Demographics holding back Arizona's economy

Those looking for more evidence of Arizona's slow recovery got plenty from a surprising source last week.

Not from Tesla, the electric-car manufacturer, which officially confirmed it had chosen Nevada over Arizona and other suitors for the home of its "Gigafactory." That bit of bad news had been expected for months, especially after bulldozers had been scraping the barren desert near Reno for weeks.

Instead, it came from Elliott D. Pollack, who heads the consulting firm that bears his name. He didn't sugar coat what he labeled a continuing "anemia" plaguing Arizona and greater Phoenix.

The usually optimistic Pollack still peppered his outlook for 2015 with familiar jokes, but those attending the Greater Phoenix Chamber of Commerce's annual event didn't hear him talking about the state as though 2006, the height of the housing boom, were around the corner.

His sobering forecast largely revolved around demographics, something usually in Arizona's favor.

Since the recovery began, greater Phoenix has grown by nearly 218,000 people, Pollack noted. But in the first five years of the recoveries that followed the three most-recent downturns, the area grew by 609,000, 483,000 and 394,000 people, he said.

Not surprisingly, job growth tells the same story. The region has gained 168,000 jobs in this recovery compared with 249,000, 219,000 and 245,000 at the same point in earlier recoveries.

Arizona has maintained its status as among the most popular destinations for U.S. residents moving to new states, but such movement has slowed markedly. Meanwhile, Arizona's status among new foreign residents has fallen from eighth in the nation in 2005 to 18th in 2012 and 2013.

Senate Bill 1070, the state's controversial 2010 immigration-enforcement law, has played a role in that.

Pollack joked that SB 1070 said, "If you are an illegal immigrant, we don't want you." But the world, he said, heard: "If you are an immigrant, we don't want you."

Jokes aside, the slowdown in population growth exacerbates the continuing depression in housing and construction. Young adults continue to live with their parents and many older adults are barred by their foreclosures from buying homes.

Pollack said the current population projections imply the region will need an average of nearly 23,000 new homes each year between 2015 and 2020. That pales compared with the 60,000 built at the top of the housing boom. Still, it's better than the 11,000 homes Pollack expects this year.