Metro Phoenix's economy

[exit2lef]

Originally Posted by vegaspilgrim

Question-- I've made the statement in the past that Phoenix has an "underpowered" economy given the size of the city; that Phoenix has about the same size economy as cities with a million or a million and a half less people. Do you agree or disagree with this statement, or is this an unfair value judgement? Is there such a thing as an "underpowered economy"?

I think Denver is a good city to compare with Phoenix. There's a reason why people on this message board in both forums get really feisty when the two cities come up. San Diego is also a good comparison; although as time goes on, and as San Diego becomes pretty much 100% built out and even more astronomically expensive, the two cities won't be much comparable anymore. And silverbear, as you mentioned earlier, I think Kansas City would be an interesting city to compare to Phoenix. KC metro a lot smaller, but the economies of the two cities might be somewhat comparable. KC is also growing and is a fairly "new" city, unlike midwest "rustbelt" metro areas like Saint Louis, Detroit, Cleveland, et al. Minneapolis is also a good comparison; the two two cities are about the same size. Sad to say though, but when you leave aside the issue of weather, I think the twin cities clearly win. Dallas and Houston are both bigger than Phoenix, with much larger economies. I don't think Austin is a good comparison though. San Antonio vs. Phoenix makes more sense. The other city I can think of that might be comparable to Phoenix is Orlando, FL.

How are we measuring the size of an economy? For the most part, I agree with your observations of city comparability, but it's hard to add much more without knowing the metrics involved.

Are talking about number of Fortune 500s? Personal income? Unemployment rates? etc.?

[MaikeerinWA]

Very true, and kinda sad. I once worked for Motorola as a recent college graduate in the late 1980s, and I think I had something like 30,000 local coworkers! It was AZ's largest private employer by far. Of course, a fair number of ex-Motorolans are working for spinoffs and acquirers like General Dynamics in Scottsdale, or ON Semiconductor.

Originally Posted by YAZ

Motorola has about 1000 employees here, a far cry from where they stood a few years ago.

[vegaspilgrim]

Originally Posted by silverbear

How are we measuring the size of an economy? For the most part, I agree with your observations of city comparability, but it's hard to add much more without knowing the metrics involved.

Are talking about number of Fortune 500s? Personal income? Unemployment rates? etc.?

I'd say a lot of factors come into play. Most importantly, diversity of industries (those giant coded lists the Department of Labor produces cataloging hundreds of different sectors. You could measure diversity by looking at employment statistics in major industry groupings). Not just token diversity, but real diversity (btw, I'm not saying Phoenix is or isn't a diverse economy-- that's the question of this thread). Especially important are industries that bring in money from outside the region, and industries that produce goods and services sold *outside* the region. So on one hand, Las Vegas is basically a one-industry town-- the whole casino/resort/hotel industry (well, two if you count construction). But it depends on outside tourists coming into Vegas, spending (losing) their money there, and leaving. Unfortunately, this activity is highly dependent on millions of people having enough disposable income to come to Vegas in the first place. Then I'd say you have to look at both GDP and GDP per capita, looking at both comparative numbers and growth rates, employment statistics, innovations (number of patents registered is one way to quantify this), and finally, international competitiveness. Are local jobs being outsourced to other countries, or are they holding their own?

I don't think unemployment statistics are the best indicator of how "powered" an economy is; you could have a city with low unemployment but most employment is concentrated in low wage jobs. Much of the outside money brought into the region from people buying second homes or from retirees, while certainly beneficial, doesn't make the local economy any more of a powerhouse in my book-- with the possible exception of a greater need for medical services. Also, corporate headquarters, fortune 500 companies don't really tell all that much by themselves. The state of Michigan has 22 Fortune 500 companies (most centered around Detroit), but I think it would be safe to say Detroit no longer has a strong economy. When I have some more time I'll look at these statistics I just noted and see how Phoenix compares.

[exit2lef]

Originally Posted by vegaspilgrim

I'd say a lot of factors come into play. Most importantly, diversity of industries (those giant coded lists the Department of Labor produces cataloging hundreds of different sectors. You could measure diversity by looking at employment statistics in major industry groupings). Not just token diversity, but real diversity (btw, I'm not saying Phoenix is or isn't a diverse economy-- that's the question of this thread). Especially important are industries that bring in money from outside the region, and industries that produce goods and services sold *outside* the region. So on one hand, Las Vegas is basically a one-industry town-- the whole casino/resort/hotel industry (well, two if you count construction). But it depends on outside tourists coming into Vegas, spending (losing) their money there, and leaving. Unfortunately, this activity is highly dependent on millions of people having enough disposable income to come to Vegas in the first place. Then I'd say you have to look at both GDP and GDP per capita, looking at both comparative numbers and growth rates, employment statistics, innovations (number of patents registered is one way to quantify this), and finally, international competitiveness. Are local jobs being outsourced to other countries, or are they holding their own?

I don't think unemployment statistics are the best indicator of how "powered" an economy is; you could have a city with low unemployment but most employment is concentrated in low wage jobs. Much of the outside money brought into the region from people buying second homes or from retirees, while certainly beneficial, doesn't make the local economy any more of a powerhouse in my book-- with the possible exception of a greater need for medical services. Also, corporate headquarters, fortune 500 companies don't really tell all that much by themselves. The state of Michigan has 22 Fortune 500 companies (most centered around Detroit), but I think it would be safe to say Detroit no longer has a strong economy. When I have some more time I'll look at these statistics I just noted and see how Phoenix compares.

Okay. The diversity metric seems like a reasonable one. The impact of companies that sell to others outside the region is also a good standard. Unfortunately, both are somewhat subjective and difficult to measure. That doesn't mean they can't be the basis of a good discussion, but the discussion may be a matter of interpretation rather than an official ranking.

I'd say that the companies I mentioned earlier -- US Airways, Village Voice Media, Apollo Group, Cold Stone, Medicis, PF Chang's, etc. -- are probably good examples of both your criteria. They represent a wide variety of industries, they bring in money from around the country (or world), and they sell their products or services in numerous markets. Add to this companies like the former Phelps-Dodge (the new name escapes me right now), Dial, and Viad. These companies are fundamentally different than a company like Basha's, which is based here but basically serves just a local market. As I mentioned earlier, most of these companies started small here in Phoenix and became national players through growth and/or acquisition of weaker companies. The optimist in me believes that we'll see more of these in the decades to come.

The next step would then be to look at similar company lists for other metro areas of similar size (and not just the cool, trendy, MTV Real World cities like Seattle and Austin) and to try to make comparisons. That would be a time-intensive task and maybe a good idea for a master's thesis (hint, hint). Regardless of how Phoenix stacks up with peer cities, I'll say that I feel much better hearing about the success of the companies mentioned above than hearing about the success of homebuilders (back when they were successful). An economy based on money flowing in and out of Phoenix in relatively equal proportions is preferable to one that is insular, with money just moving within the metro area, or one that is dependent on an inflow of cash attributable solely to migration.

My tentative and admittedly subjective conclusion would be that the Metro Phoenix economy is more powerful than its worst detractors claim, but not as powerful as it should be.

[fcorrales80]

Silverbear, I strongly agree. Metro Phoenix economy is strong and has a good base to grow from but it is not nearly as powerful as it should be, however, I also believe that this will change and more will grow. Also, the rate of degrees earned in Phoenix has been climbing slowly, and that rate is expected to increase. Good news for companies that start in Phoenix and wish to remain.