Bio and technology job growth propel robust July hiring

Hiring in the Phoenix metro continues at a strong pace in normally slow July, according to the Employment Report from the Arizona Office of Economic Opportunity (OEO). The significant job gains are turning the Valley into a migration magnet.

Although the unemployment rate, 4.3 percent, remained the same as 2017, the Phoenix area workforce grew 3.1 percent to approach 2.1 million employed. The jobs being created are primarily in higher wage occupations. This trend is reflected in the quarterly wages for the Phoenix area, which keep rising faster than the national average, and keeps the Valley among the top-ranked metros.

Arizona added 72,400 jobs in July compared with July 2017. Phoenix, which houses 75 percent of the state’s workforce, generated 87 percent of the new jobs, adding 61,300 new positions, while Tucson added 7,400.

“Arizona is not seeing significant job growth in rural areas or Tucson,” said Jim Rounds, president of Rounds Consulting Group. “We’ll see some upturn in southern Arizona with defense spending increases and when retirements open positions.”

The market’s accelerated job creation is one reason the Valley once more was at the top of the charts for population growth in U.S. Census estimates released earlier this year. Phoenix is on the leading edge of job gains in year-over-year data.

Rounds said that the Valley’s diverse employment base and its basic amenities makes it attractive to a younger workforce. He said it will take a longer time for rural areas to catch up.

“It’s a trend across the country,” he said. “Younger workers are preferring urban settings.”

Rounds points out that Phoenix has made solid gains in key employment sectors. He notes how job gains in business services, technology and financial services put Phoenix in the top of rankings in those sectors.

The economist is joined by others in noting the shift in the Phoenix employment base. Major gains are being made in bio- and life-sciences and technology. The existence of strong clusters of tech workers is cited by companies choosing to locate or expand in the Valley.

“Phoenix ranks third among metro areas in job growth in the professional and scientific technology growth. Hiring hit 5.7 percent last year,” said Lee McPheters, research professor and director of the JPMorgan Chase Economic Outlook Center at the W. P. Carey School of Business at Arizona State University. “The (Bureau of Labor Statistics) ranks Phoenix fifth in total number of professional, scientific and technology jobs in 2017.”

In July, OEO and BLS reported the professional and business services sector added 11,700 jobs year-over-year. That included 5,700 in professional, scientific and technical sectors. The demand for a skilled workforce even led to 2,000 new hires in employment services.

“Manufacturing is very strong in Phoenix and elsewhere in Arizona,” said Dennis Hoffman, professor, W.P. Carey School of Business and director of the L. William Seidman Research Institute, Arizona State University. “Phoenix has been leading in growth in this sector.”

Manufacturers added 7,400 jobs in July, a six percent increase over 2017. This marked the 16th consecutive month of job growth in the manufacturing industry, while the rest of the U.S. didn’t start seeing steady increases until May 2018.

“The quality job growth in Phoenix is also a result of the cities and their relationships with ASU and other colleges,” said Rounds. “I don’t think Tucson has ever leveraged resources at University of Arizona. A strong connection between a city and college is a necessary economic and public policy. You can see the results in Phoenix.”

Construction hiring continues to thrive, adding 13,000 new jobs in July, 5,900 each in building construction and specialty trades.

“Construction hiring reflects the strength of the Phoenix market,” said Rounds. “This is so different than 15 years ago when construction defined the Valley economy.”

The employment trends in high value and higher wage jobs have been ongoing in Phoenix for nearly a year, according to OEO employment reports. The increased number of higher wage jobs has started pushing up average wages in the Valley. Phoenix led the nation in 2017 with a 7.8 percent average wage increase. Current BLS numbers are not as robust, but show better-than-national average wage hikes in almost all sectors.

“The trend to hire highly skilled and high wage workers is going to continue, barring a recession or unexpected economic downturn event,” said Hoffman. “There’s always a little ebb and flow, but the increase in top-market jobs will begin driving demand for mid level and support positions.”

Hoffman said that companies tend to rehire the specialty skill positions first after a recession, and then fill in needed mid level positions. Those hires are drawing new populations into the Valley.

“Most people think new residents to the Valley are coming from other states,” said McPheters. “(W.P. Carey) data show that the largest single source is not California, but other Arizona counties.”

Hoffman said that there are tremendous restrictions in rural areas and it skews job growth into urban areas.

“Rural areas face challenges in Arizona,” he said. “The young are moving to urban areas. Without a workforce, it’s hard to attract a company.”

Hoffman said that there are some good signs for rural areas.

“Mining can make a comeback in the future, and that brings in rural jobs,” he said.