No question about when or if a recession might come, Arizona’s economy is in it right now, says University of Arizona economist Marshall Vest.

In his annual Economic Outlook Dec. 7, Vest said he needs more data to determine exact timing but he thinks it will eventually show the recession started in the third quarter of this year and was punctuated by the collapse of the mortgage lending industry that included the failure of Tucson’s First Magnus Financial Corp.

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He told the record crowd of about 750 people at the Westin La Paloma Resort and Spa that Arizona will be hit worse than most states because of its reliance on growth-related activities and exposure to imploding home mortgage loans. Overall, he said, the recession will last about a year "give or take a few months" and be relatively mild.

Vest cited three reasons for the recession:

ân¶ A classic inventory cycle in housing

ân¶ A credit squeeze

ân¶ An energy shock.

During the next several months, Vest said we should expect to see some growth-dependent firms fail.

"Consumer spending will suffer as job growth and wage increases languish," he forecast. "The public sector will struggle to balance budgets as tax revenues shrink."

Despite his own forecast, Vest put out this warning:

"If housing markets dive deeper, the credit crunch persists, oil prices stay above $100 a barrel, or if consumers pull back more, the downturn could extend another year and rival the severe recessions of the 1970s and 1980s."

Fortunately, he said, the population will continue to grow but at a much slower pace because potential newcomers from other parts of the country will find it difficult to sell their homes.

As for job growth, Vest said 2007 should show a 2.4 percent gain in new jobs but that will turn negative next year and will register negative 0.4 percent in 2008 and then stay virtually unchanged for 2009.

Vest, who is director of the UA’s Forecasting Project in the Eller College of Management, has been recognized four times − most recently in 2006 − by the editors of Arizona Blue Chip newsletter as having the best economic forecasts in Arizona.

Tucson regional forecast data from Vest’s Economic Outlook includes:

ân¶ Per capita personal income increased 6 percent this year to $31,457; will go up 2.8 percent next year to $32,344 and up 3.5 percent in 2009 to $33,472.

ân¶ Population of the region has now exceeded 1 million by 6,000 people, that’s up 2.5 percent in the last year. It is forecast to increase 2.1 percent to 1,026,900 next year and up another 2.3 percent in 2009 to 1,050,300.

ân¶ Overall retail sales, up 4.9 percent to $12.2 million this year, will go up 3.7 percent next year to $12.6 million and up 4.8 percent in 2009 to $13.2 million.

ân¶ Within retail sales, gasoline purchases, which this year were up 9.5 percent to $986.9 million, will decline next year by 1.7 percent to $969.7 million, then return to an increase in 2009 of 1.4 percent to $983.7 million.

ân¶ The number of jobs this year grew by 2.8 percent to 390,900 and next year should grow by 0.5 percent to 392,900 and another 1.8 percent in 2009 to 399,900.

ân¶ Job growth in mining has been "on a terror," Vest said at 19.9 percent growth this year even though it only accounts for 1,900 jobs. That should stay virtually unchanged for the next two years.

ân¶ Information sector employment fell by 14.1 percent this year and accounts for 5,900 jobs. That is forecast to bounce up 4.6 percent next year to 6,200 jobs and up 3 percent in 2009 to 6,400 jobs.

ân¶ Construction has lost 23,600 jobs since it peaked in May 2006 and is down this year 4.2 percent to 26,800 employed in the sector. That is forecast to drop another 10.1 percent next year to 24,100 jobs and down by 3.3 percent again in 2009 when 23,300 will be working in the industry.

ân¶ Trade, transportation and utilities employment will see some of the most significant job growth in the immediate future. It is up 3.6 percent to 64,300 jobs this year, will be up 1.3 percent next year to 65,100 jobs and up 2.4 percent in 2009 to 66,700 jobs.