The state's jobless rate jumped a tenth of a point in January to 8.0 percent.
That change is due largely to the loss of 45,500 jobs from the month before as businesses shed the extra staff they hired for the Christmas season. Layoffs in retail trade and employment services, mainly temporary help agencies, amounted to half of the losses in retail trade.
But Aruna Murthy, director of economic analysis for the state Department of Administration, said there is some good news in the numbers. She said the job losses for January are below the 10-year average of 58,600.
There is, however, a big cloud on the horizon: sequestration.
Murthy said Arizona is particularly vulnerable to the budget stalemate in Washington, what with federal spending making up 6.7 percent of the state's gross domestic product.
What's worse, she said, is that much of that is linked to the military. And Murthy said she expects the military side of the equation to take deeper cuts than the social programs.
Murthy said she does not expect the jobless numbers for those in civilian side of military programs to jump. That is because the more likely scenario will be furloughed, meaning they are not going to be considered "unemployed'' because they're not out looking for work.
But a furlough means less income. And Murthy said that will create a ripple effect elsewhere.
"Your consumption goes down if a person loses his job,'' she said: As these people spend less, that will cause layoffs in other industries.
That effect, she said, won't necessarily be equal across the state. Murthy predicted a bigger impact in communities with military bases like Glendale, Tucson, Sierra Vista and Yuma.
Overall, Murthy puts the potential job loss for Arizona anywhere from 30,000 to 50,000.
For the moment, though, the employment situation in the state is improving.
Murthy said that the number of people working in Arizona in January was 47,700 more than the same time a year earlier. At that time the state's jobless rate was 8.8 percent.
Even the retail sector, with its 8,800 job loss between December and January, actually still had overall employment of 3,000 more this year than last year. And there were 7,900 more people working in bars and restaurants this January than the prior year.
One tradeoff, though, has been that employment by private colleges and schools is less now than last year. Murthy said, though, that is to be expected.
When the economy goes soft, people go back to school to improve their skills. Murthy said a rising economy results in the reverse.
At the same time, though, there has been continued scrutiny of private colleges by the federal government, particularly in terms of government guaranteed financial aid.