August 2026 Labor Market Update
Arizona and U.S. Labor Markets Largely in Balance
At a glance
- Arizona's labor market held steady in August, with nonfarm payrolls up 0.5% year over year and the unemployment rate unchanged at 4.9%, as Phoenix outpaced the state while Tucson, Prescott, and other metros lagged.
- Nationally, the U.S. labor market gained firmer footing, adding 162,000 jobs in August with unemployment steady at 4.1% and upward revisions to prior months' gains.
Arizona’s labor market remained stable in August, according to the latest employment report released by the Arizona Office of Economic Opportunity. Statewide, the non-seasonally adjusted nonfarm payroll employment increased by 17,400, or 0.5%, from August 2025 to August 2026. Seasonally adjusted payroll employment increased by 0.6% over the year and slid by 0.1% over the month. The unemployment rate (seasonally adjusted) stayed at 4.9% for the third consecutive month, with little changes in the number of unemployed and the civilian labor force from prior months.
Exhibit 1 shows Arizona net job changes (not seasonally adjusted) by industry from August 2025 to August 2026. Private Education and Health Services and Professional and Business Services sectors led job gains, along with Construction; Trade, Transportation, and Utilities; Other Services; Information; and Natural Resources and Mining. Those gains were partly offset by job losses in Leisure and Hospitality, Financial Activities, Government, and Manufacturing.
Exhibit 1: August 2026 Arizona Net Job Change (Thousands) and 2025 Annual Wages per Worker
Job gains in the Phoenix-Mesa-Chandler MSA exceeded the statewide total. Non-seasonally adjusted nonfarm payroll employment in the Phoenix MSA increased by 22,300, or 0.9%, over the year, and the sectors that gained or lost jobs matched the statewide pattern. Phoenix’s job gain in Private Education and Health Services was the same as the statewide gain in that sector, and in each of the other job-gaining sectors, Phoenix’s increase accounted for most of that sector’s statewide gain. Similarly, Phoenix’s job losses in Leisure and Hospitality and in Financial Activities each accounted for at least 70% of the statewide loss in that sector, while its losses in Government and Manufacturing accounted for a smaller share of each sector’s statewide loss.
Exhibit 2: August 2026 Phoenix MSA Net Job Change (Thousands) and 2025 Annual Wages per Worker
Tucson MSA added 1,600, or 0.4%, nonfarm payroll jobs in August over the year. Most of the gains came from Private Education and Health Services, Professional and Business Services, and Other Services. Natural Resources and Mining, Construction, and Information sectors also added jobs, but unlike for the Phoenix MSA, Trade, Transportation, and Utilities posted job losses in the Tucson MSA. Financial Activities and Government sectors led the job losses in Tucson, while Leisure and Hospitality and Manufacturing sectors also shed considerable numbers of jobs.
Exhibit 3: August 2026 Tucson MSA Net Job Change (Thousands) and 2025 Annual Wages per Worker
Besides Phoenix and Tucson, all other metropolitan areas experienced payroll job losses over the year in August. Prescott MSA experienced a 900 decrease in nonfarm payroll employment from August 2025 to August 2026. The only sector that added jobs was Other Services. There was little change in jobs in Information, Financial Activities, Professional and Business Services, and Private Education and Health Services. Leisure and Hospitality posted the largest decline among all sectors, with Manufacturing; Government; Trade, Transportation, and Utilities; and Mining and Construction experiencing job losses as well.
Exhibit 4: August 2026 Prescott MSA Net Job Change (Thousands) and 2025 Annual Wages per Worker
At the national level, the picture looks more positive, as the U.S. labor market gained a solid footing in August. The U.S. unemployment rate held at 4.1% in August, with total nonfarm payroll rising by 162,000, according to the Bureau of Labor Statistics’ September 4th employment situation summary. The numbers of nonfarm payroll employment for June and July were also revised up with this release. June’s month-over-month job gains were revised to 31,000 from 20,000, and July’s month-over-month job change was revised to a 21,000 increase compared to a 23,000 decrease in the previous release. Labor force participation rate edged up to 61.6%, and the employment-population ratio rebounded modestly to 59.1%. In August, increases in payroll employment were led by 59,000 more jobs in food services and drinking places, 42,000 jobs in local government education, and 22,000 jobs in construction. Job gains were offset partially by losses in information (-23,000) and state government (-10,000). Health care employment continued the upward trend at a slower pace, adding 13,000 jobs during the month, compared to the 12-month average gain of 36,000 per month.
