Is the economic tide turning in Prescott? A shrinking workforce and fluctuating job numbers paint a complex picture, and the latest data might surprise you. According to a recent analysis by the Economic and Business Research Center (https://www.azeconomy.org/), Arizona's leading source of economic intelligence since 1949, the Prescott labor market is facing some headwinds. Let's dive into the details and see what's really happening.
The Labor Force: Smaller Than It Used To Be
In August, the seasonally adjusted civilian labor force in the Prescott Metropolitan Statistical Area (MSA) totaled 106,966 individuals. While this figure is practically unchanged from the previous month, it masks an underlying trend. After a dip from 107,062 in April to 106,855 in May, the labor force has been trying to recover. But here's where it gets controversial... Despite these recent small gains, the year-to-date civilian labor force is still a significant 3.0% smaller than it was last year. What's causing this decline? Are people leaving the area, retiring, or simply opting out of the workforce? This shrinking pool of available workers could have long-term implications for local businesses.
Employment: A Downward Slide
Adding to the complexity, seasonally adjusted resident employment in the Prescott MSA also saw a slight decrease in August, falling by 49 to 102,648. The bigger picture reveals an even more concerning trend: employment has been generally decreasing throughout 2024, dropping from a high of 106,673 in December 2024 to around 103,000 in recent months. Year-to-date, resident employment is down by a noticeable 3.6% compared to the same period last year. This means fewer people are employed in the Prescott area compared to last year. What industries are being hit the hardest? We'll get to that shortly.
Unemployment: On the Rise
Unemployment in the Prescott MSA experienced an uptick in August, rising by 55 (a 1.2% increase) to reach 4,318. And this is the part most people miss... The trend of increasing unemployment has been consistent throughout the year, climbing from 3,851 in January to its current year-to-date peak. Year-to-date, resident unemployment has jumped by a substantial 13.6% compared to last year. For context, statewide unemployment in Arizona has followed a similar pattern, increasing from 146,714 in January to 157,143 in August, a 7.1% increase. This suggests that Prescott's unemployment challenges are not isolated but rather part of a broader trend affecting the state.
Unemployment Rate: A Gradual Climb
The seasonally adjusted unemployment rate for the Prescott MSA remained steady at 4.0% in August. However, this stability is deceiving. The rate has been gradually increasing throughout 2024, rising from 3.6% in January to its current level. Arizona's statewide unemployment rate has followed a similar path, starting at 3.9% in January and February before settling at 4.1% from March through August. While these numbers are relatively low compared to historical averages, the upward trend is a cause for concern.
Wage Growth: A Bright Spot?
Now, for some potentially good news. Non-seasonally adjusted hourly earnings in the Prescott MSA saw a positive increase of 4.5% in August, rising by $1.20 year-over-year to $27.67. Similar wage growth was observed in June and July, with hourly earnings up 4.6% to $26.88 and 2.4% to $25.81, respectively. August's rate of $27.67 translates to an approximate annual salary of $57,553 for a full-time worker. Are these wage increases enough to offset the rising cost of living in the area? This is a point of debate.
Nonfarm Employment: Fluctuating Numbers
Seasonally adjusted total nonfarm employment in the Prescott MSA reached 71,600 in August, up 200 (0.3%) from July. Employment has been relatively stable in recent months, dipping from 72,000 in April to 71,400 in July before the modest August gain. Arizona's statewide employment has shown similar volatility, declining by 15,200 in June before rebounding with gains of 2,700 in July and 700 in August.
However, non-seasonally adjusted total nonfarm employment in the Prescott MSA fell 0.4% year-over-year to 71,300 in August. Most months in 2024 have shown year-over-year declines, with July being the only exception, posting a 0.9% gain to 70,100. This suggests that while there might be short-term gains, the overall trend is still slightly negative.
Industry Performance: Winners and Losers
Looking at specific industries in the Prescott MSA, "Other Services" experienced the strongest year-over-year growth in August, increasing by 3.8% to 2,700. Private Education and Health Services (+2.3%), State and Local Government (+2.1%), and Professional and Business Services (+1.4%) also saw positive growth. On the flip side, Manufacturing suffered the largest year-over-year decline, falling 5.6% to 3,400 jobs in August, followed by Trade, Transportation, and Utilities (-3.7%). Other notable decreases were seen in Leisure and Hospitality (-2.0%) and Mining, Logging, and Construction (-1.4%). Employment levels in Information, Financial Activities, and Federal Government remained unchanged. These shifts in industry performance highlight the changing dynamics of the Prescott economy. Which sectors do you think will drive growth in the future?
Retail Sales and Housing Permits: Mixed Signals
Non-seasonally adjusted retail sales excluding food and gasoline in the Prescott MSA rose by 3.4% year-over-year in August to $258.6 million. June and July showed similar growth of 1.5% and 2.2%, rising to $272.3 million and $255.7 million, respectively. This suggests that consumer spending is holding relatively steady.
However, non-seasonally adjusted housing permits in the Prescott MSA have been highly volatile in recent months. Total permits surged 147.4% year-over-year in June to 287, with single-family permits rising 25.9% to 141. In July, permit activity reversed sharply, with total permits down 44.8% to 153 and single-family permits down 25.6% to 125. The downward trend continued in August, with total permits dropping 20.3% to 118 and single-family permits falling 3.3% to 118. What could be causing these dramatic swings in housing permits? Is it a sign of uncertainty in the housing market?
Related Economic News:
* How TSMC Arizona changes the state’s economic landscape (https://azbigmedia.com/business/economy/how-tsmc-arizona-changes-the-states-economic-landscape/)
* AZ Big Podcast: Rose Castanares of TSMC talks building a massive workforce (https://azbigmedia.com/business/az-big-podcast-rose-castanares-of-TSMC-talks-building-a-massive-workforce/)
The Big Question:
So, what does all this mean for the future of the Prescott economy? The shrinking labor force and fluctuating employment numbers present challenges, but wage growth and relatively stable retail sales offer some hope. The volatile housing permit data adds another layer of uncertainty. What are your thoughts on these trends? Do you agree with this analysis, or do you see things differently? Share your opinions and insights in the comments below!
