State's population growth now at a crawl

Population rose 1.6% in past year; smallest gain since 1990

by Catherine Reagor - Dec. 10, 2008 12:00 AM
The Arizona Republic

Arizona's population is expanding at the slowest rate since the last real-estate-led recession in 1990, new figures show.

Arizona grew by 1.6 percent, or about 100,000 residents, during the past year, according to U.S. Census data analyzed by University of Arizona economist Marshall Vest. That's less than half the growth rate of just two years ago. Most of today's growth can be attributed to births, which are outpacing deaths, rather than from new residents.

Vest and others say the new population figures are conservative estimates, unlike the ones released a few years ago by the Arizona Department of Economic Security. The agency accidentally overstated the number of residents by tracking new-home permits.

At that time, Arizona's housing economy was booming. Big growth rates were a predictor of good times for the state's biggest industry: Past studies have shown one in every three dollars spent in the state was linked to the housing industry.

Today, the housing market is in a painful contraction, with home values falling and foreclosures at a record high.

Fewer people moving to Arizona means fewer potential home buyers, fewer shoppers in new stores - in short, less growth in a state dependent on it.

Some Valley cities believe their populations are actually shrinking based on drops in utility hookups and increases in vacant homes. Arizona economists say that's possible but that, overall, the state isn't in negative territory for new residents.

"People are still moving to Arizona, but at a much slower rate," Vest said. "More would likely move to Arizona if they could sell houses in other parts of the country with deeper economic problems."

Currently, about 6.5 million people call Arizona home.

Vest is forecasting the state will grow by only 1.2 percent, or 80,000 people, during this fiscal year, which ends June 30. The last time Arizona's growth rate dropped below 2 percent was in 1990. That year, the state population expanded by 1.7 percent.

Inflated numbers

The lower growth figures are vexing many, including state and local governments, who are now facing huge budget shortfalls because of the unexpected drops in population growth. Figures inflated by the housing market are making the situation worse.

When Arizona began growing rapidly in the 1950s, Census population counts and estimates done every 10 years couldn't keep up.

Arizona's Department of Economic Security began tracking the state's population growth in the 1960s by using a model that included home-building figures. The state's system worked well until the housing boom, when tens of thousands of homes were built and purchased by speculators. No one ever moved into them, skewing the results.

In 2006, Gov. Janet Napolitano called for a task force to investigate Arizona's population numbers. Government and business leaders and economists found that the housing boom had inflated the figures.

New study

In the next few weeks, a population study commissioned by the Central Arizona Association of Governments, using a new and improved model for tracking growth, is expected to be completed. Vest and Arizona State University economist Dennis Hoffman have been working on the new study of Pinal County for the past year.

But economists say we won't know for sure how far population numbers were off during the housing boom and by just how much Arizona's growth is slowing until the 2010 Census count.

This year, Vest estimates only 20,000 to 25,000 of the state's new residents will be the result of net migration, which is the number of people who move here minus the number of people who move out of state.

That compares with a conservative net-migration estimate of 140,000 to 160,000 during the housing boom of 2005-06.

The remaining population growth in the coming fiscal year will be about 55,000 people. That will be "natural" growth, which refers to the number of births, once deaths are subtracted, Vest believes.

What is clear is that, for the first time in decades, Arizona's growth is being driven by births instead of people moving here. Even though births have begun to slow in Arizona, as they have during every recession since the 1970s, they are still surpassing the number of deaths.