August 8, 2022

George W. Hammond

Here’s how Arizona labor market is remaining tight

Arizona’s seasonally-adjusted unemployment rate ticked up to 3.3% in June, up from 3.2% in May. That was slightly below the national rate of 3.6%. Arizona’s rate remains very low, signaling an extremely tight Arizona labor market.

The state added 15,000 jobs in June (seasonally adjusted), up from a revised gain of 7,000 in May. May growth was revised up from 5,800 in the preliminary estimate.

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Over-the-month job gains were driven by government (up 8,900), education and health services (up 3,100), leisure and hospitality (up 1,200), manufacturing (up 1,000), construction (up 800), professional and business services (up 600), financial activities (up 400), and information (up 300). Trade, transportation, and utilities dropped 1,200 jobs while other services lost 100. Jobs were stable in natural resources and mining.

As of June, Arizona jobs were 67,500 above their February 2020 level. Exhibit 1 shows how that breaks out by industry. Government jobs were down 10,500 during the period, with weakness concentrated in state and local government. Leisure and hospitality jobs were down 9,600, with accommodation and food services accounting for most of the gap.

In contrast, jobs in trade, transportation, and utilities were up 49,100, with most of the growth in transportation and warehousing, as well as retail trade. Financial activities were up 11,400 from February 2020, followed by manufacturing (up 9,900), construction (up 6,500), education and health services (up 5,800), professional and business services (up 3,400), and information (up 1,500). Jobs in other services and natural resources and mining were close to their February 2020 level.

Exhibit 1: Arizona Jobs by Industry, Change from February 220 to June 2022, Seasonally Adjusted, Thousands


Phoenix MSA jobs were up 70,900 from February 2020 to June 2022. Exhibit 2 shows how that growth was distributed across sectors.

Exhibit 2: Phoenix MSA Jobs by Industry, Change From February 2020 to June 2022, Seasonally Adjusted

In contrast, Tucson MSA jobs were down 5,500 from February 2020 to June 2022. Exhibit 3 shows how that was distributed across industries. The pattern was somewhat similar to the state and Phoenix, with the notable exception of professional and business services. This sector remained 6,200 jobs below February 2020 in Tucson, while statewide and in Phoenix it has more than recovered. The gap in Tucson is primarily due to losses in a sector that includes call centers, employment agencies, and services to buildings (like janitorial services). This matters because if this one sector had performed in Tucson as it did statewide or in Phoenix or even nationally, then Tucson jobs would be back to their pre-pandemic level. Further, job losses of this magnitude have not made it into the media in Tucson. It is not clear what is driving this result in the data.

Exhibit 3: Tucson MSA Jobs by Industry, Change From February 2020 to June 2022, Seasonally Adjusted, Thousands

While Arizona has more than replaced all of the jobs lost during the early months of the pandemic, jobs remain 129,000 below where they likely would have been had the state been able to sustain its average growth during the 2015-2019 period. Still more work to be done.


George W. Hammond, Ph.D., is the director and research professor at the Economic and Business Research Center (EBRC).