When will all the jobs be back? That is a major question for national and local economies alike. In this article, we look at which industries are driving the rebound within two U.S. metros closest to a full recovery of jobs, though, both still have some ways to go to reach stabilization.
In July, Tucson, Arizona was the closest to its pre-pandemic employment level of the top 50 largest metropolitan areas. While its job base was down 4.0% from February, it registered less than half of the 8.4% deficit for the U.S. average.
If we trim the list to look at only the very largest metro locations, of those with an employment base of at least 2 million people, Phoenix is closest to its previous employment level. While it is still down 5.6% from earlier in the year, Phoenix is outperforming other large metros such as Dallas (6.0%), Miami (7.9%) and Chicago (8.6%). Metros such as Los Angeles, San Francisco and New York are off by more than 10%.
So, what is driving employment in the Grand Canyon State?
Trade is Strong
Retail trade held up much better in Phoenix and Tucson compared to the national trend. In the depths of job cuts in April 2020, retail trade had lost 14.9% of its national employment base from a year earlier. The drops in Phoenix (6.9%) and Tucson (3.1%) were much less severe. The pace of improvement in Retail Trade has flattened in recent months, but the sector remains in much better shape in these Arizona metros than the national benchmark. A continued rebound across the broader economy will likely be needed to see sustained growth through the end of the year.
Sources: Bureau of Labor Statistics, LaborIQ® by ThinkWhy; Note – August metro data not available at publication date
Peeling back the onion a little further and looking at the types of business driving retail growth, Phoenix and Tucson both topped the national job growth rankings for the subsector of General Merchandise Stores - including Warehouse Clubs and Supercenters. Those types of companies experienced astonishing annual job growth in July of 17.6% and 14.2%, respectively.
Additionally, Phoenix ranked third nationally in employment growth in the Building Material, Garden Equipment, and Supplies Dealers category within the Retail Trade sector, expanding 10.9% from a year earlier. Wholesale Trade was also strong in the metro, up 6.3% from the prior year, which was good enough to rank second nationally.
Will Educational Services Maintain Strength?
Phoenix showed a large jump in year-over-year job growth for Educational Services. From an economics point of view, this sector will be interesting to watch through the end of 2020. Educational Services is a sector that tends to show a major seasonal impact, as schools go on break each summer. COVID-19 dramatically changed the normal pattern, which is why the Department of Labor had to change its methodology for seasonally-adjusted unemployment insurance claims.
The chart below shows the non-seaonally adjusted employment level for Educational Services in the area, which includes the flagship campus of Arizona State University in Tempe, Arizona. It is easy to see the dip in the sector’s employment level early in the summer break based on 2018 and 2019 data, and how the jobs were recouped by August in those years. The Bureau of Labor Statistics and the Department of Labor provide types of data series that adjust for these seasonal differences to avoid an overreaction on either side of the change.
Sources: Bureau of Labor Statistics, LaborIQ® by ThinkWhy
The challenge when analyzing the trend for 2020 is that the decline, and subsequent improvement, did not happen during the normal periods. Jobs in Educational Services were lost in April instead of June, and rehiring began a month or two earlier than normal. Will the trendline continue to rise through the end of 2020, or will it flatline?
While educational services can potentially face lingering impacts from COVID-19 due to social distancing and budget impacts, reporting shows Arizona State University’s enrollment is up 7.6% for Fall 2020 compared to a year prior. While the university offers multiple learning options, and is widely known for its online classes, close to 75,000 students are expected to be on campus in locations across Arizona based on an article from the university’s website, dated August 20, 2020. The article states another 53,000 students will be fully online, the university’s largest total to date.
Not all Sectors are Immune
While Phoenix and Tucson have success stories in some industries, not all types of businesses have been immune to the impacts of the pandemic. Leisure and Hospitality, Information and Professional and Business Services were still noticeably down in July from a year prior. Still, growth in the Trade and Educational Services sectors were enough to make the overall labor market stronger than other locations. As a note, Arizona was one of the first states approved for FEMA’s supplemental unemployment benefit, which was designed to help those in need and to sustain the economic rebound.
LaborIQ by ThinkWhy continuously monitors and forecasts labor data at all levels, measuring impact to cities, industries, occupations and business across the U.S.