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ECONOMY OFMESA

January 2008Prepared by

Center for Competitiveness and Prosperity Research L. William Seidman Research Institute

W. P. Carey School of BusinessArizona State University

Tempe, Arizona

ECONOMY OFMESA

January 2008

Prepared by:Center for Competitiveness and Prosperity Research L. William Seidman Research Institute W. P. Carey School of BusinessArizona State UniversityTempe, Arizona

Peer reviewed by the Arizona Department of Commerce Economic Research Advisory Committee:

Dan AndersonAssistant Executive Director forInstitutional AnalysisArizona Board of Regents

Brian CaryCorporate EconomistStrategic Economic ServicesSRP

Lisa DankaAssistant Deputy Director, Finance and InvestmentArizona Department of Commerce

Kent EnnisDeputy DirectorArizona Department of Commerce

Wayne FoxDirector, Bureau of Business andEconomic ResearchNorthern Arizona University

James B. NelsonEconomic Development ManagerSalt River Project

William P. Patton, PhDSenior Research EconomistEconomic & Business Research CenterThe University of Arizona

Elliott D. PollackElliott D. Pollack & Co.

Brad SteenChief EconomistArizona Department of Transportation

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ECONOMY OF MESA(ZIP CODES 85201 THROUGH 85216, 85274, 85275 AND 85277)

Aircraft manufacturing and telemarketing help drive the Mesa economy. However, the city’s economy is partially dependent on the economy of the broader region. Retail trade provides the most employment of any sector in Mesa.

Zip codes 85201 through 85216, 85274, 85275 and 85277 are used as an approximation for Mesa. These zip codes include pieces of unincorporated area, but do not include easternmost Mesa. The 272-square-mile land area of the zip codes is considerably greater than the 125 square miles of the city. The 2000 decennial census count of 427,939 residents in the zip codes was 8 percent higher than the city’s population of 396,375. The 2004 population of Mesa, as defined by these zip codes, is estimated at 485,883.

THE ECONOMY IN 2004

Total EmploymentTotal employment in Mesa is estimated to have been approximately 153,225 in 2004.

Total employment was 315 per 1,000 residents — 26 to 34 percent less than the national and Arizona averages, but slightly higher than the median value of 83 incorporated cities and towns in Arizona.

The below-average employment per capita was due to the large number of Mesa residents commuting to work in other communities. The number of jobs located in Mesa was 20 percent less than the 196,150 employed Mesa residents counted in the 2000 census.

Agriculture and GovernmentAgriculture largely is a basic activity that includes agricultural support activities as well

as farming and ranching. Agriculture employment in the Mesa zip codes in 2004 is estimated to have been about 575. Agriculture’s employment per capita was approximately 80 percent less than the national and state averages.

The government sector represents a mix of basic and nonbasic activities. Most federal government employment (both civilian and military) is basic to both the community and the state. State government employment may be basic to the community, but is it not basic to the state. Similarly, county government and community college employment may be basic to the community (for example, a portion of the employment at the county seat is basic in that some workers serve other communities in the county), but not to the county or the state. Other local government — municipal, tribal, school district and special district — only rarely is basic to a community.

Government employed approximately 21,375 in Mesa in 2004, the second-highest employment of the 20 sectors. Government employment per 1,000 residents was only 44 in Mesa — 39 to 45 percent lower than the state and national averages.

Nearly half of the government workers were employed by school districts. The Mesa Unified School District employed around 9,275 within Mesa. The city of Mesa employed 4,325. Mesa Community College and Maricopa County also were among the city’s larger employers.

Nonagriculture Private-Sector EconomyNonagriculture private-sector employment in Mesa was approximately 131,275 in 2004.

Employment was 270 per 1,000 residents — 23 to 31 percent less than the national and state averages, but higher than the median of Arizona cities and towns.

Employment estimates for 2004 for the broad sectors of the Mesa economy are shown in Table 1. Retail trade provided the most employment. Health care and social assistance also had a substantial workforce. Per capita employment was above the national average in the construction and retail trade sectors (see the “location quotient relative to nation” column of the table). Construction employment was considerably more than if the sector’s per capita employment had been equal to the national per capita average (see the “excess employment relative to nation” column of the table). Excess employment in retail trade also was substantial.

Mesa had low levels of per capita employment in the largely basic sectors: agriculture, mining, manufacturing, wholesale trade, and transportation and warehousing. Tourism also had a limited presence in Mesa. For example, per capita employment in the accommodation subsector was 65 percent less than the national average. More generally, the location quotient was less than 0.5 in nine of the 20 sectors.

More sectorally detailed data show that seven industries provided excess employment of at least 750 in Mesa in 2004, two of which have at least a moderate basic component (see Table 2). Aircraft manufacturing provided the most excess employment. It included an establishment employing more than 1,000 in 2004, according to the Census Bureau. Local sources identify this as Boeing. The other industry with a basic component was telemarketing, part of the administrative support sector. It included an employer of between 500 and 999.

The other industries listed in Table 2 primarily serve local residents. However, since Mesa had an above average proportion of seasonal residents and a slightly high share of senior citizens according to the 2000 census, a small portion of some of these industries is basic. Three construction industries are listed in the table.

