Arizona Business Outlook 2020

Here’s our take on the January 2020 economy and its possible impact on Arizona business owners. Enjoy!

Carrying through 2019 momentum

From what we can see of the 2019 economy in Arizona and the country as a whole, it doesn’t appear that there are any major signs of a slowdown. According to reports by the Arizona Business and Research Center, as of November 2019, Federal spending is on track, a good sign for Arizona’s defense and aerospace sectors. Arizona continues to outgrow the rest of the country in terms of its working population; the state’s labor force was up 3% versus year ago levels. The growth in Arizona’s labor force is more than three times the US rate of growth.

Signs on the employment and income fronts are also encouraging for Arizona residents. Data for unemployment in Arizona showed a slight downtick over the course of the year, amounting to 4.7% in November 2019. According to the Office of Economic Opportunity, Arizona nonfarm employment was up 2.4% year-on-year, reflecting gains in both the public and private sectors. The growth in personal income in Arizona was 5.4% in Q3 2019 versus 4.5% for the US as a whole.

As far what the numbers are saying about earnings for Arizona businesses, let’s look at Nonfarm Proprietor’s Income, which basically measures the difference between revenue and production costs. This figure stood at just south of $22MM during Q3 2019, up almost 7% from the same quarter a year ago.

We’d sum it up by saying that overall the picture for the Arizona economy, as well as the rest of the country, is one of continuing health and expansion. This bodes will for Arizona business owners.

What AZ business owners should be doing this January

To take this a step further, let’s say you are a business owner in Arizona. What should you be doing in January 2020, as well as in the first quarter of the year?

#1 Prepare for tax season

Yes, it’s a nuisance. Who wants to sift through a heaping stack of expense receipts? Set aside a time after hours and get organized. Time invested preparing for tax season will lessen the pain when crunch time comes.

#2 Rethink your IRA strategy

The recently passed SECURE Act may have ramifications for business owners who are using SEP IRAs as a retirement vehicle. It also may impact you if you’re using other types of IRAS such as Roth or Traditional to save for retirement. It depends on a myriad of factors, but in short, there may be tax liabilities created for the beneficiaries of these accounts so it’s best to pause and evaluate what this act will mean for the people you’re looking to leave this money to.

We’ll be publishing more on this topic, so please stay tuned and follow us on social media!

As a side note, mark your calendars that April 15th is the last day you can contribute to a SEP IRA for 2019, if this is part of your strategy.

#3 Evaluate your 401k or 403b expenses and service providers

A 401k or 403b plan is potentially a great benefit for a business owner to give to his or her employees. But have you considered this?

  • Many plans have hidden fees that get overlooked but add up over time
  • Investment options are often not well thought out, resulting in selections that are higher cost than the value they provide or simply not the best options out there for participants
  • They can be time consuming to manage if you are using inhouse resources

This quarter, take a moment and ask yourself if it would be possible to create a better 401k or 403b plan for the reasons stated above.

Conclusion

Here’s to 2020. Let’s make it a great year! Contact us if you have any questions on what we’ve discussed.

Sources

Arizona Business and Economic Research Center, 2019, Arizona Employment. Retrieved on January 14, 2020 from https://www.azeconomy.org/arizona-employment/

Arizona Business and Economic Research Center, 2019, Arizona Personal Income – Quarterly. Retrieved on January 14, 2020 from https://www.azeconomy.org/arizona-personal-income/

Arizona Business and Economic Research Center, 2019, Arizona Labor Force. Retrieved on January 14, 2020 from https://www.azeconomy.org/arizona-labor-force/

Office of Economic Opportunity, Arizona Labor Statistics. Monthly Employment Report. Retrieved on January 14, 2020 from https://laborstats.az.gov/sites/default/files/documents/files/emp-report.pdf

About Michael McGinley, CFP®, AIF®

Michael McGinley has worked in the financial services industry for over 15 years. He is currently a partner at Providus Advisors, an investment advisory firm located in Chandler, AZ.

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