In Flagstaff, the housing market is recovering, retail sales continue to improve and Northern Arizona University’s enrollment is increasing – all signs of a growing economy. But nationally, many had hoped the situation would be stronger by now. Northern Arizona University economist Ron Gunderson, Ph.D., says that is understandable.
“Historically, as nations have come out of recessions, there’s a spring effect,” he said. “That propels the economy forward. But we never got that big bounce back.”
The professor of economics in the W.A. Franke College of Business is not surprised by the sluggish recovery. He says you cannot expect people to purchase or businesses to invest at their normal rate when there is uncertainty. He attributes that uncertainty to a number of factors that make us skittish. One is the gridlock in Washington, D.C. Another is weakness in other economies like Europe and China, and a third is any supply-side shock – something we did not see coming – like the Ebola epidemic in West Africa.
He says if you are hoping for the economy to return to what it was in the early 2000s, that is not likely to happen because circumstances are different than what they were 10 or 15 years ago. Technology is changing the economic landscape. “Computers have taken jobs and robots are going to take a lot more jobs in the future. There’s a lot of unemployment and a mismatch of skills that people have compared to the jobs that are going to be available.”
Gunderson says we are experiencing a Digital Revolution. “We’ve seen this scenario before during the Industrial Revolution. Overall, there was the use of electricity, the rise of the internal combustion system, the factory and machines. Everybody benefitted but it took a long, long time. And in the middle years of the Industrial Revolution, it wasn’t pretty. People worked 12 to 15 hours a day in unsanitary, unsafe conditions. Little kids had to work. And generally if you were to look at the life of those people, it was miserable. The end product of that didn’t materialize for the economy or the average family as a whole for a hundred years. That is too long for us to wait in the Digital Revolution.”
To advance individually and maintain economic growth nationally, Gunderson says people are going to need high levels of skills and should expect to invest in a lifetime of learning. “We have to consider that you don’t stop your formal education once you have your college degree, but people will have to continue their education throughout their working life, constantly re-training and re-assessing where you and your skills are going to be or you’re going to be out of a job.”
Locally, Gunderson says the economy has recovered pretty well. The median price of a home in Flagstaff now is $50,000 higher than it was a year ago as the average price of a single family home is almost $360,000. “That isn’t far from the peak of $399,000 in May 2007. The number of homes sold through the first nine months this year is the same as last year, but we’re in a healthier position. Probably by the end of this calendar year we will show a higher level of home sales than in 2013.”
Another positive sign for the Flagstaff area is growth in retail sales. There was a 3.5 percent increase through last fiscal year; however, for the first three months of this fiscal year – July, August and September – retail sales are up 6.6 percent. “That increase has pretty much been across the board with auto sales, construction sales, tourism and retail sectors. Barring some major shock to the national or international community, I think it bodes well for local figures for fiscal 2015.”
In addition, Gunderson says increasing enrollment at NAU continues to help the local economy. “There are more than 20,000 students on the Flagstaff campus. That’s a 25 percent, five-year increase since the fall of 2009. A lot more students means a lot more potential for retail sales to increase.”
And one factor that is going to improve the local and national economy, predicts Gunderson, is the decline of gasoline prices, which frees up money for the average family to spend in other retail categories. “That may improve sales over the important holiday season.” FBN
Ron Gunderson shares his economic forecast at the Annual Economic Outlook Conference. This year’s event was Thursday, Nov. 6, at the High Country Conference Center.
By Bonnie Stevens
Flagstaff Business News