Arizona is near dead last in job growth. What went wrong? Article originally posted on AZ Central on July 7, 2025 Don’t look now, but Arizona is nearly bringing up the rear for job growth. The state finds itself in the unusual position of lagging most of the nation in this important category, as well as neighboring states. Arizona in recent decades had been an expansion economy, creating thousands of jobs and luring thousands more people. The labor force grew from about 1.7 million in early 2000 to 3.3 million at the end of 2019, a 96% increase, according to U.S. Bureau of Labor Statistics data. Is this new weakness a temporary blip or signs of more chronic problems? Some recent measures have masked this scenario. For example, the state’s unemployment rate at 4.1% in May was below the U.S. average of 4.2%. And some big-profile projects will become employment magnets for decades to come. But there have been warning signs too, including a noticeable uptick in layoffs this year. The state’s jobless rate is up from 3.4% in May 2024. Where does Arizona rank in job creation? For the year to date, Arizona ranks 47th among the states, just ahead of Massachusetts, West Virginia and last-place Iowa, according to figures compiled by the Bureau of Labor Statistics. All four of those states, including Arizona, have shed more jobs than they have created so far in 2025, noted Lee McPheters, director of the Economic Outlook Center in Arizona State University’s W. P. Carey School of Business. Arizona is down a modest 1,900 net jobs this year. The state’s labor force, representing the number of employed individuals, stands at 3.26 million, so the loss of a couple thousand or so jobs isn’t significant, at least so far. Even among states with populations close to Arizona’s 7.7 million, jobs have been generated at a better pace in most of those places. Washington, Tennessee and Indiana all have similar populations yet created about 43,000 jobs, 17,000 and 12,000, respectively, over the first five months of 2025. The exception was Massachusetts, which like Arizona, shed jobs. Which states are leading the way creating jobs? Texas ranks first, with 204,000 net jobs created so far this year. Florida is second with 135,000 new jobs, followed by New York at 123,000, then Pennsylvania and North Carolina. California, ranking seventh with 49,000 net new positions, is the top state in the West so far this year. Arizona’s outlook might turn positive over the second half of 2025, but the numbers so far indicate the state’s economy will struggle to reach even 1% job growth for the full year, McPheters predicted. What explains Arizona’s weakness? One factor has been slowing migration, with fewer people moving here from other states. According to Census Bureau figures cited by McPheters, a net 68,790 people moved here from other states in 2022, but that had dropped to 34,902 by 2024. “With domestic migration trending down and international migration dropping off a cliff in 2025, the impetus for population growth has diminished and undoubtedly plays a role here,” McPheters said. Other factors affecting jobs reflect trends that are broader in scope. For example, the emergence of artificial intelligence and robotics has led to reduced employment here and elsewhere, McPheters said. What about tariff uncertainty and elevated costs? These too have played a role in some cases. Hiring has slowed due to uncertainty over tariffs, unease over interest rates and more, and the overall effects of high interest rates and levels of uncertainty not seen since the Great Recession,” McPheters said. A few small-business owners around metro Phoenix recently discussed tariff burdens and how it is affecting them. The COVID-19 pandemic caused sudden, deep aftershocks in the job market in the spring of 2020. In April that year, Arizona’s unemployment rate spiked to 13.8%, the highest level since records were first collected in 1976. It left 469,000 people out of work. But the health crisis abated, and jobs rebounded. So far this year, construction employment is unusually weak in Arizona, said Ben Ayers, senior economist at Nationwide. “Rising costs for construction materials and slowing demand for new homes have caused many homebuilders to pare back projects,” he said. Higher mortgage rates over the past two years have also factored in. One of the larger layoff announcements during the first half of 2025 was a loss of 500 jobs, later reduced to 467 positions, at the Arizona Department of Economic Security. Director Michael Wisehart attributed that to decreased federal funding to support various programs. Are there hopeful signs? Yes. The construction of major semiconductor operations, especially that of Taiwan Semiconductor Manufacturing Co. in northwest Phoenix, eventually will create more manufacturing jobs, McPheters said, with multiplier effects in other industries, including suppliers, housing and retail. The massive $165 billion TSMC commitment is the largest nongovernmental investment in the state’s history. “It is even likely that labor shortages will develop in advanced technology industries,” McPheters said. Job-creating announcements in recent months include: Moses Lake Industries, a semiconductor chemical supplier, opening a manufacturing and research facility in Mesa; civil-construction firm W.W. Clyde expanding in Apache Junction; equipment manufacturer GTI Energy expanding in Goodyear; and Apex Power Conversion announcing a new headquarters and manufacturing plant in Mesa. The Arizona Commerce Authority, shepherding 487 projects through its pipeline, contends job-creating activity actually is heating up rather than slowing. “That’s an increase of 66 projects from a year ago and a historic high,” said Patrick Ptak, an executive vice president at the agency. Manufacturing accounts for 70% of them, with many concentrated in aerospace/defense, semiconductors, battery technology, consumer projects and renewable energy, Ptak said. Foreign companies weigh in with a record 160 projects, representing 61,000 potential new jobs. Ptak attributed this robust activity to enhanced outreach to and engagement with international companies through the agency’s trade and investment offices and other initiatives.
