Arizona's unemployment will increase from 3.9% to 4.4% by year-end, says Lee McPheters, director of Arizona State University's Bank One Outlook Center. Personal income will also fall off the pace set during 2000, growing at 6.3% this year in comparison to 7% posted last year.

Arizona's steady population gains will continue to keep a thriving residential construction industry busy, he says. The population should grow faster this year than in 2000, which means that home builders and apartment developers will continue to experience high demand.

Other economists are predicting the first-quarter slowdown could impact the local economy. Also, California's energy crisis possibly could result in higher gasoline prices here and a shortage of aircraft fuel.

Robert Eggert Sr., an economist based in Sedona, says that while higher fuel prices and increased unemployment would impact the national and local economy, it would be offset by reductions in interest rates, cuts in Federal income taxes and in labor productivity increases. "There will be no recession," he says.

Unlike its neighbor to the west, Arizona is likely to avoid energy shortages during the summer, says Robert S. Nichols, managing director of New West Energy, the unregulated division of Salt River Project, one of the state's largest power providers. But Arizona won't be totally insulated from California's energy woes, he says. Many California oil refiners won't be operating at full capacity during the summer, due to rolling blackouts, so gasoline prices are expected to rise, he says. Aircraft fuel, which also flows from California refineries, could be restricted because of pipeline problems. Arizona's economy also may be affected by California's agricultural production decline and loss of Internet services. The forecasts had been made Wednesday at the Economic Club of Phoenix's annual outlook luncheon.

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Job, Population Growth Will Insulate Economy

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