Rounds tells Maricopa supervisors federal cuts, tariffs raise odds of slowdown; urges housing fixes

Jim Rounds, an economist with Rounds Consulting, told the Maricopa County Board of Supervisors during a meeting that federal spending reductions and tariffs have increased the odds of an economic slowdown and urged county leaders to use the period to address housing affordability and shore up budgets. “We went through a period where we added $10,000,000,000,000 to our national debt in about 4 years,” Rounds said, adding that the subsequent pullback in government spending (the “G” in GDP) makes the next several quarters harder to read.

Rounds said headline GDP figures are currently difficult to interpret because of timing issues related to imports and one-time policy shifts. He told supervisors that some data revisions and federal policy effects mean economists may not identify a recession until after it has begun. “If I was going to be in 1 state during the next downturn, it would be Arizona,” Rounds said, arguing the state is well positioned but should use the time to do “good housekeeping.”

Why it matters: County revenue and the ability to deliver statutorily required services depend on continued tax collections. Rounds emphasized that for budgeting purposes the simplest, most reliable indicators are employment and state and local tax collections — the figures that determine how much the county actually receives. He warned that government spending reductions alone could be enough to produce a “very mild recession” and recommended conservative budgeting.

On housing, Rounds urged local and state reforms to increase supply without large new appropriations. He described a proposal — still preliminary — to allow conversion of vacant strip malls in Greater Phoenix into multifamily housing while freezing the property tax base for the parcels so cities would not lose revenue, estimating (as a back-of-the-envelope figure) the potential to create about 40,000 units from that single legislative change. He and supervisors also discussed converting underused public buildings, including older school properties, into starter or workforce housing or daycare, and using “innovation sandbox” approaches to pilot regulatory flexibility.

Rounds flagged a mix of technical and structural risks: revisions to Bureau of Labor Statistics employment data that sometimes produce large monthly changes, lower survey response rates that can affect accuracy, tariff-driven cost pass-throughs that could raise consumer prices over time, and potential Medicaid funding shifts to states. On the latter, he said a mild recession for the state could require roughly $1,500,000,000 in reserves to cover revenue declines, and he urged strategic, multiyear planning to absorb potential reductions.

Supervisors asked for detail and next steps during the discussion. They pressed on the timing of a possible downturn and on specific housing and permitting barriers in cities that slow infill and small multifamily projects. Several board members described local permitting and inspection practices that delay openings for small projects and discussed zoning task force work to reduce regulatory friction.

Rounds said the Federal Reserve’s path on interest rates will influence housing market movements, and he estimated mortgage rates would likely need to fall closer to 4–4.5 percent before a substantial wave of “move-up” purchases resumed. He also repeated a point he made throughout the presentation: for county budgeting the most relevant measures are collections and employment, not raw, headline GDP.

The county managers and supervisors thanked Rounds for the briefing; the board moved next to agenda item 2.