Posted inPhoenix

Phoenix recovery? Part II

The data and just driving around town make it clear that the Phoenix economy is not recovering. That the news snippets and economic forecasts desperately trying to spin things otherwise are almost exclusively focused on real estate is telling. Metro Phoenix so narrowed its economy that it was America's last big factory town, building houses. When this unsustainable game of risk crashed, the region was devastated. But like a dying rattler, it is still snapping its fangs, wildly hanging onto the hope that the Growth Machine can be started up again. It's always worked in the past! This is the forlorn cry of so many caught in past depressions and economic turning points. Buffalo… Youngstown…Detroit…

The old housing economy is not returning. The one based on large-scale output of tract houses built by national builders on a foundation of liar loans, high leverage and vast government subsidies for the suburban or exurban "American dream." Now that dream is a nightmare. The nation is much poorer after the Great Recession, yet the imbalances and high debt remain. Incomes and living standards for average people are in deep trouble. Millions of houses remain to be sold, with many more in the private "shadow inventory" as well as in the toxic "assets" taken off the hands of the banks by the Federal Reserve. Nowhere do these realities operate with more ruinous consequences than Phoenix. Any "new normal" will provide little relief for a regional economy whose business plans were based on an unsustainable profligacy of building and population increases. That little blip that might mean "the bottom" or "stabilization." So?

What's astonishing is the lack of realistic or imaginative thinking on the part of what passes for Arizona leaders faced with this harsh future. Or faced with the mounting evidence of how distorting, costly and damaging to the earnings of average people the real-estate monster had become. Metro Phoenix has never been so dependent on real estate, yet no one seriously wants to break the jones. To understand the future of discontinuity. Pinal County, a national ground zero of exurban crisis, sees only one way out: More sprawl. In fact, Pinal should be returning to agriculture as fast as it can; Arizona needs the exports to a growing Asia, as well as the capacity to feed itself in a high-cost energy future. But the self-destructive hits just keep coming:

7
Posted inPhoenix

Phoenix recovery? Part I

So desperate is "the Valley" for good economic news that the Information Center published a story on the big circulation day of Sunday quoting the Coincident Economic Activity Index of the St. Louis Fed. It reminds me of the old contest we had when I was a young reporter in San Diego: How few words could you write to alienate a reader (the winner: Otay Water District). In any event, this measure allegedly "shows Arizona's economy probably hit bottom in December." Then it quotes U of A economist Marshall Vest, a very nice man who was utterly wrong about the state's economy in the run-up to the collapse, writing that the national recovery is "proceeding nicely." (!) The story adds, "But Arizona's recovery is lagging behind other parts of the country,
though conditions are looking better." OK, then.

The mandarins of economic knowledge in Arizona, prodded by their masters in the Real Estate Industrial Complex, have been predicting a bottom for more than two years. Now every little blip or sideways shudder is even more urgently flung out with incense and sparklers as a sign of "the bottom," or better yet, "recovery." Most of these yearnings are realized in extremely limited snapshots of real-estate activity, a problem in itself. Even the St. Louis index only looks at four metrics, concerning employment, hours worked, wages and salaries. And for every pebble of "good news" comes a landslide of less "positive" stories. In Forbes' list of "America's Recovery Capitals," even Vegas is given a sense of potential; Phoenix is nowhere. With Business Insider's slide show of "12 Cities Where Home Sellers Are Being Forced to Cut Prices Like Mad," both Mesa and Phoenix make the rogue's gallery.

Boosterism and denial aside, the reality is that Phoenix's economy is not recovering in any meaningful sense of the word. The idle rich did very well in this recession — a historic anomaly — so to the extent that north Scottsdale and Paradise Valley are a B-List destination for these critters part of the year, there's your "good news." Otherwise, the situation is harsh. I do not wish this on Phoenix. I wish it were not so. I wish I were 25 and had a squash player's body. But unless Phoenicians face up to their reality, whether they wish it that way or not, a real recovery will be even longer in coming, narrow in its benefits and short-lived.

6