Ronald J. Hansen

The Republic | azcentral.com

Arizona's job growth continued to slow at the end of 2016, falling below the national rate

The weaker job growth comes as economists see more uncertainty ahead

The state's jobless rate still fell to an eight-year low in December

Arizona gained only 6,300 net jobs in December, closing 2016 with half the growth seen in 2015 and falling below the nation's overall pace.

The slowdown in job creation that began in summer deepened as the year ended and added to the caution economists are feeling about the state's finances as lawmakers prepare the fiscal 2018 budget.

Overall tax collections since the summer have grown less than they did a year earlier and the incoming Trump administration has yet to offer policy details that will help suggest how the economy might change in the months ahead, several economists told state lawmakers during a hearing of the joint Finance Advisory Committee on Thursday.

Compared with the same period a year ago, Arizona saw 1.2 percent job growth. The nation as a whole grew 1.4 percent in that time. At the end of 2015, Arizona had grown 2.8 percent in a year.

There were bright spots in the monthly jobs report: Arizona's unemployment rate fell to 4.8 percent last month — the lowest level since February 2008 — and the state's usually subpar wages continued to post above-average growth.

Still, the relatively weak job growth left the economists urging lawmakers to avoid big changes to the state's $9.6 billion budget.

"There's cause for concern among some of the key indicators. More and more, it seems over the last few years for various reasons, Arizona's economy has been out of sync with the national economy," said Brian Cary, an economist for the Salt River Project utility. "As has been pointed out, the employment numbers have been very sluggish for the last few months. They have been moving in the wrong direction."

"Certainly the second half of 2016 was a disappointment in terms of employment growth and income growth, as well," said George Hammond, director of the Economic and Business Research Center in the Eller College of Management at the University of Arizona. "I think there's some concern there as we embark on calendar year 2017. Nationally, as has been said several times, there's a huge amount of uncertainty about economic policy and fiscal policy going forward."

Other uncertainties spur caution

There are other uncertainties causing caution in Arizona.

The likely repeal of the federal Affordable Care Act will mean Arizona lawmakers will have to eventually grapple with health-insurance coverage decisions that could cost the state anywhere from $97 million if Medicaid coverage were dropped for 550,000 residents to $1.4 billion to keep that coverage untouched.

Apart from that, the economy has been expanding since mid-2009. At more than 90 months long, the current business cycle is approaching the upper limits seen since the end of World War II. The nonpartisan Joint Legislative Budget Committee estimated that a recession similar to the relatively mild 2001 downturn would cut state revenues by nearly $900 million. Such a shortfall would surpass the state's expected cash reserves, entirely drain the rainy-day fund and still leave a $277 million deficit.

For now, the state continues to grow, albeit more slowly.

The 6,300 jobs added in December was slightly smaller than the post-recessionary average of 6,600. More worrisome, however, is the fall-off in the 12-month growth numbers that better account for seasonality in the state's labor market.

By that measure, the 12-month growth rate shows the state falling from 3.2 percent growth in July to 1.2 percent in December. That's the difference between adding more than 81,000 jobs annually and gaining just 33,000 instead.