University of Arizona economist George Hammond said Thursday morning that overall, Arizona’s job recovery continues but “we’ve still got a long way to go.”
Hammond, director of the Eller College’s Economic and Business Research Center, told a breakfast crowd that from February to April 2020, more than 330,000 jobs were lost in first months of the pandemic. Then over the next two months, Arizona “saw really substantial increases with callbacks once the stay at home order expired and since June we’ve seen continued recovery but at a much slower pace than than those first two months.”
As of April, Arizona has recovered over 71% of the jobs lost between February and April last year, better than the U.S. reported 63% recovery of jobs lost, said Hammond. But Arizona is still about 95,000 jobs below pre-pandemic numbers. Job recovery also varies across the state. Tucson is just over 19,000 jobs below pre-pandemic levels, better than Phoenix at 64,000 jobs below where it was before the pandemic. Cities like Lake Havasu City, Kingman and Sierra Vista are back to the employment levels before the pandemic.
Hammond also notes job growth is disproportionately concentrated in Phoenix, accounting for about 80% of the growth in Arizona.
The question now is how to return to pre-pandemic levels?
“What would happen if we continued to add jobs at the same pace that we have from June of last year to April of this year?” asked Hammond. “That pace is about 9000 jobs per month and if we can keep that pace up, going forward, we’ll be back to that pre-pandemic peak in March of next year.”
However, maintaining a pace of 9,000 jobs a month is actually rapid growth for Arizona, said Hammond. On average Arizona’s monthly job group during the five years before the pandemic was over 6,000 jobs per month. Hammond estimated we would not return to the pre-pandemic peak until August 2022 at that rate.
Although there is uneven impact from the pandemic across industries, Hammond said across most industries unemployment is below the pre-pandemic peak. The biggest gap continues to be in leisure and hospitality at about 46,000 jobs below pre-pandemic levels. Other industries down in employment include government jobs, primarily in state and local jurisdictions; professional and business services, like call centers; engineers, lawyers and management consultants; and education and health services, down about 8,000 jobs from where it was before the pandemic began.
The one industry that did well during the pandemic was trade, transportation and utilities, due to the growth in transportation and warehousing, said Hammond.
“This reflects in part the shift of our activity to more online activity, more online shopping, and to more delivery services. This really boosted employment in this sector,” said Hammond. “We are going to see and have already seen the beginnings of a little bit of retrenchment there as activity gets back to normal. We’re going to reduce our online shopping a little bit and our reliance on delivery services as things get back to normal but for the longer run this sector will continue to add jobs at a pretty rapid clip.”
As of April, Arizona’s unemployment rate is a little above the national average at 6.7%, with both the state and national average returning to the unemployment rate last seen in 2014. With significant slack in the state and national labor markets, Hammond asks, why are we hearing so much about labor shortages?
“Some of it’s being driven by fear. Workers, particularly in the travel and tourism sectors, where you have a lot of close contact with strangers, they may still be afraid of contracting the virus. We have made progress in terms of vaccinating residents but we still have a long way to go,” said Hammond. “In addition, people in the industries that were most affected by the pandemic, if they were close to retirement, they may have chosen to retire. They may have also switched industries and may not want to go back.”
Hammond speculates some workers may have transitioned to the rapidly growing sector of transportation and warehousing. Labor force participation of women could also be impacted by reduced childcare options. He notes the more generous unemployment insurance benefits created during the pandemic through the various federal coronavirus relief aid could also contribute to the labor shortage reports.
“There are a lot of factors driving the reports of labor shortages that we’re seeing. One thing to keep in mind is that those are temporary,” said Hammond. “They’re gradually going to dissipate as we move forward through the summer, and we should see job growth pick up some steam and the unemployment rate continue to trend down.”
The center launched a set of weekly indicators in the travel and tourism sector, tracking U.S. weekly hotel occupancy rate, weekly U.S. box office sales and movie theaters, people passing through TSA checkpoints, and seated diners and restaurants using the OpenTable app. The travel and tourism industry, hit hardest during the pandemic, continues to recover.
“Hotel occupancy rates still are much better than it was last year at this time but it’s still significantly below where we’d normally be at this time of year,” said Hammond. “Arizona’s hotel occupancy rate is significantly above the national average. But even there, we still have some work to do.”
Overall movie box office sales are incredibly lower than where they would expect them to be at this time of year, since there are not as many people heading to theaters and studios are not releasing the same slate of movies, said Hammond. He expects it would improve with increased vaccinations and as people feel more comfortable.
For the week of Memorial Day weekend, Hammond expected around 16 million passengers per week during normal times, but for the last week there were more than 11 million passengers, which is better than the same time last year.
According to Hammond, restaurants and bars are faring better, with taxable sales at pre-pandemic levels. He also noted gas sales are up as people begin to drive more, but certain segments of travel and tourism remain way below where they were before the pandemic, like hotels and motels along with the amusement and recreation sector.
Over the past year, the housing market stayed strong, with rapidly rising housing prices. Housing permits increased for both single and multifamily to over 60,000 permits, the highest level of permit activity since 2006, Hammond said.