1 Economic and Workforce Overview December 7 th, 2011 Occupational Administrators Council John Catapano Research and Communications Coordinator Center for Workforce Development

U.S. Economic Overview 2 The Recovery is Proceeding at a Snail’s Pace (And it wasn’t much of a recovery to begin with) Is a “Double Dip” on the Horizon?

Growth in Real GDP 2007 Q1 to 2011 Q3 (annualized) 3

Why Did the Recovery Stall? 4 Stock market volatility European debt crisis Depressed housing market Banks have been reluctant to lend Impact of healthcare reform 2012 elections Debt ceiling debate Concern about the deficit/debt End of federal stimulus Less government spending High oil and commodity prices Turmoil in the Middle East Japanese earthquake and tsunami Extension of Bush tax cuts Concerns over future taxes and regulations Political polarization Downgrade of U.S. debt

U.S. Private Sector Employment Growth January 2007 to Present (month over month, in thousands) 5

Percent Job Losses in Post WWII Recessions 6

7

8 U.S. Unemployment Rate January 2000 to Present

9 U.S. Initial Claims for Unemployment Insurance January 2007 to Present (in thousands)

10 Consumer Confidence 1978 to Present

Negative Jobs Feedback Loop 11 Limited Job Growth Little Job Security Depressed Consumer Confidence Modest Consumer Spending Business Uncertainty

Corporate Profits After Taxes 1960 to Present (in billions) 12

Excess Reserves of Depository Institutions 1960 to Present (in billions) 13

Job Losses and Gains Since Dec-07 Peak (in thousands) Trade, Trans, Util, Other Serv Manufacturing Prof & Bus Serv, Information Construction & Mining Financial Activities Leisure & Hospitality Government Education & Health Serv Recession Recovery 14

Labor Force Participation Rate Selected Groups, 1960 to Present Men Women Year-Olds 15

16 Recovery faces significant headwinds: Housing market is still a mess Less government spending/stimulus Structural unemployment Income inequality Bright Spots: Strong corporate profits Banks are loosening purse strings Consumers are paying off debt Manufacturing is doing well, exports are up Outlook and Summary

Arizona Economic Overview 17

Employment Growth, AZ v. U.S. January 2006 to Present (percent change, year ago) 18 Arizona U.S.

19 AZ Unemployment Rate January 2000 to Present Arizona U.S.

20 Arizona Industries Employment Today Compared to a Year Ago Job Added in the Last Year Peak-to-Trough Employment Loss Healthcare+14,100Never Lost Jobs Leisure and Hospitality+10, % Construction+4, % Manufacturing+4, % Transportation and Warehousing+4, % Education+2,900Never Lost Jobs Local Government+2, % Professional/Business Services % Finance/Insurance %

Arizona’s Budget Improving 21 The budget is balanced! (but down 21% from FY2008) FY2010 was the bottom of the recession when revenues fell below FY2004 level Arizona now has six straight quarters of general fund revenue growth While revenue recovery has begun, it is difficult to forecast its speed due to the uncertain economy Short-term surpluses: – $416m – $143m – $610m to $1.2b shortfall (1% temporary sales tax expires)

Taxable Sales - Arizona January 2005 to Present (percent change, year ago) 22

Arizona’s Population Census 2010 Arizona was the second fastest growing state between 2000 and 2010 (24.6%). Nevada was first (35.1%) Total population of 6,392,017 – but less than 2009 projection Hispanic population grew 46.3% from Greater Phoenix has the 6 th most Hispanics of all cities in U.S. with 589,877 Arizona accounted for 16.6% of the growth in children 10 years- old or less nationwide between 2000 and 2010 “Cultural generation gap” of 40% 23

24 Excess supply of homes – 70,000 in Greater Phoenix alone Home prices down over 50% - to late ‘90s levels Arizona is one of the worst performing states for mortgage delinquencies and foreclosures New home construction has all but ceased Commercial real estate market is hurting Market will not recover until household formation and jobs return On the positive side - housing is now much more affordable, and interest rates are at historic lows Arizona Won’t Truly Recover Until Housing Improves

Downside Weak job market Incomes and wages are lagging Housing fundamentals are poor Public sector employment and population growth will be a drag on the Economy Population Mobility must Improve to Absorb Excess Housing Stock and Build New Homes Upside Hiring is Up Retail Sales are Up State Budget is Balanced – For Now Outlook and Summary 25

Implications for MCCCD 26 For MCCCD, the recession is a double-edged sword –Enrollment is up –But fewer resources are available District needs to look at new revenue streams –Alternative delivery –Contract training –Alleviate structural unemployment (jobs mismatch) –Underserved and emerging populations Short-term – Slow population and economic growth, little help from state Long-term - Arizona is projected to add 1.8m new jobs in the next 30 years. Many will be in Maricopa County. MCCCD will play a vital role in training

Questions? 27