Page 8 - C:\Users\Audrey\Documents\Flip PDF Professional\AASBO Spring 2019-WEB\

WINTER CONFERENCE

By Don Harris

Dennis Hoffman: Az Economy Is

Good, But How Long Will it Last?
Dennis Hoffman

Dennis Hoffman worries a lot, especially when the
economy is good.
The respected Director of the Seidman Research
Institute at the ASU W.P. Carey School of Business,
Hoffman gave AASBO members reasons to be
optimistic about the economy. He also identified
areas of potential concern.
Hoffman, a professor of economics, delivered the
keynote address at AASBO’s Winter Conference on
January 30, saying school finance is near and dear to
his heart, going back to the 1980s and his role in the
administration of Gov. Bruce Babbitt.
“I’m a worrier,” Hoffman said, explaining that
when times are bad, he sees the light at the end of
the tunnel. But, when the economy is booming as it is
today, he worries about what will send the economy
plummeting and when will it happen. ASU Professor Dennis Hoffman delivers his keynote address at the AASBO Winter Conference
Hoffman projected a series of overheads, the first on January 30, at the Black Canyon Conference Center, 9440 N. 25th Ave., Phoenix.
one indicating that 43,000 jobs were created nationally
in December. Job creation has been remarkable nationally and Businesses expand when they believe it will yield a significant
in Arizona,” Hoffman said. return. “If businesses believe business conditions will slow in
Other slides showed jobless claims at record lows and wage the next several years, they will be hesitant to invest,” Hoffman
growth accelerating nationally. But, Hoffman said, businesses said, adding that adverse pressures will mount as interest rates
are very worried about the tight labor market, making it difficult rise.
to hire quality people. “It’s a big challenge today,” he said. He recommended keeping an eye on the levels of consumer
On the question of whether growth in excess of 3 percent and business confidence, and what the trade war does to net
is sustainable, the affirmative position is that tax cuts and exports.
deregulation have created a “new normal,” and consumer “So, it’s wait and see,” Hoffman said.
confidence is “off the charts.” Taking a look at regional growth, Hoffman said Arizona is in
The negative view is that inflation will lead to higher interest a hot spot, and he wasn’t talking about the weather. The West
rates, that there is too much debt, and “global growth slowdown led the nation in the growth of Gross State Product in 2017.
will eventually prove to be a headwind,” he said. Arizona came in fourth, behind Washington, Colorado and
Growth above 3 percent is good news for Arizona. It means Nevada, and just ahead of Utah and Nevada.
defense spending remains strong, equities do well, the housing In addition, eight of the top 10 job-creating states in 2017
boom continues and revenues at baseline or better are a lock. were in the West. Arizona ranked fifth behind Idaho, Nevada,
At 2 percent or less, defense spending is questionable, equities Utah and Washington. Arizona had the sixth fastest population
struggle, housing languishes, and revenues will likely be below growth in 2017. Hoffman pointed out that Illinois was a big
baseline, Hoffman said. loser in population, especially after temperatures plunged well
Some experts are predicting 2.6 percent Gross Domestic below zero on the day of Hoffman’s presentation. “Illinois is
Product growth for 2019 and 1.9 percent for 2020. Only one of always losing population,” he said.
50 economists predicts more than 3 percent in 2019 while one Long-term issues that could affect Arizona include the
of 50 expects below 2 percent in 2019, Hoffman said. national debt, entitlement reforms, and climate change
Factors keeping growth below 3 percent include equity challenges regarding water issues in the West.
buybacks versus new investment in plants and equipment, oil Despite some of the negatives and the view of many
prices and oil investment, foreign investment, wage pressures economists, the index of leading economic indicators points to
and tightening moves by the fed, according to Hoffman continued expansion, according to Hoffman. He noted that U.S.

8 THE EDGE | SPRING 2019