The Census Bureau counted a number of other large employers in 2004. Three hospitals each employed more than 1,000. An insurance agency also employed more than 1,000.

Aircraft manufacturing and telemarketing help drive the Mesa economy. The lesser number of jobs than employed residents, however, reveal that the city’s economy is partially dependent on the economy of the broader urbanized area.

Mesa v. Comparison CitiesEmployment per 1,000 residents in Mesa in 2004 was 30 percent less than the regional

average. In the nonagriculture private sector, employment per 1,000 residents also was 30 percent less than the regional average. Despite these low figures, Mesa ranked slightly above the middle of the 33 geographic areas in the Central region on each measure (see Table 3).

Average nonfarm private-sector payroll per employee in Mesa in 2004 was $28,500 — 21 percent less than the national average, 11 percent less than the Arizona average, and 17 percent less than the regional average. Mesa’s figure was in the middle of the region’s 33 areas.

TABLE 1WAGE AND SALARY EMPLOYMENT BY SECTOR

Mesa (Zip Codes 85201-16, 85274, 85275 and 85277), 2004

Relative to Nation Relative to Arizona

SectorNumber of

Establishments EmploymentLocation Quotient

Excess Employment

Location Quotient

Excess Employment

TOTAL 8,958 153,225 0.66 0 0.74 0AGRICULTURE 72 576 0.19 0 0.20 0GOVERNMENT 13 21,385 0.55 0 0.61 0TOTAL, NONAGRICULTURE PRIVATE SECTOR 8,873 131,264 0.69 0 0.77 0Mining 7 152 0.20 0 0.23 0Utilities 2 16 0.01 0 0.02 0Construction 1,128 14,508 1.32 3,509 0.94 0Manufacturing 263 7,167 0.31 0 0.51 0Wholesale Trade 340 3,394 0.35 0 0.44 0Retail Trade 1,443 27,166 1.07 1,763 1.11 2,588Transportation and Warehousing 143 1,638 0.24 0 0.27 0Information 111 4,213 0.73 0 1.00 0Finance and Insurance 661 6,650 0.62 0 0.66 0Real Estate and Rental and Leasing 551 2,519 0.73 0 0.69 0Professional, Scientific and Technical Services 928 4,979 0.40 0 0.51 0Management of Companies and Enterprises 42 586 0.13 0 0.12 0Administrative, Support, Waste Management, Remediation Services 488 11,414 0.79 0 0.71 0Educational Services 100 1,768 0.37 0 0.59 0Health Care and Social Assistance 1,055 20,436 0.78 0 1.02 311Arts, Entertainment and Recreation 91 2,279 0.73 0 0.64 0Accommodation and Food Services 707 15,060 0.85 0 0.81 0Other Services (except public administration) 784 7,281 0.81 0 1.08 511Unclassified Establishments 29 38 0.41 0 0.67 0

Source: Nonagriculture private sector estimated from U.S. Department of Commerce, Census Bureau, Zip Business Patterns 2004. Agricultural production employees, most government employees, railroad employees, self-employed individuals and employees of private households are not included in this data source. The agriculture and government sectors are estimated — see Chapter I for details. The concept of establishment for agriculture and government differs from that used for the nonagriculture private sector.

TABLE 2NONAGRICULTURE PRIVATE-SECTOR INDUSTRIES WITH EXCESS WAGE AND SALARY EMPLOYMENT OF AT LEAST 750*

Mesa (Zip Codes 85201-16, 85274, 85275 and 85277), 2004

Relative to Nation Relative to Arizona

IndustryNumber of

Establishments EmploymentLocation Quotient

Excess Employment

Location Quotient

Excess Employment

Aircraft manufacturing 3 2,085 8.64 1,844 10.04 1,877Insurance agencies & brokerages 188 2,308 2.02 1,168 2.08 1,201Plumbing and HVAC contractors 181 2,583 1.67 1,040 1.56 931Drywall and insulation contractors 38 1,470 3.02 984 1.33 364Masonry contractors 60 1,349 3.63 977 1.20 223Telemarketing bureaus 11 1,474 2.68 924 1.22 261General medical & surgical hospitals 4 6,860 0.85 0 1.16 947

* Relative to either the national or Arizona average

Note: Those entries in bold with a gray background have a high proportion of sales to customers outside the region and are considered basic (export) economic activities. Those not in bold with a gray background have a moderate proportion of sales to non-residents. Other industries largely serve local residents.

Source: Estimated from U.S. Department of Commerce, Census Bureau, Zip Business Patterns 2004. Agricultural production employees, most government employees, railroad employees, self-employed individuals and employees of private households are not included in this data source.

In most sectors, location quotients in Mesa were average or below average among the region’s nine cities. Mesa ranked second in government, utilities, and transportation and warehousing, but with location quotients well below 1 in the two latter sectors. Its high location quotient in accommodation and food services was less than the figures in Jerome and Sedona.

