Robert Robb in today’s Arizona Republic:
So, Arizona’s housing sector has suffered a sharper decline than probably anyplace else in the country. If the rest of Arizona’s economy is dependent on housing, then why does Arizona have a lower unemployment rate than the rest of the country?
January is the most recent month for which comparative figures are available from the Bureau of Labor Statistics. During January, the country had an unemployment rate of 7.6 percent. Arizona’s rate was 7 percent.
The paradox is even starker when looking at major metro areas. The Phoenix area’s unemployment rate was 6.7 percent. Only one metro area in the Case-Shiller group had a lower unemployment rate, Washington D.C., which has an economy clearly driven by government. The average unemployment rate for the 20 major metro areas was 8.4 percent.
According to BLS, of the 49 metro areas in the country with a population in excess of 1 million, Phoenix had the seventh-lowest unemployment rate.
Phoenix has done much better than many metro areas alleged to be our economic betters. San Diego, the proclaimed bioscience leader, had an unemployment rate of 8.6 percent. Charlotte, N.C., which supposedly does right in education what Arizona does wrong, was at 10.5 percent. Portland, Ore., the antithesis of an economy driven by housing, was at 9.8 percent. Seattle, which has the big companies we supposedly can’t attract, was at 7.5 percent.
So, most large metro areas have unemployment rates substantially above the national average while Phoenix, whose housing sector has been hit the hardest, has an unemployment rate substantially below the national average.
More:
All this unveils what should have been obvious all along. Housing does not create its own demand. Something else has to draw people to an area, which in turn creates the demand for housing.
Arizona has a fundamentally solid underlying economy that benefits from, but is not dependent on, housing. And it has a frothy real-estate sector that depends on growth generated primarily by other factors.
The real-estate sector is oversized. But that is inevitable in a place that is growing faster than other places. That’s not the same as the rest of the economy being dependent on housing.
My take: There are cities that will grow out of this mess and others that will not. If you live someplace where it snows and where rust is common — not just a decadent architectural ornament — it’s time to think about moving. Even if you have to let your house go — and if your local population is declining, you’ll never get back what you paid for it — your future prospects — and your future mental health! — are probably better in Metropolitan Phoenix.
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