Texas, Arizona Have Recovered All the Jobs Lost When Covid-19 Hit

“Those four states have experienced persistently strong population growth, which really wasn’t dented by the pandemic,” said Adam Kamins, director of regional economics at Moody’s Analytics. “More and more people keep coming from expensive coastal cities to places like Dallas and Phoenix, which have a relatively lower cost of living and higher quality of life.”

The U.S. as a whole lost more than 22 million jobs in March and April of 2020 and at the end of 2021 still had 3.6 million fewer positions than in February 2020, before the pandemic hit the U.S. economy. As of November—the latest available state-level data—Texas had about 28,000 more jobs than in February. Arizona had nearly 5,000 more, Idaho had 14,500 more, and Utah leads with about 61,000 more.

Mr. Kamins expects a third of the states to return to their pre-pandemic levels of employment by the middle of 2022, with California and states in the Northeast lagging behind. He attributes that to a lack of population growth on the East and West coasts.

The surge in Covid-19 cases due to the Omicron variant could slow but not stop job growth, economists say. The labor market was tight at the start of the year, with employers struggling to hire amid a shortage of available workers. Omicron has created disruptions across industries—with airlines canceling thousands of flights, people calling in sick to in-person jobs and some schools returning to remote learning—but so far the labor market that drove the most annual job growth ever last year hasn’t cooled.

Arizona reached its pre-pandemic payrolls level in November, and its employers are facing hiring challenges like those in other parts of the country.

Rich Gallagher, chief executive officer of Synergo Cos., a residential construction company based in Scottsdale, Ariz., said that “building has just been booming” throughout the Phoenix metropolitan area. But he added that the increased demand for housing in the area also made it even harder for him to find construction workers than before the pandemic.

“We’re struggling to recruit, and it’s become an even bigger challenge to retain [workers] because the workforce has different options to look at now,” Mr. Gallagher said. “It’s really causing supply challenges because we’re just not able to meet all of our customers’ order demands.”

George Hammond, an economist at the University of Arizona, attributed the bounceback in the state’s payrolls in part to how the state handled earlier Covid-19 restrictions on business activity.

“Arizona rapidly returned to its prior peak of employment because compared to the nation we didn’t fall as far,” Mr. Hammond said. “One big reason is because the stay-at-home order in Arizona wasn’t very restrictive.”

He also pointed to the state’s lower cost of living, growth in industries such as transportation, the arrival of remote workers and population gains as major factors for economic growth in Phoenix.

“I think net migration was a big part of that,” Mr. Hammond said, adding that having more people in the state is a “factor that drives up job growth overall across sectors while also driving up house prices.”

According to recent Census Bureau estimates, Idaho, Utah, Montana and Arizona were the four states that saw the largest percentage growth in their populations from July 2020 to July 2021. Texas, meanwhile, saw the biggest numeric growth in its population of all states during that same period—an increase of more than 310,000 people, according to census data.

Cecily Maniaci, owner of Toasted Owl Café in Flagstaff, Ariz., said she is preparing to open a third location in Phoenix in the summer after the first two restaurants grew steadily in popularity. But Ms. Maniaci said she is nervous about the move because she has had a hard time finding waiters, hosts and kitchen workers at her two Flagstaff locations.

“I’m afraid to do anything or touch anything because you can’t get labor, you can’t get supplies. I mean, the supply-chain issue has been huge for us,” Ms. Maniaci said. “So I hesitate to expand right now because I don’t think it’s any better anywhere else.”

She said she has had people not show up for interviews and that one of her locations is open only five days a week instead of seven because of a lack of workers.

Austin, Texas, is leading an economic boom in that state, in part due to growth of the tech industry there.

Companies formerly based in California have relocated headquarters to the Lone Star state throughout the pandemic, including Oracle Corp. and Tesla Inc., which set their sights on Austin. Hewlett Packard Enterprise Co. announced its plan to leave Silicon Valley for the Houston-area in 2020. A diversification of the overall Texas economy has been taking place for at least a decade already, according to Michael Sadler, an economist at the University of Texas at Austin.

“The engine of growth for employment, back 10 or 12 years ago, was natural gas and crude oil. Those aren’t anymore,” Mr. Sadler said. “We have a lot more technology-style industries now.”

Chris Beaman founded Astronomic Inc., a startup support-services company, in Austin in June 2020. In that month, he employed only one person, but the company has grown to employ about 50 people now and it has about 250 late-stage startups as clients.

He said he has met “thousands of new people who have moved to Austin for the tech ecosystem” since then. “It’s very common to hear people say they moved to Austin three weeks or two months ago. There’s this kind of social climate here similar to your first day in college where everyone is new and everyone’s open to meeting each other,” Mr. Beaman said.

Write to Bryan Mena at bryan.mena@wsj.com