Alliance Bank of Arizona's 2023 Phoenix Economic Forum

April 19, 2023

Recession is not on the Arizona horizon. That bold prediction came from Christopher Thornberg, Ph.D., founding partner of Beacon Economics, a leading provider of economic research, forecasting, industry analysis and data services, during Alliance Bank of Arizona’s 2023 Economic Forum.

With his extensive background in analyzing financial markets and advising businesses on their economic strategies, keynote speaker and esteemed economist Dr. Thornberg shared his expert analysis of the current standing of Arizona’s economy and provided insights on the most pressing issues facing the state, including inflation, labor market trends and the future of economic growth.

Coining it the “Godot Recession” after the Samuel Beckett play in which two hapless characters spend the entire performance waiting for Godot to show up, and he never does, Thornberg told the room of business leaders and clients that Arizona’s economy is still on track. 

Thornberg, a regular on CNN, CNBC, NPR and the Wall Street Journal, accurately predicted the 2008 Great Recession. Passing the current dire warnings as narratives, he added that if challenges were coming to Arizona it wouldn’t be for a couple of years.

"Arizona has been one of the nation's success stories for some time, but the economy is at a pivotal moment, and it is crucial for business leaders to understand the forces driving change,” said Dr. Thornberg.

According to Dr. Thornberg, Arizona has not only recovered the jobs lost at the outset of the pandemic but has also seen job growth return to nearly pre-pandemic levels. The Valley has played a crucial role in the state's economic success, with employment growing by 73,700 jobs, or approximately 3.3%, in the last year. This growth outpaces both Tucson (2.3% or 8,900 jobs) and the United States (3.2%), but trails growth in Flagstaff (4.8% or 3,200 jobs).

Despite an uptick in Phoenix's unemployment rate, it remains well below pre-pandemic levels at 3.2%. While Tucson has been slower to recover from the pandemic than other parts of Arizona, Flagstaff has experienced exceptional growth, with employment levels increasing by 4.8% over the past year. Overall, Arizona has outpaced the U.S. economy since the start of the pandemic.

The most important statistic on employment is where the hiring is happening. Before the 2008 recession, Phoenix’s workforce was centered in real estate, construction, retail and hospitality, according to U.S. Bureau of Labor Statistics data.

In 2023, according to the Regional Intelligence Report, employment sectors have significantly diversified. Phoenix added 43,400 manufacturing, education, bioscience healthcare, and business and financial services jobs in 2022. Nearly half the jobs created in 2022 originated in sectors with what Arizona Commerce Authority calls “high-value jobs.” The Report shows that only 22,500 Phoenix jobs were created in the industries with the highest employment numbers before the Great Recession.

Tucson showed strength in manufacturing, education, healthcare and hospitality last year. Still, those gains were offset by job losses in five sectors, including business and financial services, with the sectors’ workforce plummeting 5.5 percent during the year. Flagstaff showed strong numbers in government hiring, education, healthcare and manufacturing in 2022.

According to Thornberg, some pundits would prefer that the narrative is more believable than the reality. While headlines are crying out recession warnings, the data behind the reality shows strong economic growth.

The unemployment rate is still historically low, said Thornberg, and data supports that even with the current rounds of tech and manufacturing layoffs, hiring workers is still challenging.

“Miserabilism” brought the narrative to today’s fervor, said Thornberg. Recognizing inflation as a natural part of the supply chain and daily business, the economist pointed out that U.S. inflation is relatively modest compared to most developed countries. In addition to the rate dropping, he said that in the European Union, only France and Spain have rates lower than the U.S. Most other countries are in double-digit territory.

Thornberg told the Alliance Bank clients that the news would continue to find the blues, but the data consistently shows gains and strength. Although Real GDP isn’t at the level touted in the late 20-teens, he said that year-over-year growth is within its normal range. According to data from the University of Michigan Consumer Sentiment survey, the narrative shows confidence plunged to a level lower than in the Great Recession. Thornberg pointed out that they reversed course a month later, and confidence is rising.

The critical lesson from Thornberg is that while narrative can affect the economy, looking at reality, the data shows no recession ahead for the U.S. and Arizona. At the same time, knowing both sentiment and statistics help businesses better understand what’s on the road ahead.

Follow the links below to view The Regional Intelligence Report, published in partnership with Beacon Economics, and Dr. Thornberg's "Focus on Arizona" Presentation.

View The Regional Intelligence Report

View Dr. Thornberg's "Focus on Arizona" Presentation