Construction & manufacturing jobs continue to soar in Arizona
Construction and manufacturing jobs in Arizona continued to soar in May and helped to further reduce unemployment.
But how they do in the future depends on new federal tariffs that are hitting the construction industry especially hard and rising mortgage rates.
Although those two sectors account for only about 12 percent of all jobs in the state, they provided 31 percent of the 70,700 jobs Arizona gained over the past year, the Arizona Office of Economic Opportunity said Thursday.
The 9 percent growth in Arizona construction jobs —13,100 over the year — continues to surpass the 4.2 percent growth rate in the United States and is occurring in all of Arizona's major metro areas, said Doug Walls, research administrator.
But the Phoenix area dominated as usual, nabbing 88 percent of the new construction jobs.
Building and especially housing construction is a big reason, with the growth in those jobs reaching its highest level in 12 years.
While Tucson added just 700 construction gains over the past year, it just recorded a a very large increase in new housing permits — 426 — in April, according to the U.S. Census Bureau.
While there has been a growth in apartment and other multi-family homes being built, single-family homes dominate new residential projects in metro Tucson.
The Census said 1,257 permits for housing units have been issued this year through April in the Tucson area, and that 90 percent of those were for single-family homes. The total number of units permitted in the first four months grew 41 percent from the same time in 2017.
But construction costs have been rising rapidly even before new federal tariffs were imposed May 31 on steel and aluminum on imports from Canada, Mexico and the European Union, according to an analysis by the Associated General Contractors of America. The association claims to be the industry's largest trade group with more than 26,000 member firms.
The association expects construction costs to continue to rise and for the industry to bear a heavy share of the tariffs' costs.
"Prices jumped at double-digit annual rates for metals, lumber and plywood and diesel fuel, while ready-mixed concrete, asphalt paving and roofing materials also had unusually large increases," said the group's chief economist Ken Simonson.
"The cost of all goods used in construction rose 8.8 percent from May 2017 to May 2018, the steepest annual increase in nearly seven years."
For example, from May 2017 to May 2018, the producer price index for aluminum mill shapes jumped 17.3 percent, for lumber and plywood, 13.9 percent and for copper and brass mill shapes 13.8 percent. The price of diesel fuel rose 44.5 percent.
Walls said it is too early to tell, whether rising mortgage rates will affect housing construction and sales in Arizona. Mortgage rates began rising Thursday in wake of the Federal Reserve's announcement Wednesday that it would raise a benchmark rate by a quarter percentage point to 1.75 and impose two more increases this year.
"Interest rates do impact mortgage rates. To what extent is unclear, and we will have to wait and see how that plays out in the future," Walls said.
The median price for homes in metro Tucson home reached $216,500 in May, an 8 percent increase from the same month in 2017.
Arizona manufacturing jobs grew by 8,900 over the year in Arizona (400 in Tucson). Walls said that is the strongest gain in 20 years. Computer and electronics jobs are still growing month by month after years of losses, but mostly in the Phoenix area.
Retail also is doing well, but mainly in an area where people can't buy products online as easily: building material and garden supply stores That one sector accounted for 43 percent of the 5,400 statewide retail jobs added over the year.
Jobless rate falling
Arizona's unemployment rate fell to 4.7 percent in May from 4.9 percent in April, but was still higher than the latest U.S. rate of 3.8 percent.
The rate in Pima County fell to 3.6 from 4 percent. And Maricopa's rate dropped to 3.4 from 3.8 percent.
Unemployment rates are an estimate of the percentage of people looking for a job. All state monthly job reports are estimates based on surveys and are subject to major revisions in March after more concrete data comes in.
Over the past year (May 2017 to May 2018) the sectors that added the most jobs in the Tucson area were:
Professional and business services, 1,800; food and drinking places, 1,300; construction, 700; retail trade 700 ; aerospace products and parts manufacturing, 600; transportation, warehousing and utilities, 600, and ambulatory health care services, 600.