Understanding the Economy of the State of Arizona

Instructor: James Walsh

M.B.A. Veteran Business and Economics teacher at a number of community colleges and in the for profit sector.

The gross domestic product of Arizona in a recent year was $303 billion, making it the 21st largest state economy in the U.S. Let's take a closer look at this economy in terms of where Arizonans work.

The Big Picture

Arizona has a population of 6.9 million, which makes it the 14th most populous state in the union. Arizona's gross domestic product (GDP) of $303 billion is larger than some major countries, like New Zeland. But Arizona's GDP only ranks 21st among the states, making it a bit of an underachiever given its population rank. This becomes more noticeable in the personal income data. The per capita personal income in Arizona is only $40,243, compared to $49,571 in the U.S. as a whole, putting Arizona in 42nd place among the 50 states.

Let's recap these figures (and some others) in a table. Data is for year-end 2016, except for the unemployment rate, which is for June 2017:

Data Arizona Rank
Population 6.9M 14
GDP $303B 21
Per capita income $40,243 42
Unemployment rate 5.1% 46

There are many reasons why that per capita income figure is so low. Many Arizonans work in retail and home health care, which are occupations that do not pay well. The other is just plain demographics. Arizona is a mecca for retirees from other parts of the country, so it has a higher percentage of residents over the age of 65 than in the rest of the U.S. It also has a higher percentage under the age of 18. Both of those groups are below average when it comes to income.

Arizona has plenty of warm weather and cactuses

The good news is that in 2016 Arizona added jobs at a faster rate than the U.S. as a whole. That is a trend that can pick up the state's low ranking in the unemployment rate. Let's take a closer look at the industries that provide the jobs for Arizonans.

Where Arizonans Work

Here is a table showing the top sectors for non-farm jobs in Arizona. Data is for year-end 2016:

Sector Number Employed (in thousands) % Growth in Jobs
Trade Transportation and Utilities 519.6 1.7
Education and Health care 417.3 2.7
Professional and Business services 416.7 2.6
Government 410.6 0.3
Leisure and Hospitality 319.2 5.0

Let's look at these in greater detail.

Trade, Transportation, and Utilities

This sector covers retailing jobs, which are traditionally low in both pay and benefits. The largest private employer in Arizona is Wal-Mart! This sector has a low rate of job growth as all brick and mortar retailers are under siege as Americans increasingly embrace online shopping.

This sector also includes some bright spots, especially solar power! With over 300 bright and sunny days a year and favorable tax treatment, Arizona leads the nation in solar power related jobs per capita. This can help offset some of the jobs lost as retailers cut back operations.

Education and Health Care

With a high percentage of seniors in the population mix, you can expect health care to continue as a leading provider of jobs in Arizona. Arizona also has a vibrant educational sector featuring the University of Arizona, Arizona State University, and the University of Phoenix. Many of those under-18's will need a place to go to college, and they shouldn't have to leave the state to find one!

Professional and Business Services.

This is a broad sector that includes many good paying occupations. It includes independent professionals like lawyers, accountants, and architects. It also includes business managers and supervisors, as well as people supporting businesses through research and development, marketing, and human resources.

This sector also provides the infrastructure needed by the business community. A growing piece of this sector in Arizona is data centers. Servers for computing like dry weather and companies building server farms find plenty of dry in Arizona since the climate is so arid.

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