Arizona’s Office of Economic Opportunity (OEO) just released the state’s latest monthly employment report, with updated numbers for July. The new numbers are a mixed bag for Arizonans and the state’s economy, with the unemployment rate increasing and non-seasonally adjusted employment dropping by 9,400 jobs, coupled with a good boost in construction. Other sectors continue to struggle, which should not come as a surprise to anyone who’s followed our recent posts, and private sector growth is not where it should be.
Two months ago, we took a deep dive into Arizona’s jobs data. As Governor Katie Hobbs claimed credit for jobs created in the state since taking office, we rang alarm bells about concerning trends, namely losses in the manufacturing, construction and hospitality sectors and the rapid growth of government jobs. Our initial report was met with denials and gaslighting from the governor’s staff and their media defenders, but the next monthly jobs report (for May), again, confirmed our concerns about a weak private sector, with disproportionate growth of government jobs.
Fast forward one month to the June jobs report, and for the second straight month, Arizona shed thousands of private sector jobs. Notably, manufacturing and construction had their respective weakest June numbers in at least 10 years. While other industries may seasonally struggle, June is usually a stronger month for both industries. Construction recovered its losses in July, but manufacturing plummeted further.
Most importantly, in the first seven months of the year, government employment grew 66 percent faster than the private sector. In fact, under 80 percent of new jobs this year were in the private sector, despite the private sector making up 87 percent of all jobs when Hobbs took office.
Several months of poor jobs results, on their own, might not be immediate cause for alarm, but there are warning signs popping up elsewhere. For instance, the monthly jobs reports discussed above are preliminary estimates of the data, with revised more accurate data released the following month by the Bureau of Labor Statistics (BLS). This year, Arizona’s jobs numbers have been revised downward three straight months, and four out of six months this year, to the tune of 4,600 fewer jobs than originally estimated.
To make matters worse, last week BLS released revised data for private sector job gains and losses from growing or contracting businesses in the fourth quarter of 2023. In Q4 last year, Arizona yielded a net employment loss of 9,980 jobs, and gross job losses exceeded gross job gains in 8 of the 11 industry sectors in the state. For context, Arizona had not had a negative quarter since Q2 2020, in the middle of the pandemic. To make matters worse, from April to May, Arizona had the biggest drop in job openings of any state.
All of this comes on the heels of multiple high profile layoff announcements by major employers that could affect Arizonans. The Hobbs administration can trumpet her jobs record through endless press releases[1], but the trendlines for private sector employment aren’t anything to cheer for. And if Governor Hobbs is in denial about the problem, how can we trust her not to make it worse?
[1] August is historically a stronger jobs month than July, with school year hirings reflected in the data and other seasonal factors, so we expect the governor’s office will have a press release ready touting the topline numbers. The real question will be what the underlying data shows.