Hot Industries in the Phoenix Area
The Phoenix metropolitan area is ranked No. 34 in best places for business and careers and 35th in job growth for 2018, according to Forbes. The overall job growth in Arizona was well above the national average for the third quarter of 2018, and this momentum is expected to carry over into the next year. The construction industry led this growth based on jobs, permits and prices. The majority of these gains were concentrated in the Phoenix area, although similar growth also occurred in Tucson.
Overview
Many high-tech companies have recently relocated to the Phoenix area, especially telecommunication firms. The warm winter weather in Phoenix also makes recreation and seasonal tourism strong industries, especially golfing. The military has a significant presence with Luke Air Force Base, which is located in the western metro area. A large number of cultural centers are located in downtown Phoenix, including the Phoenix Art Museum, Phoenix Symphony Hall, Pueblo Grande Museum and Cultural Park.
Job Growth
Job growth was relatively slow in Arizona during the first half of 2018, but it increased considerably in the second half. Preliminary estimates from The University of Arizona show 81,500 jobs were added in Arizona during the third quarter, with 72,400 of those coming from the Phoenix metro area. This increase represents a 3.6 percent growth in Phoenix, which is more than twice the national rate of 1.7 percent for 2018. In comparison, job growth for Q3 2016 was only 2.4 percent in Phoenix. The Tucson area accounted for virtually all of the remaining job gains in Arizona for 2018.
The construction industry led these gains for the year, with almost 16,000 new jobs being added statewide for a gain of 10.6 percent. This industry was particularly strong in Q3 2018, largely due to housing construction. Housing permits also increased by 10.6 percent overall in 2018 compared to the previous year. These gains included an 11.6 percent increase for single-family residences and an 8.2 percent increase for multi-family dwellings.
Other industries that added more than 5,000 jobs in 2018 include the following:
- Education
- Health services
- Leisure and hospitality
- Manufacturing
- Professional and business services
- Trade
- Transportation
- Utilities
Gains previously made by the financial sector slowed in 2018.
Exports
The export of merchandise from Phoenix also increased substantially in 2018, especially to countries outside of North America. Statewide, merchandise exports increased 7.2 percent overall from the previous year, although exports to Canada and Mexico were down by 1.5 percent and 1.3 percent, respectively. Exports to South and Central America jumped 68.5 percent in 2018, and exports to Europe and Asia also increased by 11.0 and 10.5 percent, respectively. Export performance should remain strong for 2019 based on the U.S. dollar’s performance against most other currencies.
Outlook
Most of the job growth in the Phoenix area is expected to be in the following four industries for 2019:
- Education services
- Health services
- Professional and business services
- Leisure and hospitality
Analysts expect these sectors to account for almost 70 percent of the total job gains for Arizona through 2020. Other sectors that should gain jobs during the next two years include the following:
- Construction
- Finance
- Government
- Information technology
- Manufacturing
- Mining
These job gains are expected to contribute toward an increase in personal income of 5.5 percent, with annual gains of 6.4 and 6.3 percent expected for 2019 and 2020, respectively. A more competitive labor market will also account for the gains in personal income, which will increase retail sales during this period.
Summary
Phoenix businesses outpaced the nation for major economic indicators during 2018, especially in construction. The financial crisis of 2007 to 2010 caused the construction industry to collapse in Phoenix in 2008, although it had recovered by 2012. Construction is now the leading industry in Phoenix in terms of job gains and other indicators. This trend is expected to continue in Phoenix for at least the next two years.
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