Tourism is critical to the recovery of rural Arizona, and outdoor venues like these are the great draw that attracts summer throngs to the Rim Country.
How long can rural communities survive during slow recovery?
(An exclusive interview with Arizona State Treasurer and candidate for Governor Dean Martin, and one of the leading Arizona economic experts, Dr. Lee McPheter, Research Professor of Economics at W.P. Carey School of Business at Arizona State University.)
By Jesse Horn
Connection Executive Editor
Richard Feynman once noted that there are a hundred billion stars in the galaxy.
“That used to be a huge number,” he said, “But it's less than the national deficit!”
There is no doubt that our country has seen some profound economic changes over the past couple of years, and Arizona is seeing some of the worst. With measures being taken and new taxes enacted to combat these challenges, one of the big questions is when will rural communities see a turn for the better?
For much of Rim Country, Memorial Day Weekend and the Fourth of July are when tourist dollars pump life back into the economy and contribute to the yearly financial survival of businesses. With the first big difficult year now past, and businesses able to start seeing how the first summer holiday compared to last, there are some surprising findings.
Many of the typical high traffic businesses we spoke to, from retail to services, indicated that they are surprisingly on track for matching, if not surpassing last year’s numbers. Jim Burton of Coldwell Banker Realty stated that gross revenue was up 15 percent when compared with last year’s first five months. According to his figures, sales are similar to those from 2000 to 2003.
“We are really about equal to where we were last year,” he said.
Although this is encouraging, the impact of a slow economy is still being felt. From business closures to diminishing school enrollment numbers, there are still signs that we have a ways to go. With the loss of construction growth, there is a serious lack of year-round industry to aid rural economic sustainability.
In order to understand where these communities stand and what we should expect in the future we spoke to Dr. Lee McPheters, one of the state’s leading financial experts. Dr. McPheters is Research Professor of Economics at W.P. Carey School of Business at ASU.
“Here is our current perspective on the Arizona economy,” Dr. McPheters explained. “First, the Arizona overall unemployment rate (9.5 percent) is under 10 percent, but that is because unemployment remains lower in the large metropolitan areas such as Phoenix, where the rate is 8.9 percent. While still high, the more favorable rates in the large metro areas pull down the overall state average, and this masks the problems in the rural areas.”
Dr. McPheters went on to state that the smaller metropolitan areas and rural counties have been harder hit by the downturn.
“The Lake Havasu-Kingman area has an unemployment rate of more than 10 percent, and Prescott has 9.9 percent (rates seasonally adjusted). But most of the rural counties have unemployment rates well into the double digits. The Yuma County rate is usually highest in the state, and now it is over 25 percent. The unemployment rate in Santa Cruz County exceeds 15 percent. These are depression level unemployment numbers, and only an extended period of economic growth can bring a return to normal.”
So, what does Dr. McPheters see coming in the future?
“Our forecast is that the state will lose jobs for the year as a whole, compared to last year. But the losses month-by-month are getting smaller, and it appears that the Arizona economy is bottoming out and a rebound may be ahead starting in the second half of the year. The bad news is that the rural areas are likely to be among the last to recover. The metropolitan areas are helped by population growth, which is expected to recover over the next couple of years for Arizona.”
One factor contributing to this is the migration of people from the rural areas looking for work.
“Many rural areas have population growth below the state average, and that will make their recovery slower.”
We also contacted Arizona State Treasurer Dean Martin, who has been on track with where the economy is going, and shares Dr. McPheters cautious optimism.
“Looking at the economy we are beginning to see the bottom of the recent recession,” he stated.
“But it’s important to keep in mind that recovery is not fast in nature. Realistically we have an excess supply of homes that continue to be a drag on the economy. The three to four years for recovery that some are talking about is optimistic. In all reality we are probably looking at six to seven years before we see peak levels like we saw before the housing bubble collapsed.”
Treasurer Martin indicated that if things continue on their current path, we would likely be in the process of recovery by the end of the year.
“There will likely be a turning point this year, and we may see positive numbers in 2010. The question is whether we will start to see a pick up in time for this summer season.”
Martin stated that raw materials including mining and logging, along with industries like construction will be very slow to come back.
“One thing that I am concerned about is the price of gas. How will gas prices affect tourism? We should not see a spike like we did a couple of years ago, if there isn’t another terrorist attack or something unexpected. Overall, the experts are expecting things to flatten out. There may be isolated areas of growth, but for now flat is the new up.”
Martin also cautioned that there are other factors to consider.
“We don’t know how the tax increase is going to effect things as well. There is a spike in the economy as people try to make purchases before the changes take place, but there is always a crash that follows a spike, and this may happen just as tourism sets in. Things are flattening out and we are poised for a recovery. But as we hit bottom we are at our weakest point. If there is a terrorist attack, or another Rodeo-Chediski, then we will have difficulty managing through it. I am cautiously optimistic for 2010.”
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