Do recent layoffs signal a worsening economy? We asked experts in Arizona
Arizona could be headed for another year of solid employment growth despite several recent high-profile layoff announcements. But some economists caution that tariff and mass-deportation proposals, if implemented after Donald Trump becomes president, could dim the jobs outlook.
While still a jobs leader with a below-average unemployment rate of 3.6% as of October, Arizona has hit some potholes of late. One recent indication: Nikola Corp., the maker of battery-electric and hydrogen powered heavy trucks, implemented another round of layoffs, following some reductions last year.
The company didn't comment directly on the number of job losses but in an email to The Arizona Republic cited the need for "adjusting and rescaling our staff needs."
A trucking-focused website, FreightWaves, reported the layoffs in October at 135. Nikola employed 870 people at the end of 2023, primarily at its Phoenix headquarters and at its manufacturing center in Coolidge, and around 1,500 at the end of 2022.
Have there been other notable layoffs lately?
Yes. Perhaps the most significant was an announcement in October by semiconductor maker Intel Corp. that it would lay off around 385 people at its Chandler campus, of roughly 15,000 nationwide.
That same month, Steward Health Care said it would let go of more than 250 people in the Phoenix area, mainly at a downtown Phoenix hospital, with aircraft manufacturer Boeing in Mesa announcing more than 180 layoffs in November.
In early December, Steve Sanghi, the new interim CEO of Microchip Technology, said the Chandler-based semiconductor maker would close its factory or "fab" in Tempe, possibly affecting around 500 workers there, in a cost-saving move. Sanghi, who came out of retirement to guide Microchip, predicted that only around 15% of affected workers would fill other roles with the company, which employs around 2,300 people in Arizona and thousands more in other locations.
Do these announcements signify a worsening jobs trend?
Not necessarily. Since midyear, about 20 companies have informed Arizona officials that they intend to lay off employees, totaling more than 2,400 affected workers, through WARN or Worker Adjustment and Retraining Act notices
Over the second half of 2023, by comparison, companies issued similar notices affecting nearly 4,000 Arizona jobs.
Combined, those 2,400 or so layoffs over the second half of 2024 amount to less than one-tenth of 1% of Arizona's workforce of 3.75 million people.
Layoffs also reflect company-specific challenges rather than broad economic pressures.
Nikola, for example, has struggled for years to market its trucks profitably. The company has reported progress recently, including a near-tripling of truck deliveries over the first nine months of 2024, with rising revenues. But it still lost more than $481 million from January through September, prompting the latest layoffs.
Based on recent layoffs, are economists worried about Arizona?
In general, no, largely because the next recession still appears to be a way off.
“Even with significant headwinds from reduced housing affordability, elevated interest rates and tight labor markets, Arizona continues to generate solid economic growth,” George Hammond, an economist at the University of Arizona, said in email comments to The Republic.
As positives, Hammond cited job gains that are increasing faster than the national level along with personal incomes that are growing relatively quickly, though Arizonans still don’t earn as much as Americans generally.
Dennis Hoffman, an economist at Arizona State University, similarly predicted continuing employment growth, a relatively low jobless rate, moderating inflation and wage gains, along with lower interest rates that could bolster housing.
"Arizona, and metro Phoenix in particular, has a lot of momentum from a growing workforce and quality business relocations," Hoffman said, also in an email.
What might slow Arizona's economy next year?
Many factors could come into play, but both Hammond and Hoffman cited pledges by President-elect Trump to impose tariffs and pursue mass deportations as policies that could hurt the state's economy.
Hammond, director of the Economic and Business Research Center at the University of Arizona, predicted big tariff increases on goods imported from Canada and, especially, Mexico, as proposed by Trump, could raise prices here and disrupt supply chains.
About 33% of Arizona’s imports come from Mexico, worth $11.8 billion in 2023, he said. Arizona sends nearly 28% of its exports, worth $8 billion, to Mexico.
Mass deportations, meanwhile, could impact Arizona’s labor market in industries including construction and agriculture and raise prices, he added. “Results of the election inject significant uncertainty,” Hammond said.
Hoffman, who directs ASU's Center for Competitiveness and Prosperity Research, largely agreed.
"An aggressive policy of purging undocumented workers from the labor force would be very disruptive on a number of fronts, both socially and economically," he said. "And a trade war with Mexico would have numerous adverse consequences for the state’s economy."
It could take many months, if not longer before it's clear how and if these proposals are implemented. "We will have to see what becomes reality and what is simply rhetoric," Hoffman said.
Reach the writer at russ.wiles@arizonarepublic.com.