Tucson MSA First Quarter 2023 Forecast Flash
Tucson forecast improves as U.S. recession looks milder
This post briefly describes the Tucson MSA First Quarter 2023 forecast update, completed in January 2023.
The detailed 10-year forecast data are available in Eviews and Excel files on the Forecast Databases page.
This forecast incorporates updated national short-run projections from IHS Markit released in January 2023. The U.S. baseline forecast includes a national downturn. On a quarterly basis, the forecast calls for U.S. real GDP to decline from the first quarter of 2023 through the second quarter of 2023. The peak-to-trough decline is 0.6%, which would be similar to the (relatively mild) early 2000s recession.
For the current U.S. and Tucson forecasts, the baseline projections are assigned a 55% probability. The pessimistic scenario has a 25% probability and the optimistic scenario has a 20% probability.
Tucson MSA job gains accelerated strongly in 2022 according to the preliminary estimates, with jobs up by 11,700 (3.1%). Growth decelerates in 2023 as the economy adjusts to higher interest rates, the end of federal pandemic income support, and a national downturn.
After adding 5,700 jobs in 2021 (1.5% growth), 11,700 jobs in 2022 (3.1%), Tucson job gains decelerate to 4,600 in 2023 (1.2%). Growth decelerates again in 2024 to 1.0%.
Driven by net migration, population increased by 14,000 in 2022. That translated into 1.3% growth. Population growth is forecast to decelerate to 0.9% in 2023 and 0.6% in 2024.
According to preliminary estimates, Tucson housing permits dropped to 5,800 in 2022 driven by lower single-family activity. Multi-family permits were up strongly. The forecast calls for permits to drop significantly in 2023, to 2,900. The decline is in response to slower population gains, higher interest rates, and reduced affordability.
Income gains decelerate in 2022 with the end of pandemic-related federal income support programs. Nominal income growth is forecast to be slightly positive in 2022 (up 0.6%) which means that real income growth is negative.
Real taxable sales (broadly defined to include retail, food, restaurants and bars, and gas) are forecast to decline by 2.7% in 2023. Nominal sales are expected to rise by 1.1%.
The pessimistic scenario calls for a slower recovery in the near term, driven by the shock to commodities prices created by the Russian invasion of Ukraine and a slower recovery from supply-chain issues. The optimistic scenario calls for stronger gains.
Exhibit 1 presents a summary of the current annual projections. Exhibit 2 provides a comparison to the prior forecast. Exhibit 3 provides a comparison of the baseline and alternative scenarios for the current forecast.
Exhibit 1: Summary of the First Quarter 2023 Tucson MSA Forecast, Completed January 2023
Exhibit 2: Comparison of the First Quarter 2023 (Current) and Fourth Quarter 2022 (Prior) Forecasts for Tucson MSA, Percent Change
Exhibit 3: Summary of the First Quarter 2023 Tucson MSA Forecast, Baseline and Alternative Scenarios, Percent Change
