Oct. 18--The economic recession is altering Arizona's economy in ways that could become permanent, according to leading economy watchers.

In the future, the state might have to rely less on population growth as an economic engine, consumer spending might not be as big a part of the economy and a higher value is likely to be placed on new ideas, they say.

Technology will be more important than ever as all Arizona industries -- whether they be old standbys like mining or agriculture or high-fliers like aerospace -- will need innovations to compete, said Nancy Welch, associate director of the Morrison Institute for Public Policy at Arizona State University and co-author of a new report on lessons from Arizona's economic history.

"I think the recovery will be slow, but ... there will be a recovery," she said. "Arizonans are by nature optimists. The innovation and creativity we need to get the economy going in the direction of more quality jobs -- Arizonans are very capable of creating that economy."

ECONOMIC PILLARS CHANGING

For much of the 20th century Arizona's economy was dominated by the five C's -- copper, cotton, cattle, citrus and climate. Of that group, only climate remains a major player in the 21st century. Among the new pillars are construction, retailing and technology industries such as computer chips and aerospace.

Coming out of the recession, more adjustments might be coming. Construction and retail might not be as important while new sectors like solar energy and bioscience might emerge, say economists.

"It may be more normal to look where construction will account for 6 to 8 percent of total employment, where in the past the normal range was over 8 percent," said Lee McPheters, associate dean of the W.P. Carey School of Business at Arizona State.

Also, consumers will not be able to finance their spending out of home equity loans as readily as in the past, he said. That means consumer spending as a percentage of the overall economy will not be as great, he said.

But McPheters sees real prospects for the state's biotech industry, saying that institutions such as the Mayo Clinic, TGen, Barrow Neurological Institute and the University of Arizona give the state "excellent" capabilities.

"The university system here has stepped up and brought in really good researchers and some of the leading people in that area," he said. "In particular, Phoenix has a growing reputation as a leading medical center."

SOLAR SO-SO?

He is less certain about the state's prospects for becoming a major solar-energy hub despite much talk about the logic of centering the industry in a place where the sun shines so brightly.