Arizona’s economy is rebounding from the pandemic, but uncertainty still looms as COVID-19 cases are rising and federal aid programs are about to disappear, one of the state’s leading economists said last week.
For now, Arizona is seeing positive signs with continued population growth, employees returning to work and retail spending on the rise, said Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at Arizona State University (ASU), who spoke during the 57th annual ASU/PNC Bank Economic Forecast Luncheon last week.
Full recovery should come next year, but it will require more federal stimulus to help those still affected by the pandemic, said McPheters, the editor of the Western Blue Chip Economic Forecast publications who also oversees the Job Growth USA website that tracks employment across states and metropolitan areas.
Here are the key takeaways from the luncheon:
Before Covid hit, Arizona ranked second in the country for jobs creation. The state has now recovered 66 percent of the jobs lost to the pandemic this year and is on track to add about 40,000 more — as long as there is an effective vaccine and additional federal stimulus.
“That will have the effect of propelling job growth in Arizona back up to around 4 percent,” McPheters said.
Currently, Arizona is seeing some of the highest rates of job growth in the country in four sectors: transportation and warehousing; wholesale trade; professional, scientific and technical; and retail trade. Over the next year, the state is projected to see employment return to full force in 2021 as it adds 115,000 new jobs.
Population, housing, spending up
Other positive signs for recovery are the numbers of people continuing to move to Arizona, which is fueling the robust housing market. Projections are for another 100,000 residents to arrive in 2021.
Consumer spending has now returned to January levels. Retail spending is up more than 17 percent.
Outsized negative impact on low wage earners, service industries
Those still in need of assistance are small businesses and lower wage workers.
While high and mid-wage jobs have recovered to January levels, low wage jobs are down 20 percent.
One of every four Arizona small businesses is now closed due to the pandemic. Restaurant spending is down 26 percent. Entertainment and airline sectors remain depressed.
And of the 285,000 unemployed in the state, they predominantly come from lower-wage industries, making recovery even more challenging for these displaced employees.
Federal assistance set to expire day after Christmas
Federal aid programs that have helped hundreds of thousands of citizens and small businesses in Arizona are set to expire on Dec. 26.
“There’s a serious issue as these policy programs wind down,” McPheters said. “Consumers saved quite a bit of money over 2020, but those savings are being exhausted and food insecurity is becoming a problem.”
U.S. to see “very gradual” economic recovery
Stuart Hoffman, senior economic adviser for the PNC Financial Services Group, who also spoke at the event, predicts a very gradual economic recovery for the nation as a whole.
The U.S. economy lost 22 million jobs with one out of every seven people becoming unemployed in March and April. About a half of those jobs have returned.
But like Arizona, recovery will depend on federal aid and what happens with the vaccine, Hoffman said.
“I want to emphasize that the strength and durability of any economic recovery depends on the path of the pandemic, which is getting much worse, and on the arrival of a vaccine, and of course vaccinations, consumer willingness to resume normal activities and an additional federal stimulus, which we think is absolutely necessary,” he said.
About the JPMorgan Chase Economic Outlook Center
Established in 1986, the Economic Outlook Center informs individuals and corporations about the likely future course of business and economic events, thereby enhancing decision-making. Led by Lee McPheters, current offerings include:
Covid-19 and the Economy Dashboard for Arizona and Maricopa County.