Regional Report: 2023 Economic Snapshot
Local analysts discuss current status of Greater Phoenix’s economy
The last few years have seen national concern over housing, wages and the overall cost of living, and this won’t change in 2023. However, two decades of intentional improvement in Greater Phoenix talent attraction and economic development have created a more resilient regional economy, and we’re seeing the benefits of this preparation in real-time.
Experts with BOK Financial, The Cromford Report and the Greater Phoenix Economic Council recently joined a GPEC Regional Report to discuss the state of the national and regional economy as well as the local housing market.
- Kristen Stephenson, Senior Vice President of Research & Analytics, Greater Phoenix Economic Council
- Tina Tamboer, Senior Housing Analyst, The Cromford Report
- Steve Wyett, Chief Investment Strategist, BOK Financial
Current status of the national economy
Wyett brought up four key national economic trends for 2023:
- Wages remain a significant driver of inflation. The Federal Reserve is tightening financial conditions to lower labor demand and regain price stability.
- The Fed may stop hiking rates in the first half of 2023. However, rates may remain elevated to avoid a second spike in inflation.
- Foreign factors such as the war in Ukraine, changes in China and COVID-19 are causing shifts in the domestic economy. Supply chain issues getting goods into the U.S. are still occurring, but companies are pivoting.
- The bond market is currently fairly priced and cautious on equities. Earnings are still going to be uncertain as we move through 2023.
Wyett was optimistic about the economy accelerating into the new year and referenced how the worst of the post-pandemic inflation bubble is in the past.
Current status of Greater Phoenix’s economy
Stephenson shared an update on local economic growth pointing at the region outpacing the national average in several areas. Before the pandemic, Greater Phoenix had about 2.25 million people in its labor force. Since then, Stephenson said the region has recovered its pandemic-induced job loss and added more than 100,000 additional jobs.
“We are currently at 2.3 million jobs in Greater Phoenix. Our unemployment rate has been hovering between 2.5% and 3% for several months,” Stephenson said. “That means that our economy is just about close to full employment.”
The Greater Phoenix economy hasn’t always been this resilient. A dependence on consumer services made Greater Phoenix one of the hardest hit regions in the U.S. during the Great Recession in 2008. In the last 15 years, regional leaders have made a concerted effort to diversify the economy and create more high-wage jobs, specifically in healthtech and financial services. This led to a faster regional recovery from economic obstacles accompanying the pandemic, Stephenson said.
Job growth in the U.S. is expected to slow down over the next two years, but Greater Phoenix is forecasted to experience minimal dips with continued growth in new industries and advanced manufacturing.
Greater Phoenix’s housing status and trends
The cost of living in Greater Phoenix is about 5-6% above the national average, but it’s still very competitive compared to peer markets like Austin, Dallas, Salt Lake City and San Francisco, Stephenson said. Housing costs continue to be a concern for many Greater Phoenix residents and economists.
“Housing is one of the more interest rate sensitive areas of the economy,” Wyett said. “It's a pretty important leading indicator for us as we think about the overall economy going forward.”
Tamboer echoed this point adding the housing industry is run by emotions because it is a human need. Greater Phoenix continues to be a seller’s market with several contributing factors like:
- Less downward pressure on prices with fewer new listings at the end of 2022.
- Cash buyers are no longer saturating the market, giving FHA and first-time home buyers a better chance to purchase.
- Owner occupant sales are back to a normal range at 74%.
- January is the start of the spring buyer season and will see more purchasers in the market.
To continue building an equitable and inclusive economy, Tamboer mentioned more condos should be FHA and VA approved. A lack of financing and rising monthly HOA fees have been discouraging first-time homebuyers.
Tamboer encouraged listeners that it's still a good time to buy a home if you can qualify under today's rates.
It’s undeniable that Greater Phoenix is growing and will continue to as it prioritizes business attraction and regional competitiveness. Stephenson said this is what makes the region a great place to live.
“We have put ourselves in a great position to keep moving forward and be a bright spot in the nation's economy.”