Month-over-month state unemployment rates were lower in 8 states and the District of Columbia and stable in the remaining 42 states. Nonfarm payroll employment increased in 4 states and changed little in the remaining states and the District of Columbia. South Dakota had the lowest jobless rate in August at 2.0%, while the District of Columbia had the highest rate at 5.7%. Eight states and the District of Columbia had lower unemployment rates over the month, while forty-two states had little change in jobless rates.
Below is a recap of the employment situation in Arizona and the U.S. in July. Arizona’s payroll employment changes in July were also discussed during the Third Quarter 2026 Forecasting Project Sponsors’ Meeting, and a recording of the presentation is available here.
In July, year-over-year metropolitan unemployment rates were lower in 241 of the 387 metropolitan areas, higher in 128 areas, and unchanged in the remaining 18. The not-seasonally adjusted unemployment rates for the Tucson and Phoenix metropolitan areas came in at 5.6% and 4.8%, respectively. Yuma had the highest unemployment rate in Arizona at 18.9%, also the second highest nationally following El Centro, CA at 19.7%. Bismarck, ND, Rapid City, SD, and Sioux Falls, SD-MN, had the lowest unemployment rates for the month at 1.9%. Over the year, nonfarm payrolls increased by 12,000 in Phoenix, while all other metro areas in Arizona saw decreases (-3,900 in Flagstaff, -1,100 in Lake Havasu, -100 in Prescott, -1,500 in Sierra Vista, -100 in Tucson, and -1,200 in Yuma).
Job openings, hires, and total separations in the U.S. changed little over the month in July, according to the monthly Job Openings and Labor Turnover Survey (JOLTS). Notable industry-level changes for the month include more job openings in durable goods manufacturing (+76,000) and less hiring in professional and business services (-188,000). Within separations, the number and rate of quits edged down to 3.1 million and 1.9%, respectively, as were the number (1.7 million) and rate (1.0%) for layoffs and discharges. Notable industry-level changes in separations include less quits in other services (-46,000) and a decrease in layoffs and discharges in finance and insurance (-22,000).
Arizona’s labor market continued to add jobs in July. Over the month, the number of jobs rose 2,300, or 0.1%, following an increase of 2,700 jobs in June. The seasonally adjusted unemployment rate stayed at 4.9%, compared to the U.S. unemployment rate of 4.1% for the same month. Over the year, Arizona non-seasonally adjusted nonfarm employment increased by 23,100 or 0.7% in July.
Exhibit 5 shows statewide net job changes by industry from July 2025 to July 2026. Private Education and Health services and Professional and Business Services sectors led job gains, along with Trade, Transportation, and Utilities; Other Services, Construction, Information, and Natural Resources and Mining. Those gains were partly offset by job losses in Leisure and Hospitality, Government, Financial Activities, and Manufacturing.
Exhibit 5: July 2026 Arizona MSA Net Job Change (Thousands) and 2025 Annual Wages per Worker
Employment trends varied across Arizona's metropolitan areas, reflecting differences in local industry composition and economic conditions. Phoenix MSA (Maricopa and Pinal counties) added 29,600, or 1.2% jobs over the year in July. Similar to the state, Phoenix job gains were driven primarily by Private Education and Health services, and Professional and Business Services (Exhibit 6). Trade, Transportation, and Utilities; Construction; Other Services, Information, Natural Resources and Mining, and Government sectors also added jobs. Leisure and Hospitality, Financial Activities, and Manufacturing sectors lost jobs.
Exhibit 6: July 2026 Phoenix MSA Net Job Change (Thousands) and 2025 Annual Wages per Worker
Tucson MSA’s total nonfarm employment decreased by 500, or 0.1% over the year in July. Job losses were seen in Government, Leisure and Hospitality, Financial Activities, Manufacturing, and Construction sectors (Exhibit 7). Those losses were partially offset by jobs gains in Private Education and Health Services; Professional and Business Services; Other Services; Trade, Transportation, and Utilities; and Information.
Exhibit 7: July 2026 Tucson MSA Net Job Change (Thousands) and 2025 Annual Wages per Worker
Prescott MSA’s nonfarm payroll employment decreased by 100 in July over the year. Job gains were from Private Education and Health Services; Trade, Transportation, and Utilities; and Government sectors (Exhibit 8). Those gains were offset by losses in Leisure and Hospitality, Manufacturing, Professional and Business Services, and Mining and Construction sectors. Jobs were unchanged over the year in Information, Financial Activities, and Other services.
Exhibit 8: July 2026 Prescott MSA Net Job Change (Thousands) and 2025 Annual Wages per Worker
