I arrived back in Phoenix to find the local newspaper editorializing, "Now is the time to invent a new Arizona." I thought the "new Arizona" was what came together to put St. Janet in power and had since been cleansed from the capitol by the Kookocracy. Anyway, on a Page One snippet (the highly formatted "product" is full of "snippets") we read, "Arizona stands on the threshold of a shimmering future...This place is redolent of change — Arizona is primed for progress." While it talks of "lift(ing) off the dead weight of the Great Recession and ... start(ing) now to ambitiously reinvent our state," the overall tone of the package is very cheerleader-y. No edge. Kid gloves. The reliable developer-economist Elliott Pollack is quoted. Gov. Jan Brewer is given a column. The status quo smiles. Everything's fine.
No disrespect. The people that remain there are nice folks doing the best they can within the constraints of the huge corporate owner, right-wing extremists and Real Estate Industrial Complex. But the Arizona Republic under Sue Clark-Johnson had a few years of sterner stuff, when I and others wrote seriously about the state's opportunities — and the challenges it would take to achieve them. We had a few successes: ASU downtown, the Phoenix Convention Center, T-Gen, Science Foundation Arizona, all-day kindergarten and light rail (WBIYB). But the moment was fleeting, the opposition ferocious and the real progress was stymied or rolled back. It has been a decade since Mary Jo Waits of a more muscular Morrison Institute wrote the Five Shoes Waiting to Drop report. While it helped spur some action back then, the rise of the Kookocracy stopped it. All shoes dropped. As Waits repeatedly warned, "Arizona will become the Appalachia of the 21st century."
Back in the 1980s, when the Republic was independent, publisher Pat Murphy led similar efforts to get the city and state's attention. Powerful civic leaders — and Phoenix once had them — used the 1990-91 crash to form a new economic strategy and go after high-wage clusters. In every case, the growth machine overwhelmed reform. Why should the Great Recession, which hit Phoenix worse than most places, be any different. But my intention today is a deeper examination of where the state and metro actually stand.
• In a new Brookings Institution report on exports, metro Phoenix ranked 17th out of the top 100 metropolitan areas in the value of goods and services it sold overseas. As the 13th largest metro area by population, one could say, "so far, not so bad." But a couple of important footnotes: It ranked only 64th in export "intensity," the degree to which exports contribute to overall output. Also, it underperforms its population peers (Seattle at 6; metro Detroit, 8; Minneapolis, 14; San Diego, 16) and even some smaller, high-wage metros (Portland, 11). Also, exports are heavily dependent on legacy industries: Semiconductors and aircraft/aircraft parts. These were brought to Phoenix by leadership of an earlier era.
Arizona's exports in 2012 stood at $18.4 billion vs. $11.9 billion in 2002. Adjusted for inflation, that's mediocre growth at best (Washington, with a similar population, posted $75.6 billion vs. $34.7 billion a decade earlier). Arizona's exports to its largest trading partner, Mexico, were only 6.3 billion, little more than Washington state. Oregon, with about 2.6 million fewer people, matched the value of Arizona's exports. This matters all the more considering that exports have been one of the few areas of growth in this dismal recovery
• The state's unemployment rate climbed to 8.7 percent in August from 8.4 percent in July. Joblessness was already higher here than nationally, but if this holds it will place Arizona among the highest rates in the country. In the second quarter, state joblessness was 15.7 percent using the U-6 measure which counts part-timers and discouraged workers.
Most of the jobs created since the end of the recession have been in low-wage sectors, and with Arizona already a low-wage state, the pain must be worse here. (And, no, purchasing power is not substantally greater in metro Phoenix). As of the second quarter, employment in metro Phoenix remained 7.2 percent below its peak, among the worst showings of the 100 largest metros. And remember, the labor force has grown since the peak.
• Figures don't lie, but liars figure. So it is with the so-called recovery of the state's pathologically dominant industry: Laying down and selling tract houses. From the trough of the downturn to the second quarter of this year, metro Phoenix house prices rose 18.3 percent, the best in the nation. But these are percentages, and naturally they look good coming off a very low baseline. Indeed, house prices were still 48 percent below the fourth quarter 2006 peak.
