Mining and cattle-raising were the principal economic activities in Arizona during the territorial period. With the introduction of irrigation in the early 1900s, farming assumed a greater importance. Improvements in transportation later in the 20th century led to the development of manufacturing and tourism. sector.
Arizona's economy compiled an impressive growth record during the 1970s and early 1980s. Between 1973 and 1983, the state population increased by 39% (4th in the US); nonfarm wage and salary employment grew by 49% (5th in the United States); and total personal income by 218% (6th in the United States). Over-expansion brought a slowdown in the late 1980s, with vacancy rates reaching record levels in the late 1980s and early 1990s. In the national recession of 1991, the Arizona's annual job creation rate dropped from 3% to zero. However, economic recovery in the 1990s was rapid. Arizona's annual job creation rate rose to a peak of about 8% in 1994 and continued above 4% until the national recession of 2001. The state gross product grew at an average annual rate of 8.75% in 1998 and 1999, and at 6.1% in 2000. However, the growth rate fell to 4.7% in 2001. Job growth was negative in 2001, and only 0.2% in 2002. In addition to substantial layoffs in the manufacturing, transportation and utilities, and finance, insurance, and real estate sectors, the state budget crunch prompted scheduled layoffs in the government for fiscal 2004. Total assets in Arizona's financial institutions, which had grown from $38.8 billion in September 1998 to $65.3 billion by September 2001 (+68.3%), fell to $46.8 billion (-28.3%) as of September 2002. Vacancy rates of 12% (in Tucson) to 22% (in Phoenix) in late 2002, though below previous highs except for hotels, exceeded national averages.
In 2001, state gross product totaled $160.7 billion,12.6% from the public sector. The biggest contributions to state gross product came from general services ($34.5 billion, up 36.8% from 1997), financial services, including insurance and real estate ($31.4 billion, up 33.6% from 1997); manufacturing ($21.7 billion, up 20% from 1997 but including a 4.4% decline in the electronics sector); and government ($20.3 billion, up 32% from 1997).