Economic diversification drives Phoenix metro economy
Economic recovery is well underway. Employment in Phoenix metro is 75% recovered, with some industries surpassing pre-pandemic highs. Optimistic expectations from the Greater Phoenix Economic Council place full employment recovery in the third quarter of 2021. Employment is picking up faster than expected, with labor shortages being the largest hurdle to reaching pre-pandemic employment. The underlying economic fundamentals of Phoenix placed this metro on the fast track to recovery — with diversification driving the way.
Economic diversification, talented workforce and high quality of life are the key fundamentals that attract individuals and businesses to the Valley of the Sun. “Diversification” can reference many parts of an economy. The residents who make up an economy can be diverse in age or background. Neighborhoods are diverse, and each has a distinct feel that distinguishes it from the neighborhood down the street. However, the economic diversification that is often highlighted as a crucial factor in business growth is employment in a given industry or sector.
Dependence on a few industries can have catastrophic effects on an economy. The goal of economic diversification is balance. However, that does not mean the same number of people need to be employed in each industry. Additionally, what works for one region may not be practical for all. A geographical area with certain natural resources will have a different industry balance than a vacation destination.
Phoenix metro encompasses a wide array of industry sectors. The size, geographic variation and makeup of the local economy encourages employment diversification. The construction boom town reputation Phoenix metro once held has been replaced by an emerging hub for technology, medical and high-tech manufacturing employment.
Diversifying employment allows for a swift recovery during an economic downturn. During the Great Recession, the regional economy was shattered and had one of longest recovery periods in the nation. This time, Phoenix metro is expected to fully recover faster than competitive metros.* This is largely due to the market’s diversification, where economic dependence is not solely concentrated on industries hardest hit by the pandemic like tourism, retail or office sectors. If an economy only relied on the industries hit hardest, the recovery would be severely strained.
Source: Phoenix Business Journal