Gila County has shared in the stronger-than-expected economic recovery in recent months — but there’s worrisome fine print on our economic performance.
Gila County’s unemployment rate remained at 6.8% in May, compared to 6.7% statewide and 6% nationally.
That means the total number of people on the unemployment rolls in Gila County has declined by 28%.
So that’s good.
But here’s the thing: The county’s workforce has declined by nearly 3% compared to a year ago and in May stood at 20,790, according to compilation of the federal figures by the University of Arizona’s Eller School of Business the workforce includes people with jobs and people still looking for jobs. (https://www.azeconomy.org/data/gila-county/).
We can probably expect better news when the U.S. Department of Labor releases the county-level June figures. Nationally, the U.S. economy in June created 850,000 jobs — the best performance in 10 months.
Moreover, average hourly wage earnings rose 0.3% for the month — up 3.5% for the year. Meanwhile, in May prices climbed at a 5% annual rate and the federal budget deficit has also climbed into record territory — some $3 trillion for the year.
Other figures from the monthly U of A tracking report for Arizona provided the picture of a steadily improving economy, still shadowed by a decline in the workforce, some labor shortages, rising wages and a housing boom.
Gila County’s slogging along, not quite matching the state average dominated by Maricopa County.
For instance, after booming in March and April, Gila County building permits plunged in May — dropping 14% compared to a year ago. So the housing market is still hot — driven by a lack of inventory — but new construction has started to slow.
The county’s lag in its recovery probably reflects the continued reliance on tourism — the sector most battered by the pandemic. Another bad wildfire season and forest closures have added additional problems so far this summer.
U of A Economic and Business Research Center Director George Hammond said “the Arizona economy continues to recover from the pandemic, but progress has been uneven. The travel and tourism sector is improving, but still has a long way to go.”
The transportation and warehousing sectors are adding jobs rapidly due to online sales, but that boom has largely bypassed rural areas. In fact, retail sales have in many cases hurt storefront operations that remain the lifeblood of small towns.
Hammond continued, “Federal fiscal stimulus has driven strong income growth, which boosted consumer spending — but that will end later this year. House prices continue to surge, driving down affordability. Arizona’s population rose at a faster pace than most states during the past decade, but growth was slow relative to the past.”
So far, the state has replaced 71% of the jobs it lost to the pandemic recession. That’s better than the national replacement rate of about 63%. However, it still leaves Arizona 94,000 jobs short of the pre-pandemic peak.
Leisure and hospitality — the mainstay of the economy in Rim Country — took the biggest hit. That sector alone shed 45,000 jobs in Arizona.
The center’s “optimistic” scenario suggests Arizona will pass its pre-pandemic peak in employment before the end of the year. However, that assumes the effort to vaccinate at least 80% of the population doesn’t stall out before the spread of new variants causes a fresh COVID peak.
Only about 52% of the state’s working age adults remain in the labor market — compared to about 62% nationally. Before the pandemic, Arizona had a workforce participation rate of about 59%.
“Overall, there appears to be significant slack in the state labor market,” said Hammond. “If that is true, why all the discussion of labor shortages?”
Arizona refused the latest extension of enhanced unemployment payments from the federal government — which boosted maximum weekly benefits from about $240 per week to more than $800 per week. Gov. Doug Ducey rejected the extra money on the grounds that it might keep the unemployed from returning to work. So far, that hasn’t seemed to have much impact on the unemployment rate.
On the other hand, the legislature just approved an increase in the state’s maximum unemployment rate — currently one of the lowest in the nation. The new rate will boost the maximum to $320 a week.
Hammond attributed the modest overall impact of the 14% unemployment rate during the pandemic in large measure to federal stimulus spending. The original CARES Act resulted in an estimated $19 billion increase in the state’s personal income in 2020. The 8.2% rise in personal income flew in the face of a fourfold increase in the jobless rate.
The stimulus money may have also supported a rise in retail sales, which left most local counties and towns in much stronger shape than they originally anticipated. Taxable retail sales jumped 17% from January 2020 to February 2021. However, the travel and tourism sectors mostly saw declines — including a 7% decline in bars and restaurants and a 43% decline in hotels.
Hammond noted, “Overall during the next decade, Arizona is forecast to add 643,000 new jobs. The Phoenix MSA is expected to continue to drive state economic gains during the forecast and adds 576,000 jobs. The Tucson MSA contributes as well, but at a slower pace, adding 53,000 jobs.”
Most rural areas will likely continue to lag behind — as they have for the past decade.
However, things could go a lot worse. “The pessimistic scenario assumes a resurgence of the outbreak driven by a new variant. Containment measures are reintroduced, slowing consumer spending and delaying recovery. Under these assumptions, Arizona jobs return to their pre-pandemic peak in the third quarter of 2022 and adds 577,000 new jobs during the next decade,” concluded Hammond.