's a huge head wind going forward. And historically, that's been a place where people didn't get paid very well, but at least they had some job security. Now, of course, they don't get paid very well. They have furloughs and wage reductions and there's, of course, risks and layoffs.
Ted Simons: Well we are seeing over the year job gains I guess for the first time in three, four years, and the report says job growth will be better here than overall in the U.S. But obviously, something has to change here, Dennis, what needs to happen here?
Dennis Hoffman: Well, I think that we do have an opportunity here, Ted. You ask almost any economist, they say wait until 20 15, 2020, growth will come back. We have under-invested in infrastructure for 20 years, the cost of capital is as low as it's ever going to be, we have idle construction workers and schools that need to be repaired, we’ve set that aside forever. We could accelerate our highway and transportation construction and we could put folks to work there and fix water lines. Infrastructure in the cities. We have opportunities. And you could finance those down the road. With some revenue bonding. You could probably raise some taxes in transportation to finance this infrastructure. Now is the time. You have idle capacity. You have a construction sector that's been beleaguered. Put some folks to work. Create some jobs. The good old fashion way, and build out infrastructure.
Ted Simons: Can you do that on a state level without federal assistance or without much federal assistance?
Dennis Hoffman: I think we're going to have to. If you look at the federal assistance this state already get, I mean, 1.2, to 1.3 cents for every buck we send to D.C. and I bet it's closer to a buck and a half right now. $65 billion show up in the state from D.C. You know, holding out hope that Washington is going to bail us out of issues that we ought to be controlling our own destiny on, I just don't think is the correct strategy here.
Ted Simons: Quickly, is there an opportunity, a chance, a possibility, for some -- we bring you on in six months and something dramatic has happened and now job growth is back up and going and spitting fire?
Dennis Hoffman: Well, I hope that happens. It's hard to see that catalyst. What I'd like to see is an acceleration in some of these plans -- you know, ask the folks at the Department of Transportation, the plans are on the books. The engineering has been undertaken, we could accelerate some of this stuff. We have to get the dollars back in the cities and towns so they can repair the roads and put folks to work there and fix the schools. There's opportunities in this state, Ted.
Ted Simons: All right. Dennis, good to see you again.
Dennis Hoffman: Good to be here.