By Roland Murphy for AZBEX
The Arizona Office of Economic Opportunity is projecting Construction will see the highest rate of job growth between Q2 2023 and Q2 2025 across the 11 supersectors it tracks.
According to the Arizona 2023-2025 Projected Employment Report, AOEO expects Construction to see 3.3% growth during the period, followed by Education and Health Services at 2.6%, Leisure and Hospitality at 1.9%, Manufacturing at 1.3%, Trade/Transportation/Utilities at 1.2% and Other Services at 1.1%. All the other supersectors had growth rates of less than 1%. Natural Resources and Mining is the only supersector expected to shrink, with growth projected at -0.2%.
The report also projects jobs for Arizonans who are Self Employed will increase 0.7%. Self-employment numbers are not normally reflected in the monthly state employment report.
On the whole, AOEO projects employment in Arizona will increase to 3,514,910 jobs in Q2 2025, compared to 3,412,254 in Q2 2023, an annualized growth rate of 1.5%.
Since the end of the pandemic, all supersectors have performed well. Construction was one of the top performing segments, showing job counts and annual percent changes of 201,839 (7.0%) in Q3 2022, 207,195 (7.4%) in Q4 2022 208,397 (8.2%) in Q1 2023, and 214,433 in Q2 2023.
In Q2 2025, Construction is expected to see a 3.3% annual percent change and include 228,721 jobs. That will still not completely return Arizona Construction employment to its all-time peak in 2006, when the sector reached 240,300.
Even though growth is expected, the report points out it has slowed compared with recent quarters and will continue to moderate. “The primary factor behind this anticipated slowdown is the increased cost of financing, a consequence of federal funds rate increases that occurred in 2022 and 2023,” it says.
Addressing Construction specifically, the report says, “Construction employment is projected to grow by 14,288 jobs (3.3%) annually from 214,433 in Q2 2023 to 228,721 in Q2 2025. The projected slowdown in job growth is primarily attributed to the heightened federal funds rate, which has increased financing costs. The number of private housing building permits in Arizona decreased by 2,088 (-32.0%) in December 2023 compared to March 2022—the period when the Federal Reserve began raising the federal funds rate.”
Along with housing, much of Construction’s recent rise has stemmed from increased demand for Industrial development, a sector that continues to fuel Construction worker demand even as the pipeline hits record delivery volumes. Warehousing/Logistics and Manufacturing have been the primary subsectors in Industrial demand.
The AOEO lists Transportation and Warehousing under the Trade, Transportation and Utilities supersector. The report says Transportation and Warehousing, “is projected to grow by 6,260 jobs (2.2% annually) from 139,579 in Q2 2023 to 145,839 in Q2 2025. Job growth in the Warehousing and Storage sector is anticipated to decelerate as the industry approaches maturity. Additionally, the 2022 and 2023 increases in the federal funds rate have increased the cost of financing and are expected to influence decisions regarding expansion within this sector.”
Manufacturing is its own Supersector for AOEO reporting. The report notes, “Manufacturing is projected to increase by 4,985 jobs (1.3% annually) from 194,646 jobs in Q2 2023 to 199,631 jobs in Q2 2025. From Q2 2022 to Q2 2023, non-durable goods manufacturing lost 325 jobs, while durable goods manufacturing gained 5,566 jobs in the same period. Within the Manufacturing supersector, Computer and Electronic Product Manufacturing (2,238 jobs) and Transportation Equipment Manufacturing (1,454 jobs) are projected to record the largest job gains.”
Over the two-year projected period, job growth is expected in 14 of the state’s 15 counties, with only Apache County expected to experience losses and go from 18,702 jobs in Q2 2023 to 18,627 in Q2 2025, a rate of change of -0.2%.