Phoenix, January 23, 2026
Phoenix is set to navigate a complex economic landscape in 2026, marked by resilience and strategic policies amid national challenges. Following robust national economic growth in 2025, factors like tariffs and inflation will play critical roles. Local entrepreneurs must adapt, leveraging innovation to sustain growth. Job gains are expected to rebound, supporting overall economic momentum. Collaborating on fiscal and monetary policies will be essential to foster community-driven opportunities and achieve continued success for businesses in the region.
Phoenix’s 2026 Economic Path: Navigating Growth & Innovation
As the national economy faces intricate challenges, Phoenix is poised for continued resilience, driven by local ingenuity and strategic fiscal policies.
The year 2025 delivered a surprisingly robust economic performance nationwide, even amidst significant political “fireworks” in Washington D.C. and challenging periods for financial markets. A market sell-off observed in April, following the introduction of new tariff campaigns, swiftly reversed course. Later in the summer, the Federal Reserve lowered interest rates, and the economy demonstrated its ability to navigate through the longest government shutdown in the nation’s history during the fourth quarter. As the year concluded, 2025 ultimately proved to be a strong year, characterized by excellent returns in the financial markets.
Looking ahead to 2026, the economic landscape presents a unique set of “K factors”—a blend of challenges and opportunities that will test the agility of businesses and policymakers. For Phoenix AZ business leaders and Arizona AZ entrepreneurs, understanding these dynamics is crucial for sustaining the momentum of economic growth and fostering continued personal achievement within our vibrant communities.
The National Economic Landscape: A Delicate Balance
The Federal Open Market Committee (FOMC) is currently navigating a complex array of issues, striving to guide the national economy toward a broader, more stable growth pattern that benefits all households and businesses. This balancing act involves several key considerations that will shape the economic outlook for the year.
One significant factor on the national stage is the ongoing discussion around tariffs. The tariff package is most likely to settle in the 15-17% range. However, uncertainty looms over whether the Supreme Court will ratify the existing tariff package. Should the current package be struck down, the ensuing uncertainty could likely cause turbulence in the markets, though numerous backup plans are presumed to be in place.
Inflation remains a central concern nationwide. Data indicates that inflation has been consistently near 3.00%, which stands above the Federal Reserve’s target of 2.00%. It is also presumed that inflation will push higher during the first half of 2026 as the tariff package becomes more broadly implemented. Indeed, the behavior of inflation represents the biggest risk to the 2026 economy. While the Federal Reserve is cutting rates, inflation is currently high and rising. Industry researchers anticipate that the current inflation surge should self-correct by mid-year, with inflation falling back to 2.5% or lower, even as rates are being cut. However, if inflation becomes stuck above 3%, all assumptions about interest rates would need to be re-calculated, which would cause turbulence for both the stock and bond markets nationwide. The FOMC maintains a delicate balancing act, cautiously pushing rates lower while seeking confirmation that inflation will indeed return to a more comfortable zone. Although markets are expecting multiple interest rate cuts in 2026, these may not fully materialize.
Unpacking the “K-Shaped” Recovery
A notable trend influencing the nationwide economic discussion is the concept of a “K-shaped economy.” This refers to an increasing skewing of the income, wealth, and spending distribution across the nation. Data suggests a clear sense of this phenomenon, where a significant share of spending is driven by individuals in the top 20% of the income distribution. Understanding this divergence is essential for assessing consumer spending patterns and their broader impact on various sectors of the economy, highlighting areas of prosperity alongside segments that may experience slower growth.
Catalysts for Growth: AI and Fiscal Policy
Despite the challenges, several powerful tailwinds are in place that are expected to keep the economy and markets moving forward throughout 2026 nationwide. Artificial Intelligence (AI) is projected to be a significant driver, continuing to power economic growth. This technological innovation creates new industries and efficiencies, fueling progress across numerous sectors.
Complementing technological advancements is the role of fiscal stimulus. This includes deficit-financed tax cuts and spending increases, which are expected to contribute to the growth narrative nationwide. Tax cuts aimed at businesses, particularly in the form of full expensing of investment spending, are anticipated to support the build-out of AI infrastructure and other crucial investments. Additionally, tax cuts for individuals are expected to manifest as much larger refund checks in the near future. These tax refunds are projected to be approximately $100 billion more than last year, a substantial amount that is consequential for consumer spending and, by extension, the national Gross Domestic Product (GDP).
