Economic Pandemic

Pandemic job recovery

George Hammond, the director of the UA’s Eller Economic and Business Research Center, said that while the Arizona economy is bouncing back from the upheaval caused by the COVID-19 pandemic, Tucson’s job recovery has been slower than Phoenix and Flagstaff.

Hammond presented his newest compilation of economic data virtually at the Arizona Economic Outlook event on Nov. 30. Hammond advised attendees to keep their eyes on Arizona’s labor and housing markets.

Tucson is behind Flagstaff and Phoenix in replacing jobs lost in the beginning months of the pandemic. Tucson had a 77.5% job replacement rate, while Flagstaff had 85% and Phoenix had 105.8%. Hammond found hospitality and leisure jobs were significantly affected by the pandemic, leading him to believe this may be one of the reasons Tucson is falling behind in job replacement rates.

“Government jobs, leisure, and hospitality jobs are way below where they were before the pandemic began while trade, transportation, and utilities jobs are way above,” Hammond said.

Another element Hammond presented to explain Tucson’s job replacement lag is the region’s population demographics. According to United States census data, 14.3% of Tucson’s population is 65 and older.

“That demographic is a little bit slower to go back to the kinds of in-person activities that we were enjoying before the pandemic began,” Hammond said.

With fewer customers from older demographics using hospitality or leisure services, there is less need for staff. However, the pandemic has significantly impacted the labor market in multiple ways. People 65 and older are less likely to leave the house and many Americans across the nation are rethinking what they want from jobs.

“Employers are struggling to hire while employees or at least some employees, are sitting on the sidelines and kind of rethinking their lives, what they want to do with their lives, what they want their career and occupation to look like going forward,” Hammond said.

Hammond described the labor market as being in “turmoil” but forecasted widely available COVID-19 vaccines will promote job growth and population growth in the future.

This point was also made by former Chief Economist at Chase Anthony Chan, who also presented at the Nov. 30 Economic Outlook virtual event. 

“I think everybody should make up their own minds, but I just don’t want people to die because when they die that’s when you get nervous about spending, you get nervous about economic growth,” Chan said.

Population growth is essential to Arizona’s economy. More people leads to more workers, more spending, and more contributions to the local economy. Arizona’s population growth of 12% is well above the national average of 7.4%. Tucson’s population growth is below the national average at 6.4%. 

Migration and natural increase play an important role in Arizona’s population growth. Arizona’s natural population increase is the difference between birth and deaths. As the Baby Boomer generations grow older, deaths are expected to outweigh births in Arizona. Hammond reported that Arizona has had a declining natural increase since 2007 and Arizona’s natural increase rate was negative for the first time last year.

“That means our population growth is going to be completely driven by net migration,” Hammond said. “Since net migration is relatively volatile, that means our overall population growth is going to be more volatile in the future than it has been in the past.”

With Arizona’s rapid population increase, the housing market skyrocketed in the last year. Tucson’s median housing prices increased 20.4%. This can be attributed to high demand and low supply. 

But Hammond reported Tucson housing permits had a stronger increase than Phoenix. Total housing permits in Tucson rose by 30%, while Phoenix permits rose by 11.9%. More housing supply should assist with demand and slow the stark increase in housing costs.

“Overall I think we’re in good shape to continue to be one of the fastest growing states in the nation,” Hammond said. “Phoenix is going to continue to be the engine of state growth, Tucson will participate as well, we’ll see the Tucson economy continue to add jobs, population and income, but at a somewhat slower pace than we’ll see in Phoenix.”