Guzzo the Contrarian

As I’ve written in prior posts, because of their accuracy in assessing our economy, the folks at University of Arizona, Eller College of Management (EBR), Economic Business and Research Center should be considered the leading economic forecasters for our State, and even our nation. They accurately predicted the Great Recession at at a time when many other leading economists in Arizona were forecasting continued growth and prosperity. So, whenever EBR is willing to share their views and opinions, I’m all ears.

Well, I just noticed that EBR recently published it’s January 2010 – Winter Edition of Arizona’s Economy (pdf) this month. According to excerpts from this quarter’s publication:

The Arizona economy suffered greatly during the recession, recording absolutely stunning losses. Arguably the hardest hit of any state, Arizona’s economy has suffered extensive damage that will require years to repair.

Third quarter real GDP growth of 3.5% confirms that the U.S. recession ended before midyear. Recovery will be fragile and vulnerable during the coming year and it will be 2011 before it can be sustained by private-sector forces. In Arizona, the economy is still contracting and it will be well into next year before recessionary forces recede. A great deal of damage has been wreaked, and it will take years to repair. It will be 2013 or beyond before Arizona’s nonfarm employment returns to its prerecession levels and for unemployment to drop below 6%.

In recent months, stress in financial markets has improved significantly. Interest rate spreads between high-grade and lower-rated corporate bonds, Treasury-Euro dollar (TED) spreads, and commercial paper spreads all have returned to historical levels. That does not mean that credit markets are back to normal, however. Banks are sitting on this infused liquidity and are still tightening credit standards. During the recession, firms were quick to lay off workers. The downside, of course, is the deleterious effect on consumer spending and confidence. The upside is that productivity has soared along with profitability and business firms are sitting on a mountain of cash that’s ready to be spent for new equipment and additional workers. All that’s needed now is for businesses to regain confidence that the recovery will continue.

They summarize their report by writing: The national recession may be over, but there is still a long way to go before the Arizona economy gets back to “normal.” For some lagging sectors, such as real estate and the public sector, it will be years. For now, it’s at least somewhat reassuring that the recession has ended.

Make sure to read Arizona’s Economy in order to evaluate the data yourself, get EBR’s insight about what to expect for 2010, the crisis at our State Capitol, and immigration and economic integration along the border.