New research from the Brookings Institution shows the Valley’s rising unemployment rate and falling home values position the area as one of the nation’s weakest economically.
The first MetroMonitor study from the Washington research group looks at the impact of the recession on the 100 largest U.S. metro areas. It will be updated quarterly.
The study divides the metro areas into five categories based on overall economic strength, and the Phoenix area is positioned in the “second-weakest” category with a diverse group of cities including Tucson, San Diego, Minneapolis, Orlando and Cleveland.
“Phoenix has one of the weakest economies in the nation right now,” according to Lee McPheters, director of the JPMorganChaseEconomicOutlookCenter at Arizona State University. “The characteristics of this particular recession all combined to hit Arizona harder than almost any other state, and Phoenix has fallen further than almost any other major labor market.”
Overall economic performance in the cities was determined in four ways: change in employment rate from peak levels; one-year percentage-point change in unemployment rate; change in gross metropolitan product from peak levels; and one-year change in home values. All data are current through the first quarter of 2009.
Metro areas in Texas and Oklahoma dominated the strongest-performing group, including San Antonio, Austin, Houston, Oklahoma City and Tulsa. No city west of Albuquerque, N.M., ranked in the best-performing group.
While Detroit was ranked the weakest-performing city, metro areas in California and Florida dominated the bottom 20.
“While some areas of the country have experienced only a shallow downturn and may be emerging from the recession already, people living in metro areas that are now performing weakest economically should prepare themselves for a long recovery period,” according to study co-author Alan Berube.
The rankings for the Phoenix metro area are all over the board. According to the MetroMonitor study, the Valley showed the strongest quarterly growth in wages from the fourth quarter of 2008 to the first quarter of this year. Its gain of 2.6 percent was far stronger than the U.S. average of 1 percent, placing the city No. 1.
According to the report, cities such as Phoenix and Las Vegas that have sustained large job losses saw their average wage levels rise over the last quarter. That may indicate migration to these places has slowed, and that recent job losses have occurred disproportionately among lower-paying industries.
While Phoenix was tops for wage increases, the city ranked very poorly in nearly every other economic indicator. Its quarterly drop in employment was 2.9 percent, ranking it 98th among the 100 metro areas.
The Valley also performed poorly in housing measures, ranking 92nd in the one-year change in housing prices, with a drop of 16.6 percent. The national average drop was only 6.3 percent.
“Phoenix attracts potential buyers at the national level. It is a fast-moving efficient market, and that is why prices have come down,” ASU’s McPheters said. “The silver lining is that homes are affordable again in Phoenix, setting the stage for a strong rebound in the economy after 2010.”
The Phoenix area ranked 95th in the number of real estate-owned properties. REOs are properties that revert to the mortgage holder after an unsuccessful foreclosure auction.
While the economy is in worse shape here than most other areas of the U.S., the Phoenix area has been down before and responded with staggering growth.
“The state and Phoenix have the capability to rebound with growth rates two to three times those of the nation as a whole.” McPheters said.
1st: Increase in average wage (4Q 08 vs. 1Q 09) 38th: Change in gross metro product (4Q 08 vs. 1Q 09) 92nd: One-year change in home prices 98th: Change in unemployment (4Q 08 vs. 1Q 09)
Economic Performance
Strongest cities: San Antonio, Texas Oklahoma City, Okla. Austin, Texas Houston Dallas
