Based on recent employment data, the Phoenix economy has landed with a thump.

This observation is based on the fact that, over the past 14 months, the rate of job creation in the metro area has dropped from +5.0% year over year — the fastest among the 25 largest U.S. metro areas — to -2.2%, the third slowest.

It is worth noting that these numbers are "official" and do not include layoffs of the undocumented workers that make up an estimated 8% of the Arizona workforce.

By far, the major contributor to this dramatic deceleration in job growth has been the construction industry. In fact, construction is responsible for over 70% of the drop in total employment in the metro area over the past 12 months.

Other sectors contributing to the drop in employment include: trades, transportation and utilities (-7,200 jobs); professional and business services (-7,000); finance insurance and real estate (-2,700); and manufacturing (-2,300).

Education services and leisure and accommodation services are the only two sectors to add jobs over the past year.

Three factors will weigh down the Phoenix economy in the near term: (1) a record number of unsold homes; (2) a decline in net migration, due in part to an exodus of undocumented workers; and (3) the residual impact of record-high gasoline prices.

While it is unlikely that the Phoenix economy will be airborne before the middle of 2009, the seeds of the city's recovery have already been sown.

The combination of a dramatic 27% year-over-year drop in house prices and an easing in credit conditions (assuming the financial bailout happens) should result in a steady improvement in housing demand in 2009.

Of course, one of Phoenix's most valuable assets — the sun — will also do its part to draw an increasing number of temperature-challenged migrants from the colder northern states and Canada.