Arizona currently has the highest population growth rate in the United States and has the third-highest population growth since 2010, according to 2020 census data. Arizona is also currently ranked 4th in the U.S. for GDP growth per year. Further, when measuring chained GDP (GDP growth measured over multiple years and adjusted for inflation) over the past 50 years, Arizona has the second-highest percent growth within the United States, trailing closely behind its neighboring state Nevada.
As Arizona forges ahead at the forefront of technological development, medical advancement, aerospace, research, and mining and minerals, experts ponder if the state is emerging as a national economic powerhouse or if the growth will be short-lived.
Arizona’s economic fundamentals
Arizona’s economic origins are most commonly organized into the five C’s: Copper, Cotton, Cattle, Citrus, and Climate.
The production of copper, an essential mineral for growth sectors such as construction, manufacturing, and tech, makes up over 6 of the 14 billion dollars produced by Arizona’s mining industry.
The United States is the fourth largest copper producer in the world and Arizona is responsible for over two-thirds of American production. During the Second World War, Arizona’s mining industry was called upon in order to facilitate the manufacturing of weapons and defenses integral to victory in the war.
This precipitated a momentous shift in Arizona manufacturing. After 1950, the manufacturing and service industry surpassed the economic output of the mining industry in the state, taking Arizona in a new direction by connecting the state’s economy to the service industry.
Harvard professor Michael Porter has asserted that in order to predict and determine economic growth as well as an increase in the standard of living, one must examine the change and continuity of economic clusters throughout the history of a state.
Economic clusters, defined as a dense network of companies and institutions in a certain geographic sphere, succeed, according to Porter, when the private and public sectors invest in them and establish policies and partnerships that are conducive to their growth. This leads to job creation and expanded economic output.
Comparing the most prominent economic clusters from the 1950s to Arizona’s present helps to illustrate how Arizona has become one of the fastest-growing and most competitive states.
The clusters of innovation concept represent a new way of thinking about the economy and have begun to take hold as communities across the nation look at the successes of California’s Silicon Valley and Massachusetts Route 128. What Arizona has done so far is managing to develop new economic clusters while sustaining traditional economic clusters like mining and manufacturing.
Arizona’s Most Important Clusters
The most heavily traded clusters in Arizona include aerospace and defense, business services, metal mining, medical devices, and communication services.
The aerospace and defense cluster offers the state a competitive edge in the manufacturing of aircraft and research and development. Employing 52,000 people directly with an average salary of more than double the median salary in Arizona, the aerospace and defense industry has proven to be an extremely important economic cluster for Arizona. Leading international companies like Northrop Grumman, Honeywell, and Boeing’s investment in the state also contribute to other industries that support manufacturing. However, such an economic cluster requires an extremely innovative workforce.
An Innovative Workforce and Research and Development
Universities in Arizona are also a major part of the equation that can help one to understand Arizona’s fast-growing economy.
“Research universities act as magnets for businesses that seek the talent they produce and benefits derived from the innovations and creative activity underway,” says Dennis Hoffman, ASU economics professor and associate dean for research at the W. P. Carey School of Business. Besides employing more than 50,000 people directly and indirectly and providing more than $2 billion in wages annually, ASU serves as a huge hub for research and development.
Hoffman also explained in an interview that “University R&D acts as a catalyst for private activity. Trace the paths of the most successful entrepreneurial ventures and you are likely to find that research university connectivity played an important role.”
The University of Arizona, Northern Arizona University, and Grand Canyon University have also emphasized the role of academia in fueling research and development.
The University of Arizona is ranked among the top 20 U.S. public universities for research expenditures, and their Office for Research, Innovation, and Impact emphasizes topics ranging from augmented reality to “the fusion of the digital, physical and biological worlds”.