Arizona’s Resilient Horizon
Locally, Arizona’s economy is forecast to accelerate, especially if the U.S. economy continues its growth trajectory. This positive outlook for Phoenix small business and broader Arizona economic growth is built on several optimistic projections. State job growth, which modestly decelerated in 2025 from 2024’s slower gains, is expected to rebound robustly. Forecasts indicate that job gains will rise from 0.8% in 2025 to 1.6% in 2026 and then to 1.5% in 2027. Despite this rising job growth, the unemployment rate is projected to increase slightly, from 4.1% in 2025 to 4.4% in 2026 and 4.5% in 2027.
Nominal personal income growth in Arizona, which slowed to 4.8% in 2025 from 5.9% in the prior year, is expected to rise again to 5.7% in 2026. This anticipated increase in income helps sustain gains in retail and remote sales, which are projected to accelerate from 4.6% in 2025 to 3.6% in 2026, following a 1.3% growth in 2024. Population growth statewide is expected to remain relatively steady at 1.3%-1.4% per year over the next couple of years. This growth is primarily fueled by net migration, as the natural increase (the annual difference between births and deaths) remains weak and is expected to gradually weaken further. It is worth noting that these slower population gains are anticipated to translate into declines in housing permit activity.
Conclusion
Phoenix, Arizona, stands at the cusp of a dynamic 2026, characterized by a complex interplay of nationwide economic forces and distinct state-level opportunities. The ability of our Phoenix AZ business community to leverage entrepreneurial innovation and adapt to evolving fiscal and monetary policies will be paramount. By fostering environments that encourage small-business resilience and private investment, we can continue to build on Arizona’s promising economic growth. Remaining engaged and supporting local ventures will be key to shaping a prosperous future for all in Phoenix.
Frequently Asked Questions about the 2026 Economic Outlook
- What was the general performance of the national economy in 2025?
- Economic growth was surprisingly robust in 2025 nationwide despite lots of fireworks in Washington D.C and some pretty challenging periods for the financial markets.
- What is the primary risk to the 2026 economy nationwide?
- The biggest risk to the 2026 economy nationwide is the behavior of inflation.
- What is the forecast for Arizona’s job growth in 2026?
- State job growth in Arizona is expected to rise from 0.8% in 2025 to 1.6% in 2026 and 1.5% in 2027.
- How is AI expected to impact the national economy in 2026?
- AI is expected to power growth going forward and is a key part of the optimism for 2026 nationwide.
- What is the projection for population growth in Arizona?
- Population growth statewide is expected to remain roughly steady during the next couple of years, at 1.3%-1.4% per year.
Key Features of the 2026 Economic Outlook
| Feature | Description | Scope |
|---|---|---|
| 2025 Economic Performance | Robust growth despite political and financial market challenges, with strong returns. | Nationwide |
| Inflation Concerns | Inflation near 3.00% (above Fed target), expected to rise then self-correct to 2.5% or lower by mid-2026. Risk if stuck above 3%. | Nationwide |
| Tariff Package | Expected to settle in 15-17% range, with Supreme Court ratification uncertainty. | Nationwide |
| Interest Rate Policy | Fed cutting rates cautiously, seeking inflation confirmation; market expectations for multiple cuts may not fully materialize. | Nationwide |
| “K-Shaped” Economy | Increasing skewing of income, wealth, and spending distribution, with top 20% driving spending. | Nationwide |
| Role of AI | Expected to continue powering economic growth. | Nationwide |
| Fiscal Stimulus | Includes deficit-financed tax cuts and spending increases; business tax cuts supporting AI infrastructure; individual tax refunds up $100 billion. | Nationwide |
| Arizona Job Growth | Expected to accelerate from 0.8% in 2025 to 1.6% in 2026. | State-level |
| Arizona Unemployment Rate | Projected to increase slightly from 4.1% in 2025 to 4.4% in 2026. | State-level |
| Arizona Personal Income Growth | Forecast to rise to 5.7% in 2026. | State-level |
| Arizona Population Growth | Expected to remain steady at 1.3%-1.4% per year, driven by net migration. | State-level |
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Author: STAFF HERE PHOENIX WRITER
The PHOENIX STAFF WRITER represents the experienced team at HEREPhoenix.com, your go-to source for actionable local news and information in Phoenix, Maricopa County, and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Waste Management Phoenix Open, Cactus League Spring Training, and Arizona State Fair. Our coverage extends to key organizations like the Greater Phoenix Chamber of Commerce and Visit Phoenix, plus leading businesses in technology and healthcare that power the local economy such as Intel and Banner Health. As part of the broader HERE network, including HERETucson.com, we provide comprehensive, credible insights into Arizona's dynamic landscape.