Which states are leading the way creating jobs? Texas ranks first, with 204,000 net jobs created so far this year. Florida is second with 135,000 new jobs, followed by New York at 123,000, then Pennsylvania and North Carolina. California, ranking seventh with 49,000 net new positions, is the top state in the West so far this year. Arizona’s outlook might turn positive over the second half of 2025, but the numbers so far indicate the state’s economy will struggle to reach even 1% job growth for the full year, McPheters predicted. What explains Arizona’s weakness? One factor has been slowing migration, with fewer people moving here from other states. According to Census Bureau figures cited by McPheters, a net 68,790 people moved here from other states in 2022, but that had dropped to 34,902 by 2024. “With domestic migration trending down and international migration dropping off a cliff in 2025, the impetus for population growth has diminished and undoubtedly plays a role here,” McPheters said. Other factors affecting jobs reflect trends that are broader in scope. For example, the emergence of artificial intelligence and robotics has led to reduced employment here and elsewhere, McPheters said. What about tariff uncertainty and elevated costs? These too have played a role in some cases. Hiring has slowed due to uncertainty over tariffs, unease over interest rates and more, and the overall effects of high interest rates and levels of uncertainty not seen since the Great Recession,” McPheters said. A few small-business owners around metro Phoenix recently discussed tariff burdens and how it is affecting them. The COVID-19 pandemic caused sudden, deep aftershocks in the job market in the spring of 2020. In April that year, Arizona’s unemployment rate spiked to 13.8%, the highest level since records were first collected in 1976. It left 469,000 people out of work. But the health crisis abated, and jobs rebounded. So far this year, construction employment is unusually weak in Arizona, said Ben Ayers, senior economist at Nationwide. “Rising costs for construction materials and slowing demand for new homes have caused many homebuilders to pare back projects,” he said. Higher mortgage rates over the past two years have also factored in. One of the larger layoff announcements during the first half of 2025 was a loss of 500 jobs, later reduced to 467 positions, at the Arizona Department of Economic Security. Director Michael Wisehart attributed that to decreased federal funding to support various programs. Are there hopeful signs? Yes. The construction of major semiconductor operations, especially that of Taiwan Semiconductor Manufacturing Co. in northwest Phoenix, eventually will create more manufacturing jobs, McPheters said, with multiplier effects in other industries, including suppliers, housing and retail. The massive $165 billion TSMC commitment is the largest nongovernmental investment in the state’s history. “It is even likely that labor shortages will develop in advanced technology industries,” McPheters said. Job-creating announcements in recent months include: Moses Lake Industries, a semiconductor chemical supplier, opening a manufacturing and research facility in Mesa; civil-construction firm W.W. Clyde expanding in Apache Junction; equipment manufacturer GTI Energy expanding in Goodyear; and Apex Power Conversion announcing a new headquarters and manufacturing plant in Mesa. The Arizona Commerce Authority, shepherding 487 projects through its pipeline, contends job-creating activity actually is heating up rather than slowing. “That’s an increase of 66 projects from a year ago and a historic high,” said Patrick Ptak, an executive vice president at the agency. Manufacturing accounts for 70% of them, with many concentrated in aerospace/defense, semiconductors, battery technology, consumer projects and renewable energy, Ptak said. Foreign companies weigh in with a record 160 projects, representing 61,000 potential new jobs. Ptak attributed this robust activity to enhanced outreach to and engagement with international companies through the agency’s trade and investment offices and other initiatives.