Phoenix MSA First Quarter 2025 Forecast Flash

Feb. 13, 2025

By George W. Hammond, EBRC director and Eller research professor

Phoenix MSA growth forecast to remain strong

This post briefly describes the Phoenix MSA First Quarter 2025 forecast update, completed in February 2025. Keep in mind that the Phoenix forecasts now include projections for both Maricopa and Pinal counties.

The detailed 10-year forecast data are available in Eviews and Excel files on the Forecast Databases page.

This forecast incorporates updated national projections from S&P Global released in January 2025.

The U.S. baseline forecast assumes a soft landing for the U.S. economy. On a quarterly basis, the forecast calls for real GDP to increase through 2034 (no recession).

For the current U.S. and Arizona forecasts, the baseline projections are assigned a 50% probability. The pessimistic scenario has a 25% probability and the optimistic scenario has a 25% probability.

Phoenix MSA growth is projected to gradually slow as the economy adjusts to slowing national growth.

The baseline forecast calls for Phoenix job growth to decelerate modestly from 3.0% in 2023 to 2.7% in 2024 and then to 2.2% in 2025. Growth in 2024 is forecast to be above current job growth rates in the preliminary nonfarm payroll data, because the U.S. Bureau of Labor Statistics preliminary benchmark suggested that they will revise the Phoenix data up next March.

Net migration drove Phoenix population gains last year, which translated into 1.5% growth. Population gains bounce up slightly to 1.6% in 2025 and then fall back to 1.5% in 2025, as slower job growth and reduced housing affordability impact mobility.

Housing permits drop from 44,644 in 2024 to 44,211 in 2025 and then to 42,705 in 2026. This reflects slowing population gains and reduced housing affordability. Thereafter housing permit activity gradually descends to a level consistent with population gains.

Nominal personal income growth accelerated to 7.1% in 2023 (historical data). It is forecast to slow to 6.4% in 2024 and 6.2% in 2025.

Real retail sales (broadly defined to include retail, food, restaurants and bars, and gas) is expected to drop in 2024 (down 2.5% from 2023) then slowly accelerate through 2027.

The pessimistic scenario assumes U.S. growth below the baseline through 2028, but no recession. That is driven by tighter financial conditions caused by tariff-induced inflationary pressures and more restrictions on immigration (additional deportations). This generates slower growth in Arizona as well. The optimistic scenario assumes gains faster than expected under the baseline.

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.