DALLAS - Arizona may need another two years to fully recover from the recession of 2008, according to economists at Arizona State University's W. P. Carey School of Business.
"The basic question is: 'Is Arizona out of the woods yet?'" said Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at the Carey School. "The answer is 'No.' The wolf is not at the door, but Arizona is not out of the woods. The economy is not back to normal; we're recovering but not recovered."
McPheters joined fellow W.P. Carey professors Dennis Hoffman and Michael Orr at the school's annual economic outlook forum on May 8 in Tempe.
While the U.S. has recovered nearly all the jobs lost in the recession, Arizona has only regained about 56%, McPheters said.
"We've seen continued but slow improvement," McPheters said. "But we're still saying, as we have been for two to three years, that recovery is two to three years ahead."
Unlike with previous recessions, government has failed to contribute to the recovery, as federal and state employment is actually lower than pre-recession levels. Arizona Republicans, who control the legislature and governor's office, have promoted austerity as a solution to the economic troubles.
"The government response in this cycle is the weakest we've ever seen," Hoffman said. "Government spending is actually below what it was prior to the recession. In contrast, in the 1980s, state and local government spending expanded dramatically."
Orr said one reason behind low demand for new and resale homes is the fact that many potential homeowners are -- for now, at least -- disqualified from owning.
"We had an enormous tsunami of foreclosures and short sales," Orr said. "That's now over, but the effects remain. People who went through a foreclosure or short sale will in most cases have a very hard time qualifying for a new mortgage for several years."
Given that foreclosures peaked between 2008 and 2011, Orr expects that a wave of former homeowners will be eligible to buy again beginning in 2015 and running through 2018.
Arizona carries issuer credit ratings of AA-minus from Standard & Poor's and Aa3 from Moody's Investors Service.
