Despite the economic downturn triggered by the COVID-19 pandemic, Arizona’s economy has forged ahead of the pack nationally and remains on track to recover and grow faster than average as the pandemic subsides.
There are various factors that have contributed to Arizona’s economic growth during this challenging time, but the high inflow and growth of fast-growing businesses has certainly contributed to this recovery.
Growth firms are companies that have a track record of unusually high growth compared to that of competitors. The presence and expansion of fast-growth firms are an indicator of future economic success and prosperity for a state or region, according to Michael Foster PhD, who led the Clusters of Innovation economic study at Harvard University.
Arizona’s fast-growth economy
In 2019, 105 companies made the Inc. 5000 list of fastest growing private firms in America. Similarly, in a year that has been faced by much uncertainty, 2020 has allowed for more companies to come to light.
Last year, 107 companies made the Inc. 5000 list. Arizona’s Freestar stands out nationally with 7,239% growth over the last year. Such fast growing companies are a driving force behind the economy in Arizona.
There are many draws to being located in the Valley. Phoenix is currently the 5th most populous city in the nation, and one of the fastest growing as well. The U.S. Census showed that the city of Phoenix grew by 234,301 residents over the past decade. Its infrastructure was rated among the best in the nation, coming in at the 11th best.
Powerhouses of the U.S. economy
According to a new study done by Wakefield Research, fast-growth firms are truly the “powerhouses of the U.S. economy.”
During the last economic downturn in the United States, approximately one-third of all new jobs were created by only 2% of the companies. These companies typically had $10 million to $1 billion in revenue and grew at an annual rate of 20% according to the report.
In addition to the growth seen in the “ScaleUps,” or fast growing firms, Arizona is also experiencing a large quantity of businesses moving in and setting up shop.
According to Phoenix Commercial Advisors, company relocations resulted in more than 7,000 new jobs for the metropolitan area population. Among these various companies were ShellPoint Mortgage’s expansion into Tempe and Infosys expanding its operations into Tempe as well. Together these expansions count for over 2,000 new careers for Arizonans.
The recent growth in the economy can also be attributed to sectors such as health care, financial and business services, and manufacturing.
According to the U.S. Bureau of Labor Statistics, the fastest growing parts of the economy from 2019 to 2029 are projected to be in health care and social services, where Phoenix’s economy has been experiencing rapid growth as of late. These careers include nurse practitioners, occupational therapy assistants, and physician assistants that are supposed to grow by at least 30% by 2029.
“The economy is growing in what we would call the right ways because those industries are the ones that tend to be recession-resistant, according to what people have told us,” said Eric Jay Toll, communications manager for the Phoenix Community and Economic Development Department.
In 2019, the state’s gross domestic product was the third-fastest growing in the nation, well above the national average. Looking at the economy amid the COVID-19 pandemic, Arizona is still doing exceedingly well.
George Hammond at the UArizona Eller College of Management recently took a look at the projected recovery scenario for Arizona.
The state is estimated to have a 20% chance of returning to pre-pandemic levels by early 2021 via a V-shaped recovery. There is a 30% chance that there will be a W-shaped recovery, which involves another state shutdown. The most likely scenario at 50% chance is the baseline recovery. This would entail the economy bottoming out which would be followed by a steady and consistent rebound in the economy.
This growth is projected well before the United States is predicted to be back at pre-pandemic levels of performance, which illustrates Arizona’s capacity for economic expansion.