COVID-19 Updated Market Insights for Phoenix

Phoenix – Strongest in the West 

Phoenix lost 164,000 jobs, or 7.6%year over year according to the April results from the Bureau of Labor Statistics. This rate of decline ranked 3rd of 82 metros and considerably better than its west coast peers including San Francisco (-13.5%), San Diego (-12.3%), Los Angeles (-14.5%), San Jose (-10.8%), Portland (-12.5%), Oakland (-14.9%) and Denver (-9.9%)However, Phoenix’s unemployment rate jumped to 12.3% in April, close to Denver (12.1%) but higher than Salt Lake City’s 11.2%. These numbers, however, are preliminary and subject to change. 

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Looking for additional insights? Explore our interactive COVID-19 map to analyze the potential impact on commercial real estate markets.

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Of Phoenix’s losses55.2%, or 90,500 jobs were in the leisure and hospitality sector. This equates to a rate of decline of 38.2%. The retail sector shed another 37,100 jobs, a decline of 16.0%. Netting out these two concentrated sectors puts the remaining year-over-year rate of job decline at 2.1% which ranked 2nd best of 82 metros. The U.S equivalent decline net of leisure, hospitality and retail was 8.0%, and the metro average decline was 8.3%. 

Phoenix’s total office sector shed 23,100 jobs year over year, which was a rate of decline of 3.8%. This ranked 22nd of 82 metros and was worse than the decline in Denver (-2.3%), San Francisco (-0.9%) and San Jose (-2.2%). The metro average office year-over-year decline was 6.6%, while the national rate of decline was 6.8%. On a bright note, Phoenix’s finance and real estate sector shed only 200 jobs year over year, a decline of 0.1%. Phoenix’s banks (Wells Fargo, Bank of America and JP Morgan Chase) had expanded significantly in the metro over the prior five years. 

Also of note, Phoenix’s manufacturing sector was flat as per the April data as a number of businesses had been expanding prior to the pandemic. In late 2018, Honeywell secured a $1 billion Air Force contract for continued logistics support of aircraft power systems (Source: Phoenix Business Journal). According to AZBIGMedia.com, other businesses that had expanded in the Phoenix area include drone company AiroboticsAndersen Windows, Deloitte, Creighton University and Cambridge Senior Living. 

To put these cumulative jobs in perspective, Phoenix’s seasonally adjusted job gain over the last expansion was 536,900 jobs, a growth rate of 31.8%. The recent seasonally adjusted loss of jobs accounted for 43% of the gains in the recent expansion.  This ratio ranked 5th best of 82 metros. For the national average the recent loss represents a decline of 94% of the net gain during the expansion, while the metro average decline was 83% of the net expansion gain. 

Although Phoenix suffered fewer job losses than most metros and had a lower rate of COVID cases than other parts of the U.S., Arizona is making headlines with its caseload still on the rise as of mid-June. This could spell trouble as much of the economy is open for business, Phoenix and elsewhere may have to close businesses if the spread is not contained. Most but not all leisure, hospitality and retail jobs will return this month and the next few, but many will not have the momentum to survive, especially given social distance standards in restaurants that are used to packing patrons in close. Moreover, many small businesses could shed jobs once their payroll protection funding runs out in July or August. Thus, Phoenix’s outlook remains uncertain until the virus is contained and/or the PPP is renewed.  

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You may also find our website dedicated to COVID-19 to be helpful during this time. Visit moodys.com/coronavirus for our latest research and views on the credit and economic impact of COVID-19. This site brings together insights from across Moody’s to help you better understand the financial implications of the outbreak