A Spring Awakening for Arizona Job Growth?

By George W. Hammond, EBRC director and Eller research professor

Arizona job gains accelerated in March, but remained down over the year

Arizona added 11,400 seasonally-adjusted nonfarm payroll jobs over the month in March. February gains were revised down from 4,300 in the preliminary data to 3,100. The state seasonally-adjusted unemployment rate ticked up from 3.9% in February to 4.1% in March. That was slightly below the U.S. rate of 4.2%.

Over-the-month job gains in March were led by professional and business services (up 4,600); private education and health services (up 4,400); leisure and hospitality (up 2,100); construction (up 2,000); and financial activities (up 1,000). Other sectors adding jobs in March included government (up 300); natural resources and mining (up 200); and manufacturing (up 100). Jobs were down over the month in trade, transportation, and utilities (down 2,800); other services (down 400); and information (down 100).

Over the year in March, Arizona jobs were down 16,400, or 0.5% (not seasonally adjusted). That was the third consecutive over the year decline. Nationally, jobs were up 1.2% over the year.

Arizona job losses were led by professional and business services; trade, transportation, and utilities; construction; manufacturing; information; and leisure and hospitality. Other sector losing jobs in March included government and financial activities. Only three sectors added jobs over the year: private education and health services; natural resources and mining; and other services (Exhibit 1).

Exhibit 1: Arizona Net Job Change (Thousands) and 2023 Annual Wages per Worker

The Phoenix MSA lost 9,500 jobs over the year in March. That translated into a drop of 0.4%. The pattern of job losses was similar to the state, with the largest declines in professional and business services; trade, transportation, and utilities; construction; information; manufacturing; and leisure and hospitality. Private education and health services led job gains.

Over the year in March, Tucson MSA jobs were down 3,700 (or 0.9%). Trade, transportation, and utilities; manufacturing; government; and construction jobs declined the most. Jobs were up significantly in private education and health services.

The Prescott MSA also registered over-the-year job losses in March, with a decline of 1,400. That translated into a drop of 1.9%. Losses were driven by trade, transportation, and utilities; leisure and hospitality; professional and business services; manufacturing; and mining and construction. Jobs were up in private education and health services, as well as other services.

Arizona is generating over-the-year job losses in early 2025 because that calculation looks back at a relatively high employment level achieved in early 2024. As Exhibit 2 shows, Arizona employment measured by the establishment survey (same dataset referenced above) reached a recent peak in March 2024, then declined through August 2024. The decline during that period was nearly 54,000 jobs. That’s a substantial decline. It exceeded the employment declines that the state experienced during the national recessions of the early 1990s and early 2000s, but also fell far short of the declines experienced during the Great Recession or the COVID downturn.

Job losses during the March-August 2024 period were widespread across industries, with the biggest declines in professional and business services; government; construction; leisure and hospitality; trade, transportation, and utilities; manufacturing; and financial activities.

Note as well that while employment measured by the household survey does show slowing growth in 2024, it does not show the same substantial declines.

It is not clear what underlying factors drove the establishment survey employment declines last year.