Economists at FAC: AI and data‑center investment lifted recent GDP growth, but labor and housing trends show signs of softening
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Summary
External economist Danny (Elliot Pollock firm) told the Finance Advisory Committee that AI and data‑center investment have been a major recent driver of U.S. GDP, while employment softened, housing affordability remains strained, and Arizona faces slower long‑term population growth concentrated in the Phoenix metro area.
At the Finance Advisory Committee’s January session, Danny of the Elliot Pollock firm presented a rapid‑fire national and state economic outlook, telling the committee that AI and data‑center investment helped avert expected recessionary outcomes in recent years and materially boosted GDP growth.
“Steve Eisman calculated with AI spending in 2024, GDP was 1.8 growth. Without it, we would have been at 0.5%,” Danny said, using that estimate to illustrate the concentrated role of large technology and data‑center projects in recent national growth figures.
Danny framed several broad themes: traditional recession indicators (leading indicators, Treasury yield spreads, consumer sentiment) have flashed warnings intermittently, but a full recession has not occurred; employment growth has softened (three‑month averages have been negative while 12‑month averages remain positive); and demographic constraints (an aging labor force and lower fertility) mean future growth will be more dependent on international migration.
On housing and commercial real estate, Danny told the committee that mortgage‑rate 'lock‑in' and affordability problems persist: the median home‑buyer age rose to 59 in 2025, single‑family permits fell materially, apartment deliveries have outpaced absorption though vacancy and rents have started to moderate, and industrial demand remains strong. He cautioned that some of the AI‑driven investment could be 'artificial' GDP growth that may not translate into broad‑based wage gains for lower‑income households.
Arizona specifics: Danny and other panelists said Arizona has been resilient but slower recently; staff and panelists pointed to downward revisions in long‑term population forecasts (noting that the Arizona Office of Economic Opportunity’s new forecast projects lower long‑term growth and higher concentration in the Phoenix metro), that some counties may face population declines over the multi‑decade horizon, and that employment revisions could change the near‑term picture.
Panel reactions: Committee panelists generally agreed with the broad characterization of the economy. Doug said Arizona should weather national adjustments relatively well, Ben Henderson and George Hammond urged caution about preliminary job data revisions, Jim Rounds urged conservative short‑term forecasting and fiscal prudence, and Alan Maguire cautioned that consumer sentiment and food inflation effects continue to depress purchasing power.
Next steps: The FAC will use the discussion to inform the April baseline update; no policy actions were taken at the meeting.
