PHOENIX — Arizona has been making strong economic strides in recent years, and nobody has touted the progress more than Gov. Doug Ducey.
In a series of news releases in recent weeks, the governor’s office has been quick to point out improvements in areas including jobs, personal income and overall economic size.
Ducey’s statements are correct but don’t provide a complete picture of where the state ranks.
Economists say the full picture is more complex.
Metro Phoenix ‘leading the nation’ in jobs
In a July 3 statement, the Governor’s Office correctly noted that the Phoenix metro area led the nation in net new jobs created over the past 12 months.
Ducey’s office was referring to a U.S. Bureau of Labor Statistics report. The 66,500 net nonfarm jobs added in the Phoenix area over the past 12 months through May represent a 3.2% growth rate — tops for any metro area with a population over 1 million.
“Arizona’s pro-business policies, low taxes and light regulations are delivering more job opportunities and bigger paychecks for Arizona workers,” Ducey said.
Analysis: Arizona’s job market has improved, but not as dramatically as the federal report indicated. Yes, employment growth — new jobs added minus jobs lost — has been high in metro Phoenix.
But Arizona’s jobless rate as of May, 4.6%, was still above the U.S. average, as was the metro Phoenix figure of 4%. Nearly all other big cities have lower unemployment rates — San Francisco, San Diego, Denver, Dallas and Boston each are in the 2% range and thus have less room for further improvement.
Arizona and metro Phoenix are still playing catch-up to the job gains recorded earlier by much of the rest of the nation.
“Phoenix is really driving that (statewide growth),” said George Hammond, an economist at the University of Arizona. “Tucson is expanding, but at a much slower pace.”
Tucson’s 4.4% unemployment rate as of May was lofty for larger cities.
And Yuma had the highest urban jobless rate anywhere in the country at 17.1%, which partly reflects seasonal hiring in agriculture, said Lee McPheters, an Arizona State University economist.
Arizona also attracts a lot of newcomers, which tends to keep the unemployment rate high, as it takes time for many of them to find work.
‘Personal income growth best in nation’
Arizona ranked second nationally for personal-income gains in the first quarter of 2019, compared with the fourth quarter of 2018, the Governor’s Office said on June 26.
“Arizona ... had a faster growth rate than every neighboring state, in addition to states such as Texas, Florida and California,” the office said.
Arizona ranked highly for personal-income growth on a per-capita basis, too. As noted by the Governor’s Office, per-capita personal income here grew at an annualized rate of 3.8%, compared with 2.8% nationally.
“Arizona’s booming economy is delivering larger paychecks for our citizens,” Ducey said. “With personal income growth outpacing the national average, Arizonans have more money in their pockets to provide for their families.”
Analysis: Arizona did indeed rank No. 2 for personal-income growth in the first quarter, with an increase of 5.5%, second only to West Virginia (5.6%) and comfortably ahead of the U.S. average of 3.4%. Nor was it a flash in the pan, as Arizona has generated increases of 5% or better in four of the last five quarters.
But here again, Arizona is playing catch-up and remains a moderately poor state. Arizona ranked 42nd among the states with income of $43,650 per resident at the end of 2018, says a U.S. Bureau of Economic Analysis report.
That was well below the U.S. average of $53,717 and badly trailed Connecticut and Massachusetts, both above $70,000.
“Historically, wages in Arizona tend to be 5% to 10% lower than the national average,” McPheters said.
Hammond said many newcomers are willing to accept lower-paying jobs to live in a state with a relatively good climate and an affordable cost of living.
Compared with Arizona’s personal-income ranking of 42nd among the states in 2018, Arizona was 37th a decade earlier, in 2008. So for all the recent gains, “Arizona has moved backward in this one important indicator,” McPheters said.
The income of Phoenix-area residents is about 15% below the U.S. average, and the gap for Tucson is nearly 19%, according to data tracked by Hammond.
Personal income in Tucson has been lagging substantially since the mid-1970s.
‘Fourth in the nation for GDP growth’
Gross Domestic Product is the key measure of the size of an economy, so larger numbers and faster growth rates are better. The Governor’s Office on May 1 touted a Bureau of Economic Analysis report showing that Arizona’s real or inflation-adjusted GDP rose 4% in 2018, for the fourth-best rate nationally.
“Arizona’s GDP growth outpaced that of 46 other states including California (3.5%), Florida (3.5%), and Texas (3.2%),” Ducey’s office said. “A growing economy means more job opportunities, bigger paychecks for Arizonans and more investments in the things that matter like education, child safety and public safety.”
Analysis: Ducey was justified in highlighting the state’s good performance, although Arizona likely was aided by a strong regional showing and migration trends. The three states above Arizona last year all are in the West — Washington, Utah and Idaho.
This trend of regional strength has been apparent for several years.
A Bureau of Economic Analysis study examined the four-year trend from 2015 through 2018. Arizona ranked eighth overall, a solid showing, with annualized economic growth slightly over 3%.
Still, six regional neighbors logged higher economic growth over the four-year period, led by Washington and including Oregon, California, Utah, Colorado and Idaho. Florida also was a bit higher for GDP expansion.
The nation’s gradual western, and southern, geographic shift has helped Arizona’s economy.
“During the current expansion, as in recent Arizona expansions, in-migration from other states has been a major growth catalyst,” McPheters said. “This boosts the economy, since a large proportion of movers are of working age, and retirees above working age typically bring with them accumulated wealth.”
Newcomers also require more goods, services and infrastructure — from housing and haircuts to supermarkets — so the economy expands.
Last year, Arizona ranked second, behind Florida, for the highest net population inflow, McPheters said.
Hammond watches an indicator that he said affects the state’s future GDP and isn’t so favorable for Arizona: educational attainment. Compared with national averages, the percentage of working-age adults with college degrees is below average for metro Phoenix, metro Tucson and Arizona overall.
Educational attainment ties into state GDP because it tends to drive wage growth, innovation and productivity, Hammond explained. “It tells us where we’re heading.”
