Economic Outlook (GDP and Tempe Sales Tax Growth)GDP (Gross Domestic Product) measures the market value of all goods and services produced within an economy for a given time period. In essence, it measures the amount of economic activity for a time period.
Sales tax growth only measures the sales of goods and services (except food) within Tempe city limits. While different from US GDP, it still provides an indicator of the health of the city economy. Expect sales tax growth to generally be higher than GDP growth in good economic times, and lower than GDP growth in economic downturns.
Real, or inflation-adjusted, means that values have been adjusted for inflation so we can calculate the “real” growth over a period of time. If figures are not adjusted for inflation, the growth over time would appear artificially higher than it really is.
National GDP and Phoenix Metro Area GDP are about the same for 2015, at 1.9% and 1.8%, respectively.
Growth in Tempe sales tax collections has been stable the last couple years at 6.58% from 2013 to 2014, and 6.71% from 2014 to 2015.
In Q3 2016, Tempe sales tax collections are 1.4% higher than Q3 2015.
Inflation vs Compensation (Employment Cost Index for Phoenix Metro Area)
The Employment Cost Index, or ECI, is a measurement of the cost to employ a worker. There are two numbers that are produced: Salaries & Wages” and “Compensation.” While Compensation includes salaries and wages, it also reflects benefits. This is a useful statistic for businesses and employees because it measures if employment costs are rising or falling, and is also a measure of income for workers.
CPI-U West measures the prices of various goods in the western states that are important to urban consumers. The CPI-U west is essentially a measure of the cost of living for individuals living in an urban environment in the Western states.
Growth over last 12 months: This simply means that for any given point, the last 12 months of data have been combined to produce an annual, or 12 month rate.
In the third quarter of 2014, total compensation and salaries and wages were growing at about half the rate (1.1 and 1.2%) of the price of goods (2.0%), meaning compensation was not keeping pace with the increases in the price of goods. In the third quarter of 2016, the rates of total compensation (2.8%) and salaries/wages (2.6%) have surpassed the growth rate of the prices of goods (2.0%).
Phoenix Metro Job Market
One of the chief measures of the health of an economy is the unemployment rate. The unemployment rate is the amount of people who are looking for work but do not have a job, divided by the total amount of people in the labor force (those working or looking for work). Two factors impact the unemployment rate: a change in the number of jobs and a change in the labor force. As jobs are added to the economy and less people are unemployed, the unemployment rate decreases. Similarly, as the labor force increases (more people opt in to work) with no change in the number of those unemployed, the unemployment rate decreases. Any combination of these two factors impacts the unemployment rate.
Tempe Housing Market
The housing market is another indicator of the health of the economy. Generally as more houses are sold (high demand), the higher the prices are because there are more people competing to purchase a limited supply of homes.
Building Permits reflect the investment approved by the city to be spent on new buildings and building renovations, and thus is a good local economic indicator. For a city such as Tempe, there can be spikes in the dollar amount of building permits when the actual number is low because of large-scale projects like the recent State Farm offices.
Vacancy Rates (Tempe)
These vacancy rates are Tempe specific and show how well the city economy is utilizing the buildings.
While retail vacancy has been relatively stable, office vacancy spiked to 14% in Q3 2015 and has steadily declined in 2016 to 10.2% in Q3.
Employment Cost Index: BLS.gov
CPI-U West: BLS.gov
Local employment data: http://www.bls.gov/eag/eag.az_phoenix_msa.htm
Local housing market data: Discovery Triangle Development Corporation
Vacancy rates: Discovery Triangle Development Corporation