An illustration representing Arizona's economic changes and challenges in 2024.
Arizona is facing a slowdown in economic growth for 2024, with job growth forecasts revised down to align with national averages. The state’s job market shows sluggish growth in compensation and income, coupled with issues surrounding housing affordability and weak permit activity. Despite some improvements, the overall economic landscape remains fragile, and concerns about federal policies and climate change pose risks to future sustainability. Key sectors contributing to job gains include education, health services, and construction, while others, like IT, have seen losses.
Arizona is facing an unexpected slowdown in economic growth for 2024, with forecasts suggesting a continued lackluster performance into 2025. The state’s job growth rate has been revised down from 2.1% to 1.3%, bringing it in line with the national average for the year. These adjustments highlight the ongoing challenges within Arizona’s labor market, which remains tight yet stagnant in terms of job creation.
Despite a solid month-over-month job growth at the beginning of 2025, the progress has not been significant enough to indicate a robust recovery. Economic indicators show that growth in employment compensation has been sluggish, which has led to a corresponding decrease in overall income growth and taxable sales. Arizona’s issues with housing affordability continue to create obstacles for residents, mirroring trends seen nationally.
Current economic conditions show weak housing permit activity in early 2025. Although the initial figures were not promising, recent data has provided some signs of improvement. Nevertheless, the total number of housing permits in the state declined by 14.4% during the first quarter of 2025, and multi-family permits saw a 40.5% drop.
Concerns around economic policy uncertainty also loom large over Arizona and the United States. Potential changes in tariff and immigration policies could have destabilizing effects, contributing to fears of a national recession in 2025, which may further hinder growth and lead to net job losses in Arizona.
Forecasts for job growth in the state reveal a decrease from 1.2% in 2024 to 1.0% in 2025, with a modest rebound anticipated thereafter at rates of 1.8% in 2026 and 1.7% in 2027. Population growth, driven mainly by net migration, is expected to show a slight increase in 2025 before slowing to 1.3% in both 2026 and 2027.
Key industries contributing to job gains in Arizona include private education, health services, construction, government, and the leisure and hospitality sectors. However, not all sectors shared in this growth. Areas that recorded job losses include professional and business services, financial activities, and information technology. In fact, small job losses were noted in the Tucson Metropolitan Statistical Area (MSA) in 2024, defying previous expectations of modest growth for the region.
In terms of the housing market, the median sale price for homes in Phoenix experienced a slight dip of 1.1% year-over-year, settling at $445,000. Similarly, Tucson’s median home price dropped by 1.6% to $368,000. The increasing cost of housing is evident; as of January 2025, 45.1% of median household income in the Tucson MSA would be needed to afford a mortgage, with Phoenix slightly higher at 47.5% and the national average at 47.0%.
Retail sales in Arizona have also shown signs of slowing; taxable retail sales growth fell to 4.2% in the first quarter of 2025, down from 5.6% in the fourth quarter of 2024. Meanwhile, consumer price inflation in Phoenix was reported at 0.3%, below the national average of 2.3%. This stagnation in economic indicators underscores the fragility of Arizona’s economic landscape.
Looking to the future, the baseline scenario anticipates that Arizona’s economy will rebound from the subpar growth experienced in 2024 and 2025, with a projected return to normal growth rates in 2026. However, this optimistic outlook is contingent on steering clear of significant disruptions stemming from proposed federal policies related to immigration and trade. Additionally, concerns surrounding water availability and climate change present ongoing risks to the state’s long-term economic sustainability.
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