Although the housing industry has healed somewhat, much of it is coming from distortions that will lead to future bubbles, such as hedge funds and private equity buying empty or foreclosed houses to rent out and then bundle the proceeds into securities to sell on Wall Street. Yes, some building is happening in the affluent suburbs. But the old housing boom is not back, is not coming back. All the wishing, cheerleading, misleading numbers and intimidation of fact-telling won't change it.
• Last week's Census report showed metropolitan Phoenix with the second worst poverty rate among the top 25 metro areas, 17.4 percent. The city of Phoenix continued to be the widening donut hole, with 24 percent living below the federal poverty line. Arizona's rate in 2012 was 18.7 percent, which would make it the fifth worst in the nation. All these measures are significantly worse than in 2000.
• Both the state and its metro areas have suffered falling and low per-capita income relative to the national average since the 1980s. Arizona ranked 41st among the states in 2012, slipping from 32nd in 2007. According to one study, Phoenix and Tucson incomes have been lagging for 40 years. The same trouble and trend is found in median household income. The numbers are even more profound when Phoenix is stacked up against high-wage/high-performance cities and metros.
And don't believe the brush-off that living costs are lower, therefore it all balances out. In 2011, Arizona's regional price parity was 98.6, with the national average of 100. Thirty two states were as affordable or cheaper than Arizona. Living costs are higher still in metro Phoenix, and many remote towns. And don't fall for the perennial Bob Robb column trying to wish this data away and using a statistical trick of fast percentage growth for a limited period (this was flashier when more people were coming to Arizona, hence the appearance of growth but really just bouncing off a low baseline).
What all this points to is a low-wage economy with plenty of working poor, and it's not getting better. I started writing about this in 2000, and the local-yokels were defensive and denying, as usual. Then the Greater Phoenix Economic Council commissioned a study and at its in-house unveiling, I am told that people gasped and murmured "My god, Talton's right." The post-1991 cluster strategy had failed for lack of sustained focus. Not that this realization did any good. The "drunk on growth" mentality, as the first GPEC President Ioanna Morfessis put it, continued and continues still. In addition to an economy based on low-wage, low-skill jobs, slow growth hurts, too. Despite having (on paper, at least) the 15th largest gross metropolitan product, Phoenix came in 83rd in growth. This partly drives the poisonous infighting over a limited pie in the metro area, with suburbs drawing assets from Phoenix, and even one part of the city trying to bushwhack another — because the pie isn't growing fast enough.
• Startups are barely a factor in metro Phoenix, a serious impediment to competitiveness. For example, last year's Global Startup Ecosystem Index listed Seattle fourth in the world. Phoenix wasn't on the list. Phoenix consistently fails to draw the amount of venture capital of its high-performing rivals. This is a big reason, although not the only one, that Phoenix can't match the technology prowess of competing cities such as Austin or San Diego (tellingly, neither of which consider lackluster Phoenix a competitor).
• Nor have the "business-friendly" policies of the Kookocracy yielded especially strong results, despite the attention that the latest call center or warehouse gets. Everything I have written above points to the failure of the right. But there's also a useful interactive map from the Census Bureau showing the number of businesses in each state. For its population, Arizona performs poorly. For example, the state has 130,305 businesses, but supposedly left-wing (and similar population size) Washington state has 173,511. Colorado, with fewer people, a Democratic governor and the commie hive of Planet Boulder, has 150,889. And, as we have discussed often here, Phoenix has lost the major headquarters and powerful moneyed stewards that are essential to progress.
• With the lowest percentage of adults over 25 with bachelor's degrees or higher among major metros, Phoenix is not a significant player among what Richard Florida calls "the Knowledge Metros" that are not just winners post-recession, but best positioned for the future. Without a true big-city downtown and density, Phoenix is not drawing the level of young talent it needs. ASU is a fine asset, but not enough, especially with the continuing brain drain.
I could keep laying out the case, but I am mindful of your time and patience. I write this not because I "hate Arizona," but because people need a fact-based, clear-eyed view of how the state and city stand. Then, perhaps some responses can be formulated. Because the inaction, policy blunders and denial of the past 20 years won't help. The selective statistics. The comparing Phoenix against itself or a "peer" Fresno or El Paso. The business-unfriendly extremism. The illusion that "average" is good enough in today's world or the attitude of "let us alone in the sun." The world won't let us alone. A metropolis the size of Phoenix is either competing on a world-class level or it is failing.
The Five Shoes have fallen. A closet-full awaits.