Arizona Manufacturing Hits the Accelerator

Jennifer Pullen, Senior Research Economist

Pinpoint Shadow  Manufacturing Jobs in Tucson, Arizona MSA

How important is manufacturing to Arizona? In 2021, manufacturing represented 6.0% of total employment in Arizona. That was slightly less than the national share of 8.3%. Manufacturing makes up a larger share of GDP for both Arizona and the U.S., at 9.0% and 10.7% respectively. Manufacturing jobs and GDP in Arizona increased significantly since the end of the Great Recession and surged after the initial onset of the pandemic. Manufacturing is important to a region because it often provides high-wage jobs across a broad spectrum of skill levels.

As of October 2022, Arizona added 39,600 manufacturing jobs since the beginning of 2015 (Figure 1). That was a 25.1% increase in manufacturing employment in just under eight years. Nationally, manufacturing employment increased by only 5.1% during this time.

Figure 1: Manufacturing Jobs (Seasonally Adjusted, in Thousands)

Manufacturing jobs in Arizona have increased significantly since the Great Recession, with an average growth rate of 3.0% since October 2015. That increase includes the decline in manufacturing employment during the coronavirus shutdown. It is also well above the average growth for the nation during this period at 0.7%. The increase in manufacturing jobs significantly picked up following the pandemic shutdown, with a 7.9% increase in employment between October 2021 and October 2022 (Figure 2).

Figure 2: Percent Change in Manufacturing Jobs (Over-the-Year in October, Seasonally Adjusted)

The Bureau of Labor Statistics defines the manufacturing sector as those establishments that engage in the mechanical, physical, or chemical transformation of materials, substances, or components into new products. The manufacturing sector includes the creation of durable and nondurable goods. Durable goods are products that do not need to be purchased often (typically lasting longer than three years). The durable goods category can be broken down into many subsectors, including aerospace products, computer & electronic products, and fabricated metal products. In Arizona, employment in computer & electronic products, as well as aerospace products, far exceeded the national share of jobs for these subsectors (Figure 3). Additionally, Arizona had a smaller share of nondurable manufacturing jobs when compared to the nation. In October of 2022, the Arizona Commerce Authority announced that Arizona ranked number three in the country for employment in semiconductor manufacturing and top five for aerospace and defense manufacturing employment.

Figure 3: Share of Manufacturing Jobs by NAICS Subsector (October 2022)

As of October 2022, Arizona had replaced all of the manufacturing jobs lost during the early months of the pandemic, plus added 17,000 jobs. The majority of those jobs were in durable goods manufacturing. Employment in aerospace increased by 2.6%, computer and electronic manufacturing jobs increased by 2.9%, while employment in fabricated metals increased by 7.6% (Figure 4). The other durable goods subsector posted an increase in employment of 16.5%, and nondurable manufacturing employment rose by 12.1%. Other durable goods jobs are calculated as the residual after subtracting aerospace, computer and electronic, and fabricated metals jobs from total durable goods jobs. During this same period, the nation posted a decline in manufacturing employment in aerospace and fabricated metals.

Figure 4: Percent Change in Manufacturing Jobs by Subsector (February 2020 to October 2022)

More locally, Tucson's employment in manufacturing increased but not as quickly as the state or the Phoenix MSA. Overall, between February 2020 and October 2022, manufacturing employment in Tucson increased by 6.8%. That was slightly slower than the state growth rate of 8.0% and much slower than Phoenix’s gain of 12.4%. Figure 5 highlights the month-over-month employment gains in manufacturing for Tucson and Phoenix.

Figure 5: Manufacturing Jobs (Seasonally Adjusted, Levels in Thousands)

For more details on Tucson’s manufacturing sectors, see Tucson Manufacturing: High Wages, Significant Impact.

Arizona manufacturing job growth is expected to remain strong in the near term, reflecting in part shortening global supply chains (partly in response to the pandemic and overall geopolitical instability) and the significant expansion of the semiconductor chip (Intel and TSMC in Phoenix) and battery industries (American Battery Factory and Sion Power in Tucson), among others.

The MAP Dashboard and Arizona’s Economy will continue to track manufacturing trends in Arizona and regionally within the state. You can stay up to date on monthly changes to manufacturing in Arizona and Tucson on Arizona’s Economy.