As jobs picture worsens, legislature fails to act

Just as I finished writing an article on efforts to combat unemployment and underemployment brought on by the Great Recession and other economic blows in the Arizona marketplace, the state's Department of Commerce issued its twice-annual job forecast — and it’s not good news. (For a copy of the full report, click here.)

The department revised upward its estimate of job losses for the year 2010, estimating that 50,400 nonfarm jobs will be lost in the state this year. The department’s previous estimate (made in October 2009) for job losses this year was 17,300, and the reason the forecast was changed? “This is because the observed losses of nonfarm employment have been greater that the forecasted job losses,” which is essentially a way of saying either “we spoke too soon” or “we were just flat-out wrong.”

Although it forecasts a slight job recovery in 2011, projecting a gain of about 23,100 nonfarm jobs next year, the fact is that we don’t know whether the forecasters will be wrong again.

Even if the forecasters are correct, that slight uptick represents a recovery of less than half of the employment to be lost in 2010, and it won’t come close to making a dent in the 189,900 nonfarm jobs that were lost in Arizona in 2009, let alone the 300,000 lost since the Great Recession began in 2007.

Reading between the lines a little bit, the most salient point of the report is that the chief cause of Arizona’s woes is its lack of economic diversity.

“Housing construction was a significant driver of the Arizona economy during the boom in 2001-2006,” the report says. In June 2006, construction employment represented 9.5 percent of the Arizona nonfarm workforce compared with 5.7 percent in the nation as a whole. Today, construction represents about 4.6 percent of the Arizona workforce, compared with 4.3 percent in the nation as a whole.

“Arizona benefited from the expansion of the housing bubble as suggested by leading economic indicators such as employment growth and home price evaluation,” the report says. “With the contraction of the housing bubble, Arizona has some of the highest rates of job losses, home price devaluation and home mortgage foreclosures in the nation.”

The need to diversify Arizona’s economic base was stressed by the Republicans in the Arizona House of Representatives when Speaker of the House Kirk Adams prepared to introduce Arizona’s job recovery act, or HB 2250, in January. The bill, which includes tax cuts to businesses as incentives to bring more jobs to the state, was based on research by Scottsdale-based economist Elliott D. Pollack.

Although people may disagree over how to create more jobs in the state — opponents of the bill said that Arizona could not afford to lose the tax revenue while the state’s budget is so fragile and that the bill could not guarantee job creation, while proponents said that the incentives would be tied to actual job creation and the state’s budget problems will not go away without job growth to foster more revenue — the fact is that this is the most important issue facing the state today, and the bill stalled in the Arizona Senate. (This video from KAET's nightly "Horizon" program features the opposing points of view on HB 2250.)

This State Legislature put items like being able to carry concealed weapons and the immigration enforcement bill on a fast track, like these were problems that needed immediate relief, while doing nothing of substance to solve the state’s budget or unemployment crises.

No economist has linked Arizona’s massive job losses — about 300,000 and counting since the Great Recession started in 2007 — to illegal immigration.

HB 2250, which passed the Arizona House, never made it to the floor of the Senate for a vote. Expressing disappointment at the bill’s fate, Paul Boyer, spokesman for the House majority party, told Business Banter, “I think at some point, we’re going to have to address the job losses.”

That “some point” should be now.

Copyright © 2010, Salvatore Caputo

Gov. Symington meant business

I know the following column strays a long way from pop culture, but how can any Arizonan ignore Gov. Symington's forced resignation from office after being convicted on seven of 21 felony fraud counts? Like Evan Mecham, Fife Symington ran for governor of Arizona with the promise that he would make government efficient by applying sound business principles. It was a persuasive argument, apparently After all, a public raised on stories about insane patterns of government spending (insert a ridiculous $ figure paid for a coffee pot or a toilet seat here) knows that there ought to be a tougher method of cost accounting. American business with its "leaner, meaner" philosophy of the '80s seemed to have it. Symington appeared to be a successful businessman, dealing in more dollars than Mecham's auto dealership could dream of. So why not give him a try? Could it hurt to reduce the tax load on the average citizen by making government cut bloat? Other people's money Symington, who dealt in millions of dollars, used a sound business principle to make himself the developer of the Esplanade and the Mercado. That principle is that whenever possible you must use other people's money to power your deals. If you can get people to fund your "vision," you put nothing on the line except your reputation. However, your reputation usually has to be pretty good to get savvy people to put up the money. Symington's reputation was good. He knew the art of the deal, and he put deals together the way an artist applies paint to canvas. People believed he could make things happen and were willing to back him financially. In government, he used the same principle, by using taxpayers' money. He got this government deal to go by promising some returns to the taxpayer in the form of reduced income tax. If you didn't look at the toll it took on social-service agencies such as Child Protective Services and the state's aid program to public schools, it seemed like a good deal. Ultimately, though, government -- especially the government of a democratic republic -- is not a business. Self-interest and public interest A businessman has the right to be out solely for himself in business, but government has to look out for everyone's interests. The businessman will try to convince the other guy that a deal is mutually beneficial, but he'll do everything in his power to make the deal more mutually beneficial to himself. (Think of this idea from George Orwell's Animal Farm: "All animals are created equal, but some are more equal than others.") That philosophy doesn't work, though, in government. If there's widespread cynicism about government, it exists precisely to the extent that politicians take the system for all that it's worth, instead of acting as public servants. The system continues to limp along instead of running because of self-serving attitudes in politics. Symington favored business. He showed no sympathy for the average Joe who had to stick his kids in one of Arizona's struggling public schools. How much would even a $50,000-a-year wage earner have to scrimp to put one child through a high-quality private-school education in Arizona? Could even a zero-percent income tax put enough money back in that parent's pocket to make it possible? Business is good Business does make things run, and in general, good business makes good sense. American business has created the standard of living here. However, American business owes its ability to flourish in large part to one of the most stable governments the world has seen. This is not a government that's about to nationalize any industries. (OK, the railroads are the exceptions that prove the rule.) In fact, quite the opposite. Government extends a large helping hand to many troubled businesses. However, because business is powered by self-interest, it can edge toward practices that are not in the public interest. It's costly, for instance, to keep a chemical factory from polluting the environment, and the short-term, bottom-line interests of business would like to avoid that cost. (Having become a modest entrepreneur myself, I face ethical issues every day that make it tough to get ahead. I'm convinced it would be much easier to do business if I didn't have a conscience.) The government is supposed to be responsible for a different kind of cost accounting. It's supposed to ensure the public interest rather than self-interest -- or at the very least, attempt to find a compromise between opposing self-interests. (Although there are many questions about the way government today is shouldering this responsibility, no one has created a model in which business would willingly shoulder the social burdens it creates.) Business is bad Symington, acting in his self-interest, lied to bankers. At least that's what federal lawyers persuaded a jury to believe. This was a crime for which he may well be imprisoned. To my way of thinking, his larger crime was that he used similar false representations -- that he was a successful businessman -- to win election. He will never be put on trial or sent to prison for this, though. There's no law against lying to the voting public. Yet as sure as Symington seemed about his innocence and the soundness of his principles, maybe he really believed that it's OK to lie to bankers. (I can see me misrepresenting my worth to get a loan. Ha!) Then again, maybe he just lied to himself. Copyright © 1997, Salvatore Caputo