During the economic expansion years of 2003 through 2007, Arizona’s economy grew at a faster rate than that of the nation as a whole. In 2005 and 2006, Arizona was one of the top-three fastest growing states in the nation, economically.
In 2007, Arizona fell to 28th and in 2008 Arizona’s economy was 43rd in the nation, according to gross domestic product (GDP) growth rates published by the U.S. Bureau of Economic Analysis (BEA). Arizona’s GDP fell by 0.6 percent in 2008.
The decline in construction was the major cause of the slowdown, subtracting 0.98 points from the state’s GDP in 2008. This was followed by finance and insurance, which subtracted 0.68 points, and retail trade, which subtracted 0.34 points, according to BEA.
From August 2007 through August 2010, Arizona lost 284,000 jobs, according to the Arizona Department of Commerce (ADOC). The hardest hit industries were construction, which lost 112,800 jobs; professional and business services, which lost 58,500 jobs; and trade, transportation, and utilities, which lost 45,200 jobs.
Within the trade, transportation, and utilities industry grouping, 70 percent of jobs lost were in retail trade. Arizona’s unemployment rate rose from a low of 3.6 percent in July 2007 to a high of 9.7 percent in August 2010 — its highest level since August 1983. As of late 2010, there was only a faint sign of improvement in the statewide employment situation, with September job numbers showing a 0.5 percent increase over September 2009, according to ADOC.
During the expansionary years, Arizona‘s economic growth was fueled by population growth, which led to a boom in construction and ancillary industries. With the nationwide recession that began in December 2007, population and economic growth slowed considerably. Although the recession bottomed out in June 2009, the pace of the recovery remained slow through the end of 2010, as this document was being prepared.
SEAGO areas impacted disparately
Areas within the SEAGO service area were impacted disparately. Of the four counties within the SEAGO region, Cochise County was least impacted by the economic downturn, largely due to the presence of Fort Huachuca and the large number of federal government jobs. The hardest hit county in the SEAGO region was Santa Cruz County.
The counties within the SEAGO region that were hit hardest by the economic downturn saw the most improvement in 2010. Cochise County, which was spared the most damaging effects of the downturn, had not yet shown signs of significant improvement in the closing months of 2010.
As of September 2010, Cochise County’s unemployment rate remained high and economic activity remained unsupportive of a scenario of significant improvement in the immediate future. The trend in unemployment in Cochise County in the first 9 months of 2010 was generally upward, according to ADOC figures. Nonetheless, Cochise County‘s unemployment remained considerably below that of the SEAGO region overall, as well as that of the state and nation.
Santa Cruz County hardest hit
In Santa Cruz County — the hardest hit area in the SEAGO region — the trend in unemployment was upward in the first 4 months of 2010, but beginning in May this reversed with the unemployment rate falling by 3.5 percentage points from May through September, according to ADOC figures.
The monthly unemployment rate, however, remained uncomfortably high at 15.1 percent in September. It is important to note, however, that at peak employment in recent years, Santa Cruz County’s unemployment rate did not dip below 6.7 percent.
This is higher than the level economists consider the natural rate of unemployment (i.e., zero cyclical unemployment with combined structural and frictional unemployment between four and six percent [e.g., unemployment due to job skills becoming obsolete as a result of changes in the economy; persons between jobs; and new entrants to the labor force].
This suggests that, even in the best of times, Santa Cruz County suffers from a lack of available jobs to meet the needs of its labor force.
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