Arizona’s unemployment rate had big drop in August, but economists see decline in workers as cause

Arizona News Business
Arizona unemployment

Arizona’s jobless rate dropped sharply last month, tumbling to 5.9% from 10.7% in July despite lingering softness in many industries. The change put the state’s unemployment measure back near — but not quite down to — pre-coronavirus levels.

Gov. Doug Ducey hailed the Thursday report from the state Office of Economic Opportunity, asserting that “Our economy is coming back” and that there are “help-wanted signs all across the state.”

Some economists, however, questioned the magnitude of the improvement and attributed much of the decrease to people dropping out of the labor force.

Arizona created nearly 80,000 net new jobs last month, but employment gains were not broad-based, with government jobs accounting for about three in five of the additional positions created.

Still, 150,000 people in Arizona left the labor force from July to August, likely reflecting the difficulty many people have in finding work.

Much of the private sector — the main engine of long-term growth — remains hobbled by the economic downturn triggered by efforts to slow the spread of the COVID-19 virus.

And as discouraged job seekers stopped looking for work, they no longer were counted among the unemployed.

“It is not a sign of improvement in Arizona’s labor market because it was primarily driven by a decline in the labor force,” said George Hammond, director of the economic and business research center at the University of Arizona. “The state economy is still struggling with the economic consequences of the COVID-19 pandemic.”

The jobless-rate improvement was “due in part to people leaving the labor force and not being counted as unemployed,” agreed Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at Arizona State University.

Rates drop but private sector lags

The trend in Arizona’s seasonally adjusted jobless rate was mirrored in metro Phoenix, where the jobless rate fell to 5.9% in August from 10.4% in July. It remains above the 4.2% level one year earlier, in August 2019. Metro Phoenix accounts for four in five statewide jobs and has increased that proportion in recent years.

Arizona’s unemployment rate came in significantly below the U.S. level of 8.4% in August, which was down from 10.2% in July, but above the 3.7% mark for August 2019.

Of the additional 79,200 nonfarm jobs created in Arizona last month, government agencies accounted for 48,800 net new positions. Those were nearly all attributable to jobs in local schools and colleges/universities.

The private-sector increase came in at 30,400, though that was above the historical private-sector employment pattern for August. Overall, the private sector accounts for 85% of Arizona’s nonfarm employment of 2.84 million.

Over the past year, only two of 11 industry sectors tracked by the Arizona Office of Economic Opportunity have boosted employment, led by the trade/transportation/utilities group. In contrast, the leisure/hospitality sector is still down 63.5%, and employment in professional/business services is off 28%.

Governor remains upbeat

Ducey acknowledged that the state’s economy still has much room for improvement, but he said the latest numbers show Arizona is moving in the right direction.

“The rate went down because employment increased in the state of Arizona,” he said, adding that there are “jobs available all across the state” and that the “rebound is across the board.”

As for discouraged workers, Ducey said that they need to know that positions are available, at employers ranging from online-retailing giant Amazon.com to Axon Enterprise, a maker of stun guns and body-worn cameras. “They can re-engage and join the workforce.”

The Governor’s Office also highlighted an August report that evaluated Arizona as having the sixth-best economy in the nation. The study by 24/7 Wall Street examined four criteria: each state’s June unemployment rate, five-year growth in state Gross Domestic Product, five-year growth in state jobless rate and each state’s poverty rate. Utah placed first overall in the study, followed by Idaho, Washington, Colorado and Maryland.

Arizona graded above-average in the first three categories but was pulled down by a 14% poverty rate, which was 14th highest in the nation.

Arizona Republic reporter Maria Polletta contributed to this report.

Reach the reporter at russ.wiles@arizonarepublic.com.

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