George Hammond, EBRC Director and Research Professor
Arizona jobs were back on trend in January
Arizona added 22,700 seasonally-adjusted jobs over the month in January 2023, up from a revised loss of 1,300 jobs in December. The preliminary estimates for December suggested that the state added 3,100 jobs in December.
Strong job gains in January were driven by government (up 8,200), professional and business services (up 6,900), education and health services (up 4,600), leisure and hospitality (up 1,900), financial activities (up 1,100), construction (up 1,000), trade, transportation and utilities (up 400), and natural resources and mining (up 200). Jobs were flat over the month in information, while other services jobs declined by 700 and manufacturing jobs dropped by 900.
Arizona’s seasonally-adjusted unemployment rate dropped to 3.8% in January, down from 4.0% in December. That was slightly above the national rate of 3.4% in January.
With the release of the preliminary January data, the Bureau of Labor Statistics (BLS) has released benchmarked (revised) estimates for prior years. The revisions primarily impact estimates for 2021 and 2022, although data for prior years may reflect revisions as well.
Also, with this release, the BLS has transitioned from 2017 North American Industrial Classification System (NAICS) codes to 2022 NAICS codes. The largest impacts of this change are in retail trade. Stay tuned for more on this in upcoming posts.
The benchmark revisions suggest stronger job growth in Arizona in 2021 and 2022. On an annual average basis, job growth for 2021 has been raised from 3.6% to 4.1%. For 2022, growth has been raised from 3.7% to 4.2%. In percentage terms, construction and professional and business services jobs were revised up significantly in both years.
As Exhibit 1 shows, nearly all major industries in Arizona are now above their pre-pandemic employment level. The one sector that has yet to regain its pre-pandemic peak is government, particularly local government. Overall, total state jobs are estimated to be 151,600 above their pre-pandemic level.
Exhibit 1: Arizona Jobs by Industry, Change from February 2020 to January 2023, Seasonally Adjusted, Thousands
Exhibit 2 shows Arizona total nonfarm jobs relative to two ways of thinking about our pre-pandemic trend. One way to think about that is to ask where jobs would be had we been able to maintain our average growth rate during the five years before the pandemic began. Using that metric, Arizona jobs were 96,400 below trend in January.
However, it’s possible that the pre-pandemic trend is too high a bar. After all, even before the pandemic it was likely that state growth was going to slow for demographic reasons alone. Another reasonable benchmark is the Forecasting Project forecast released in the first quarter of 2020, just before the pandemic began. As the exhibit shows, after a strong showing in January, Arizona jobs were back on trend.
Exhibit 2: Arizona Total Nonfarm Jobs, Actual vs. Trend and Forecast, Seasonally Adjusted, Thousands
