Arizona Unemployment Rate Fell In May, But Is It A Real Indication Of Economic Turnaround?

Published: Tuesday, June 23, 2020 - 2:20pm
Updated: Tuesday, June 23, 2020 - 2:21pm
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LAUREN GILGER: Since the hit — pandemic hit our state just a few months ago, we've seen case numbers and deaths here rise and we've also seen hundreds of thousands of Arizonans lose their jobs. And unemployment hit a high point at 13.4% last month. Well, last week we got a little good news on that front at least. Arizona's unemployment rate fell to just 9%, and we added 45,000 jobs in May. So this all looks good, but is it any real indication of an economic turnaround? For more on that, I got a hold of ASU Economics Professor Lee McPheters, and we began with those job numbers. Adding 45,000 jobs is a good thing, right?

LEE MCPHETERS: Well, that is really completely a surprise, I think, to a lot of analysts. In normal times, and these are certainly not normal times, the Arizona economy loses jobs over the period late spring and into the summer. So it would be typical for May to have actually lost jobs, and of course, with all of the unemployment insurance claims, I think there were some analysts that were expecting that we were going to see another drop in employment. Instead, job growth kicked up 45,000 and certainly looked like a fairly significant, maybe short-term turnaround.

GILGER: Yeah. Where are we seeing these, these added jobs? Is this in certain sectors that have sort of reopened as a result of the stay at home order being lifted, for example?

MCPHETERS: Well, the main driver, of course, was a return of over 30,000 food service workers. And that accounted for a big part of that 45,000. Health care workers, that number was up. Retail, those workers were called back. So really, it was the sectors that were hard hit in April that bounced back in, in May when the economy opened up around the middle of the month.

GILGER: OK, so let's then talk about the jobless rate number. It was at a high of 13.4%. It's down now to 9%, which is quite a big drop. This also sounds like good news. Is, is it?

MCPHETERS: Well, the economy took a real nosedive in April. Arizona unemployment rate surged up to, as you noted, over 13%. The May number, I think there's a cloud over that May number — 8.9%, approaching 9%. I think everybody would have bet on double-digit unemployment, and I think part of the problem is that at the national level, the numbers have been underreported. Even the Department of Labor admits this, that the national unemployment rate in May, which came in at 13%, they admit it should have been about 16%, but they had misclassified. And we may have seen a little bit of that at work here in Arizona. But even so, 9%, 10, 12%, which it might be, it's going in the right direction, but there's still over 300,000 people unemployed in the state.

GILGER: Where were we, remind us, before this pandemic hit? What did unemployment look like then?

MCPHETERS: Unemployment in Arizona was actually — this is kind of interesting — we were in the range of, oh, say, 4.5%, 4.8%. That put Arizona among the states, the four or five states with the highest unemployment rate. Now with 8.9%, we're among the four lowest unemployment rates.

GILGER: Lee, is there a population of people who have ... We always hear when we talk about unemployment numbers, you know, people who have stopped looking for work and therefore aren't counted in this. Is that going to be one of the bigger groups of people as we recover from this pandemic?

MCPHETERS: Well, it's a couple things going on here. When I, when I say there's 300,000 people unemployed that sounds like a huge number. But in normal times, we would have about 150,000 unemployed. Those are people that are between jobs or new entrants into the labor force or what not. So it's not as though we have this huge dead weight of 300,000 unemployed. The surprise is, of course, 150,000 others that are unemployed due to the economic downturn. And then, of course, on the sidelines, you have all the people that have dropped out that have gotten discouraged or what not, and for one reason or another are not in the official unemployment numbers. And that, that group is always there. Typically now, people that are, you know, your gig workers and people that are not formally connected to an establishment perhaps or a professional employment kind of situation, those folks would not be counted. But now at least they are getting some unemployment payment relief through the legislation here that has been enacted to try to stimulate the economy. So even though there are some folks that are kind of on the margin, they're still drawing unemployment compensation right now.

GILGER: So what does this say about the future of the economy here in the state? Like does it look to you, looking at these numbers like this is a blip or like this is the economy picking back up and that will be on the upswing?

MCPHETERS: Well, I would say that 30,000 fast food, restaurant service workers coming back to work ... Can we repeat that month after month? If we added 40 to 45,000 new jobs every month going forward, we would actually end up the year having replaced all the lost jobs. But, you know, right now we're down over 160,000 jobs. The expectation is that we may add jobs as the economy continues to expand, but I don't think we're going to be seeing it at the rate of 45,000 a month. It would be a surprise, I think, if it averages 10 to 15,000 a month. So basically, I think we're going to end up the year still down somewhere in the range of about maybe 100, 150,000 jobs, below what we saw for last year. So it's going to take another year, year and a half to finally replace all of these lost jobs.

GILGER: Wow. All right. That is Lee McPheters, an economics professor at ASU and director of the JP Morgan Chase Economic Outlook Center there. Lee, thank you so much for the time today.

MCPHETERS: Good to talk with you, Lauren.

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