Rising COVID-19 cases may spell trouble for Arizona economy

Arizona added more than 4,100 new cases of COVID-19 on Thursday, part of a trend that could have a nasty effect on the state’s economic health and unemployment situation.

New figures from the Arizona Department of Health Services show the number of positive tests is the highest for any single day since early July.

There also were 19 new deaths, bringing the total since the beginning of the pandemic to 6,384.

And there were other signs of a deteriorating situation, including 1,796 people in hospitals with the coronavirus, matching rates not seen since August.

For the moment, that is well within the number of overall beds available.

But former state Health Director Will Humble said in a blog post Thursday that, absent major new measures to curtail the virus, he foresees “another hospital capacity crisis in Arizona in December.” And Humble, now executive director of the Arizona Public Health Association, said that could force implementation of the state’s Crisis Standards of Care, which create protocols for how hospitals and medical professionals make treatment decisions when the demands for services outstrip the resources.

There was no immediate comment from Arizona Health Chief Dr. Cara Christ.

But Doug Walls, announcing the latest jobless numbers Thursday said he could see how rising COVID-19 numbers could put a dent in Arizona’s economic recovery.

Walls, research administrator for the Office of Economic Opportunity, announced the state’s seasonally adjusted unemployment rate hit 8.0% in October. That’s up from 6.5% in September and 5.9% in August, though the last figure may have been artificially low because of sampling and survey issues.

Still, it remains below the 10.7% figure from this summer.

Walls said one reason for that summer spike was a sharp rise in infections at that same time. He said that was a natural effect of the fact that people were unwilling to go out as much.

And that could portend even higher unemployment rates in the months to come.

“If consumers and individuals react in the same way (they did this summer), they might be more wary to go out to restaurants or bars or to grocery stores,” Walls said. “That could have a negative impact on the employment situation for those businesses.”

That is an industry that’s already suffering and was one of the hardest hit by the pandemic — and not just by the virus itself.

Emergency orders issued this spring by Gov. Doug Ducey resulted in the complete closure of all bars and restaurants, along later with movie theaters, gyms and swimming pools. And while they are now allowed to reopen, it is at limited indoor capacity, meaning less need for employees.

In fact, the leisure and hospitality industry has 48,700 fewer workers now than it did a year ago, a drop of more than 14%.

It’s not just bars and restaurants dragging down that sector of the economy. Employment in the hospitality industry — hotels, motels and resorts — is 30.5% less now than last year.

Ducey himself acknowledges the link between the state’s fiscal welfare and keeping COVID-19 infections in check.

“It’s our focus 24/7, because we know how important keeping the virus at bay is to the health of our citizens, and to the health of our economy,” he said Thursday in a prepared speech for the Arizona Tax Research Association.

But the governor the previous day, even facing what he acknowledged is an increase in infections, approved only minor changes in health regulations. These include expanding a mask requirement at schools to now include the surrounding grounds and buses, and establishing voluntary testing sites at the state’s three major airports, including Tucson International Airport.

And Ducey remained adamant he intends to impose no new restrictions, saying Thursday he wants to keep “blood safely pumping through our economy.”

But if Walls is correct, the effects on the economy will occur if people decide on their own they are just not comfortable going out and risking infection.

“If there’s a resurgence and people are pulling back, that is one industry that, if that scenario plays out, that could be impacted,” Walls said.

The latest unemployment report does have some bright signs.

Walls said Arizona has recovered abut 193,000 of the 294,000 jobs since the pandemic began. And while total employment in Arizona remains 3.4% below what it was in February, that’s still better than the national average of a 6.6% loss.

Still, the recovery, to the extent it is occurring, is not across the board.

The state’s manufacturing industry has gained back just 21% of the jobs lost since February, with a 49% recovery of jobs in the information sector and employment in professional and business services at 53% of February levels.

Construction remains at 62% of where it was. Walls suggested, however, there are indicators of better times to come.

One of those is the number of permits taken out by builders for new homes.

Those dropped to fewer than 1,000 a month during the Great Depression, a downturn fueled in part by overconstruction and speculators buying up homes as investments under the premise that real estate prices had nowhere to go but up.

That proved to be false as home prices dropped and people walked away from their houses, leaving a glut on the market.

Since then, there has been a more or less steady increase in new home construction, with Walls reporting nearly 4,800 permits for new housing units in September, the most recent figures available.

The other sign that the economy is increasing is that the number of initial claims for unemployment insurance in the most recent week was 12,367. While that is a small increase from the prior week, it remains far below figures from as recently as early October where new claims topped 400,000, though there is some question about how many of those were fraudulent.

Walls also pointed to a decline in the number of people actually collecting benefits. But here, too, he said while these may be people finding jobs it also could include those who have exhausted their benefits.