Arizona\'s Economy - Short term Gloomy, Solar Bright Spot - PhoenixCEOCFO.com

Arizona's Economy - Short term Gloomy, Solar Bright Spot

"The outlook in the near term is ugly," prominent Arizona economist Elliott D. Pollack told the audience of 800 at a gathering sponsored by the Greater Phoenix Chamber of Commerce and Cox Communications in September 2008. Pollack said 2009 will be as bad as 2008 for the Phoenix region, with job losses continuing to spread beyond the construction industry. Housing will continue to suffer into 2009 as more subprime adjustable rate mortgages reset and probably won't see a full recovery before 2012, Pollack said. He continued to say that the commercial real estate market is starting to significantly weaken. He pointed to negative signs in the national and state economies, including the credit crunch and finance-sector problems; a drop in sales of retail and durable goods; declining architectural billings and equipment sales; high consumer debt; energy and food inflation; and poor housing resales. Unfortunately, Pollack has a reason to be depressed. He had invested with Mortgage Ltd, a hard money lender that had gone bankrupt in 2008.

Adding to the gloomy news, Arizona Governor Janet Napolitano said on October 1, 2008 that the state could face a $800 million budget deficit next year. The next day the Arizona Department of Commerce predicted that the state could lose nearly 34,000 jobs in 2008 and another 13,500 in 2009.

Pollack was optimistic about one area: energy. The high price of gasoline is causing consumers to switch to fuel-conserving vehicles, which could reduce demand for foreign oil, he said.

The Greater Phoenix Economic Council CEO, Barry Broome, had some positive news. Broome and City of Phoenix and Arizona Department of Commerce officials had just returned from a trade mission to Europe. Broome said that eight energy companies were looking at the Phoenix area for possible production and engineering sites.

Arizona's solar industries did get a boost from the $700 billion bailout package with its eight-year extension of the solar investment tax credit. The passage means that Arizona Public Service Co. can move forward with its plans for the Solana Generating Station, a 280-megawatt solar powered plant to be built near Gila Bend.

Broome went on to say, "We need to build an empire around solar." Inexpensive energy is critical to an economy. If a breakthrough occurs to make solar more viable, Arizona could be the center of the solar industry.

John Laub is the Chairman of the Phoenix CEO-CFO Group.

1. "Economist: Slow Economic Recovery for Phoenix Area." Paul Davenport. Associated Press. September 24, 2008.

2. "Arizona Forecast: Economy May Take Years to Recover, Solar Could be Bright Spot." Mike Sunnucks. Phoenix Business Journal. September 24, 2008.

3. "Building Our Future in Arizona." The Arizona Republic. September 25, 2008.

4. "Arizona Solar, Wind Officials Buoyed by Bailout Passage, Credit Extensions." Patrick O'Grady. Phoenix Business Journal. October 3, 2008.

5. "Arizona Commerce Agency Expects 47,500 Lost Jobs." Associated Press. October 2, 2008.

6. "State Could Sell Arizona Lottery to Deal with Expected 2009 Deficit." Mike Sunnucks. Phoenix Business Journal. October 1, 2008.