PHOENIX (March 29, 2018) – Arizona continues to be a star of the U.S. economy, with economic activity growth in Arizona exceeding growth across the country, according to a Regional Intelligence Report presented last week at the Alliance Bank of Arizona 2018 Economic Forum by notable economist Dr. Christopher Thornberg. 

Population growth is responsible for much of the increase in Arizona’s economic activity. From 2016 to 2017, the state’s population increased by 1.6%, well ahead of the nation’s growth rate of 0.7%. At the same time, employment increased at an even faster rate of 12.6%, well above the 9.3% growth in nonfarm employment for the nation as a whole. 

The expansion of the statewide economy has fueled growth across many of the state’s industries, including real estate. Nearly every industry of the Arizona economy is adding jobs in Arizona each month as nonfarm employment statewide increased by 2.2% from Jan. 2017 to Jan. 2018, with the state’s unemployment rate falling 0.2 percentage points to 5.1% in that time. 

In percentage terms, mining and construction led the state in job growth at 8.3% (12,300 jobs) from Jan. 2017 to Jan. 2018, with nearly all of that growth coming in construction (12,100 jobs). This was followed by a 4.9% increase in manufacturing employment (7,900 jobs). Education and health services tied as the third-fastest-growing industries in percentage terms, at 3.5%, with the highest overall gain in jobs, at 14,800, most of which came from healthcare. High-paying and prominent industries grew with professional and business services employment increasing by 1.3% (5,500 jobs). 

Other notable findings of the report:

  • Tourism: Arizona’s tourism activity has bolstered employment growth in leisure and hospitality, with 2.8% of employment growth (8,600 jobs) from Jan. 2017 to Jan. 2018. Tourism indicators in the state have generally shown improvement in recent years. From Dec. 2016 to Dec. 2017, gross sales from tourism in Arizona increased by 4.6%, national park visitation increased by 9.1% and state park visitation increased by 10.3%.
  • Phoenix-Metro Jobs: With 2.1 million jobs in Jan. 2018, the Phoenix-metro area accounted for nearly three quarters of the state’s 2.8 million jobs overall. With 4.7 million residents, it also accounts for the lion’s share of the state’s 7-million residents. It should be no surprise that the Phoenix-area economy is tracking closely with the performance of the state economy. Employment has been increasing steadily, the unemployment rate is falling (at 4.5% in Jan. 2018), and wages are climbing. In looking at the composition of the local economy, the trade, transportation and utilities industries have the greatest number of jobs in Phoenix metro. However, the high-skilled, high-wage financial activities and professional/business service industries each have higher concentrations of jobs in the Phoenix labor market relative to the U.S. This suggests a regional advantage for these industries. Likewise, mining, construction, leisure and hospitality also have higher concentrations of jobs in the Phoenix economy than in the U.S., giving those industries competitive advantages locally.
  • Taxable Sales: Job growth combined with wage growth translates to higher demand for goods and services. In Phoenix metro, taxable sales increased by 4.7% from Dec. 2016 to Dec. 2017. Gas prices are on the rise nationwide, while leisure and hospitality spending remains strong. As a result, even though retail sales have experienced only moderate growth (2.9%), hotel/motel (12.6%), gasoline (12.5%), and restaurant and bars (12.4%), spending increased substantially from Dec. 2016 to Dec. 2017.
  • Residential Real Estate: With such a strong and robust labor market, how is the Phoenix-metro residential real estate market keeping up? The region’s existing single-family median home price stood at $246,700, increasing 6.0% (vs. 5.6% nationally) from 2016 to 2017. Affordability is roughly on par with the nation as a whole. Across the U.S., the existing single-family median home price stood at $248,800. The median household income in the Phoenix is estimated at $59,500, compared to $59,000 across the country. In terms of rentals, just over one-third (38.3%) of households in Phoenix metro are renters. Apartment rents increased by 3.5% from 2016 to 2017. Arizona’s other major metros offer a mixed picture regarding multifamily trends.
  • Commercial Real Estate: The Phoenix-metro commercial real estate market has been expanding in recent years in response to continued growth in local industries. From 2016 to 2017, the average office rent increased by 2.1% to $2.11 per-square-foot monthly, while the office vacancy rate remained relatively stable at 22.4%, a decrease of only 0.4 percentage points in that time. The average retail rent increased by 3.0% to $1.89 per-square-foot monthly, while the retail vacancy rate remained roughly flat at 8.8%. Economic growth has prompted commercial construction growth in the Phoenix area. In Maricopa County, permit values increased by 89% from the fourth quarter of 2016 to the fourth quarter of 2017. Total commercial permit values were $5 million in the fourth quarter of 2016, but $9.5 million in the fourth quarter of 2017. 

Further details can be found in the Regional Intelligence Report, prepared by Beacon Economics LLC and presented by Alliance Bank of Arizona at the organization’s inaugural economic forum. 

To download the full version of the Regional Intelligence Report, visit https://goo.gl/eKS2Qg

As a division of Western Alliance Bank, Alliance Bank of Arizona is the state’s largest locally-headquartered banking division. Western Alliance Bank, the primary subsidiary of Western Alliance Bancorporation (NYSE: WAL) holds more than $20 billion in assets. For the third year in a row, Western Alliance ranks in the top ten on Forbes’ list of America’s Best Banks – taking the No. two spot for 2018. 

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Alliance Bank of Arizona is a division of Western Alliance Bank, Member FDIC, the go-to bank for business in its growing markets. Founded in 2003, Alliance Bank of Arizona offers a full spectrum of deposit, lending, treasury management, international banking and online banking products and services, plus superior service to meet the needs of local businesses. With ten offices in Greater Phoenix, Tucson and Flagstaff, along with Western Alliance Bank’s robust national platform of specialized financial services, the banking division is a valued resource for Arizona’s business, real estate, professional, municipal and nonprofit communities. Western Alliance Bank is the primary subsidiary of Phoenix-based Western Alliance Bancorporation. One of the country’s top-performing banking companies, Western Alliance ranks #2 on the Forbes 2018 “Best Banks in America” list.