Five comparison areas were selected, independent of region. Cities and towns of similar size (between 50 percent and 150 percent of the 2004 estimated population of Mesa) located nearby (within 50 miles) generally were selected. These comparison areas were supplemented as necessary with larger nearby cities and towns, smaller nearby cities and towns, and similarly sized cities and towns more than 50 miles away. The magnitude of the difference in city size, distance, and industrial mix also was considered.

Per capita employment in Mesa was the fifth highest of the six cities in this comparison group, greater than in Chino Valley and the unincorporated area. Per capita nonagriculture private-sector employment in Mesa was in the middle of the group, less than in Cottonwood and Williams and about the same as Parker. Though low from a state and national perspective, payroll per employee in Mesa was similar to that of most of the comparison cities.

Some of the export sectors are shown in Chart 1. Mesa’s location quotient was in the middle (ranked third or fourth) in each of these sectors. Except in accommodation and food services, export activities are rare in this group of cities.

CHANGES IN THE ECONOMY BETWEEN 2001 AND 2004Between 2001 and 2004, Mesa’s employment dropped approximately 4,125 (3 percent).

Employment per 1,000 residents also fell, as did the location quotients relative to the national and state averages.

Mesa experienced a decrease of 4 percent in nonfarm private-sector employment between 2001 and 2004, inferior to the Arizona gain of 5 percent, the regional increase of 3 percent, and the barely positive national change. The location quotient relative to the U.S. average fell 0.07 between 2001 and 2004 in Mesa, a little more than the regional average. In contrast, the state’s location quotient dropped only marginally.

The town’s employment growth was accompanied by a small increase in inflation-adjusted payroll per employee. The 3 percent rise was superior to the decreases in the regional, state and national figures.

Some sectors experienced a moderate loss in location quotient between 2001 and 2004 (see Table 4). Professional, scientific and technical services (PST); mining; information; and manufacturing had declines. The decreases were smaller in retail trade and construction, but were accompanied by a loss in excess employment. Very large decreases in excess employment were measured in the payroll services (part of the PST sector) and semiconductor manufacturing industries. Aircraft and explosives manufacturing also declined. The largest gains were in the insurance agencies and telemarketing industries.

TABLE 3MESA’S RANKS ON EMPLOYMENT PER 1,000 RESIDENTS

Rank in Central Region TOTALNonagriculture Private Sector Government

All 33 Areas 13t 11 1827 Incorporated Cities and Towns 12t 10 1513 Largest Incorporated Places 7 7 721 Incorporated Places in Maricopa County 10 9 10

Notes: A rank of 1 is highest. In agriculture, Mesa tied (‘t’) for 22nd among all 33 areas.

CHART 1LOCATION QUOTIENTS IN 2004

Selected Sectors in Mesa and Comparison Cities

Source: Estimated from U.S. Department of Commerce, Census Bureau, Zip Business Patterns 2004. The agriculture sector was separately estimated — see Chapter I for details.

TABLE 42001-TO-2004 CHANGE IN WAGE AND SALARY EMPLOYMENT BY SECTOR

Mesa (Zip Codes 85201-16, 85274, 85275 and 85277)

Relative to Nation Relative to Arizona

SectorNumber of

Establishments EmploymentLocation Quotient

Excess Employment

Location Quotient

Excess Employment

TOTAL, NONFARM PRIVATE SECTOR 655 -5,301 -0.07 0 -0.07 0Forestry, Fishing and Hunting, and Agricultural Support Services -1 8 0.01 0 0.06 0Mining 0 -393 -0.52 0 -0.42 0Utilities -8 -29 -0.03 0 -0.03 0Construction 86 642 -0.04 -189 -0.04 0Manufacturing 6 -6,465 -0.23 0 -0.32 0Wholesale Trade 4 203 0.02 0 0.01 0Retail Trade -40 1,423 -0.03 -657 -0.05 -832Transportation and Warehousing 1 497 0.05 0 0.09 0Information -7 -1,640 -0.26 0 -0.21 -983Finance and Insurance 136 1,991 0.14 0 0.17 0Real Estate and Rental and Leasing 118 313 0.03 0 0.06 0Professional, Scientific and Technical Services 138 -5,647 -0.55 0 -0.56 -770Management of Companies and Enterprises 3 -171 -0.04 0 -0.09 0Administrative, Support, Waste Management, Remediation Services -30 199 0.00 0 0.00 0Educational Services 11 575 0.08 0 0.07 0Health Care and Social Assistance 143 1,803 -0.04 0 -0.09 -1,501Arts, Entertainment and Recreation 5 523 0.10 0 0.04 0Accommodation and Food Services 99 1,205 -0.04 0 0.01 0Other Services (except public administration) 44 326 -0.01 0 0.05 342Unclassified Establishments -48 -86 -0.33 0 -0.22 0

Source: Nonagriculture private sector estimated from U.S. Department of Commerce, Census Bureau, Zip Business Patterns 2004 and 2001. Agricultural production employees, most government employees, railroad employees, self-employed individuals and employees of private households are not included in this data source. The agriculture and government sectors are estimated — see Chapter I for details. The concept of establishment for agriculture and government differs from that used for the nonagriculture private sector.