- Associated Press - Monday, December 5, 2016

PHOENIX (AP) - Stronger than expected growth in the state’s economy this year should continue in 2017 even though single-family housing starts continue to disappoint, an Arizona State University economist told business leaders Monday.

Research professor Lee McPheters also said an increase in the minimum wage from $8.05 an hour to $10 per hour in January isn’t likely to stifle economic growth, despite concerns among the business community that the increase will harm employment levels and profits. That’s because the voter-approved measure raising the minimum wages will cut turnover in low wage jobs and offset higher costs for most businesses, boosting profits, and higher wages will increase overall economic activity.

He pointed to reports on Seattle’s 2015 minimum wage boost as evidence that boosting pay won’t crimp growth.

“We don’t have laboratory experiments in economics - but the numbers are in from the Seattle minimum wage increase,” McPheters said in an interview. “In fact, employment went up over the year of that minimum wage increase and the unemployment rate continues to go down.”

That doesn’t mean there won’t be some businesses that replace workers with technology to cut hours, he said.

McPheters, director of the ASU business school’s JPMorgan Chase Economic Outlook Center, delivered his annual economic forecast at an event for business leaders at the Phoenix Convention Center on Monday. He said the state is on track to create about 76,000 new jobs this year, a 2.9 percent increase and nearly 8,000 more than expected. Unemployment has dropped from 5.9 percent last December to 5.2 percent now, and is expected to drop to 4.8 percent next year.

Despite a big increase in apartment construction, single family homebuilding that has for decades been a key to Arizona economic growth remains well below healthy levels. McPheters expects a 10 percent increase this year to slightly more than 28,000 new homes, a big increase from the height of the housing collapse in 2011 but far below the healthy level of 50,000 to 60,000 new homes per year.

Wildcards remain, however, including what might happen to Arizona’s cross-border trade with Mexico if president-elect Donald Trump modifies free-trade agreements. And repeal of the Affordable Care Act also could affect one of the bright spits of the state’s economy, health care.

“If in fact there were changes that undercut the health care industry broadly speaking that would really slow down a key engine of growth for Arizona,” McPheters said. “We’re No. 5 in the country for the rate of growth for health care jobs.

Anthony Chan, chief economist for JPMorgan Chase, said there remain lots of unknowns about the repeal of President Barack Obama’s health care law.

“If you completely eliminated it and don’t replace it that would have a large negative impact on the U.S. economy, because you’re going to take 10 or 20 million people and just throw them off the rolls,” Chan said. “But I don’t hear any of that message from the president-elect. I hear about repeal and replace.”

Chan also said fears of a trade crackdown Trump campaigned on that could impact Arizona have been tempered by statements from the president-elect’s economic advisers.

“I am concerned, but I don’t really think that I hear that message as loud from a lot of the president-elect’s key economic advisers,” Chan said. “I do hear a signal or a message that they may be using some of these things as negotiation tactics.”

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