Last month the Metro Program released its latest report card for the nation’s 100 largest metro economies, the MetroMonitor. The report, which evaluates economic performance through the third quarter of 2012, revealed that as the economic recovery continues to play out slowly across the country, some of the metros hit hardest by the recession are seeing surprising rebounds from their lows.
The Phoenix, Ariz. metropolitan area epitomizes this trend. After a precipitous fall into the recession, the region is making notable progress. Phoenix lost 12.5 percent of its jobs, which ranked it among the worst-hit labor markets in the nation. Unemployment rocketed to a high of 10.2 percent by the end of 2009. And local housing prices dropped a staggering 56 percent during the recession.
But as the recovery has taken shape, Phoenix has been among those metros that have rebounded fastest. Housing prices have increased more than 10 percent from their low point in mid 2011. Unemployment has fallen to a rate of 6.9 percent. Employment and output are also on an upward trend. As a result, Phoenix, which saw the eighth worst recession among the nation’s 100 largest metro areas, is now seeing the third best recovery.
Phoenix is far from the only region where this cycle can be observed. Boise, Idaho, Bakersfield, Calif., and Cape Coral, Fla. are also seeing fast-paced recoveries. Each of these places saw consumption-driven booms prior to the recession followed by dramatic housing-busts. Recent trends are a welcomed departure from those of the recession. However, there should be concern that the recovery taking shape is pushing these places towards an economy that is no more sustainable than it was prior to the recession.
A closer look at recent employment and output growth reveals that much of these places’ recoveries are being fueled by the same forces that sunk their economies in the recession. Consumption-driven industries like hospitality, retail, construction, and real estate accounted for six out of every 10 jobs Phoenix lost during the recession. These same industries have accounted for seven out of 10 jobs created in the metro area during the recovery. These trends suggest that places like Phoenix are reverting back to a growth model that is increasingly untenable.
Phoenix and metro areas like it still have a long way to go to a full economic recovery. They may be moving toward recovery faster than many other metro economies, but they have more ground to cover. Phoenix lost about 240,000 jobs over the course of the recession and had recovered less than one-third of them through September of 2012. At this pace, Phoenix will make a full employment recovery near the end of 2017 – a full ten years after the Great Recession began. Over those 10 years, the state of Arizona projects that the metro area’s population will have grown by 666,000 people, or 17 percent.
Naturally, regions like these that suffered among the worst losses will require more growth to return to a healthy economy. However, getting there will require metro areas to purposefully restructure their economies, moving from a growth model focused inward and characterized by consumption to one that is globally engaged and driven by production and innovation. Though a quick start is encouraging, a shift toward a more sustainable, inclusive economic prosperity will be more rewarding in the long-run.