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THE 'R' WORD

Is Arizona really facing a – gulp – recession?
If so, how bad is it, and is there any relief in sight?

one of the experts wants to come out and say it, but the truth seems undeniable at this point. Arizona’s economy is in a recession.
The ‘R’ word refers to two consecutive quarters of negative economic growth, and economic indicators show Arizona on a precipice.
In June, researchers for the W.P. Carey School of Business at Arizona State University found that the Arizona Business Conditions Index scored below 50 for six of the previous eight months. The index is based on surveys that ask various businesses about materials purchased, new orders received, workers employed, goods produced and delivery times. A score of 50 or below indicates economic decline. The Arizona economy scored less than that for every month except April in the first half of 2008, leading researchers to declare a “mild recession” for the state.
With the local economy’s health so closely tied to the housing and construction sectors, it’s no surprise that families are pinching pennies, businesses are struggling and we may not have seen the worst of it yet.
Phoenicians cashed in on skyrocketing home values and steady job growth in recent years, but it came to an abrupt stop when the subprime mortgage crisis took hold, foreclosures spiked and home values plummeted.
And beyond the housing sector, higher prices for food, energy and gas have ground the economy – here and across the country – nearly to a halt. This points toward less spending on consumer goods, which researchers say eventually will trigger an “official recession” if it continues.
“Arizona has been hit harder than most states because of the housing slowdown,” says Tracy Clark, an economist at ASU. “We’re doing what we normally do. We rise higher during the good times, and we fall lower during the down times.”
All the local research on the economy points to the housing sector dragging down the entire economy. ASU research shows that single-family home permits are expected to drop 43 percent from 2007 to 2008 – one of the most severe drops ever recorded. On top of that, the median home price in Maricopa County declined from $265,000 in April of last year to $210,000 in the same month this year.