Arizona is positioned for a faster economic recovery than the rest of the nation, and with some strategic moves on the part of state policymakers and citizens, it should jump back to a leading spot within next year or so, according to local economists.
“We have the chance for this to be one of the best decades ever, but it’s going to take more work to be in the top five again in terms of economic activity,” said Jim Rounds, president of Rounds Consulting Group, Inc. that advises both public and private sector entities on matters of policy and economics.
Rounds recently spoke to Chamber Business News about why the state economy is outshining the nation and what is needed to keep that momentum going.
University of Arizona economist George Hammond, featured in a recent Arizona Chamber of Commerce & Industry webinar, says the most important step moving forward is for Arizonans to stay masked, socially distanced and sanitized. Hammond directs the university’s Economic and Business Research Center at the Eller College of Management.
“If we can avoid a significant surge in the outbreak as we go through the fall and winter months, I think we’ll continue on a gradual recovery trajectory like a Nike Swoosh type recovery, getting us back to where we were before the pandemic by mid 2021 or in the second half,” he said.
Prior to the pandemic, Arizona ranked in the top five in the nation for personal income growth, job growth, population growth and overall economic activity. Much of that growth was due to policy decisions made after Arizona’s economy tanked during the Great Recession of 2008, both economists said.
In clawing its way back, the state put several economic pillars in place. One was Governor Doug Ducey’s $1 billion rainy day fund that has proven its worth during the pandemic.
The state’s competitive tax rates, business-friendly regulatory environment and investment in workforce training and education also have helped put Arizona in a better position than other states, Rounds said.
Currently, Arizona is No. 3 in the country in terms of jobs growth.
Arizona’s healthier data is in part due to it being one of the fastest growing states before COVID-19 hit. Industries like construction and remote retail have stayed strong. Gov. Ducey’s early and gradual reopening of the economy also contributed to jobs and economic growth, Hammond said.
Personal income also got a boost from the bipartisan CARES Act passed by the U.S. Congress in late March to help keep Americans and businesses afloat during the coronavirus shutdowns.
These lifeline programs have helped families pay their bills and put food on the table, Hammond said.
In the first few months of the pandemic, CARES Act programs pumped more than $17 billion into the state’s economy including:
Increased unemployment benefits: Unemployment compensation recipients in Arizona received an extra $600 tacked on to their weekly benefit of $240 for up to two months. That injected about $8.2 billion into the state, amounting to about 2.4 percent of the state’s total personal income last year.
The federal Paycheck Protection Program: The program, which provides grants to small businesses to keep employees on the payroll and pay company operating expenses, injected $7 billion into the economy early in the pandemic, representing about 2.1 percent of personal income in 2019.
Recovery rebates: Rebates provided another $2 billion to citizens in the state.
“So somewhere north of 5 percent of Arizona’s personal income last year was injected into Arizona’s personal income in just a couple of months,” Hammond said. “I think that’s had a significant impact in our ability to deal with the pandemic so far.”
A state economic jobs package would be a good step forward to help reskill society, Rounds said.
“We need to focus on high wage job creation and high tech and make sure universities are supported because they are going to be a supplier of this high wage workforce,” he said.
Another measure that could stimulate recovery would be state assistance for the tourism industry, the hardest hit large sector, Rounds said.
Currently, the tourism industry is down about 45,000 jobs. Additional state funding of $10 million a year could do a lot to stop other states from “stealing that pent up demand for tourism activity from under us,” Rounds said.
Meanwhile, state policymakers will have to work “very hard” to pull Arizona out of this downturn, Rounds said.
“The concern now is, can we continue the momentum into the recovery? I think we can. People forget, we always outperform the U.S.
“When times are good we do better than the U.S. When times are bad, we’re even better.”