Phoenix MSA First Quarter 2026 Forecast Flash

Feb. 25, 2026

By George W. Hammond, EBRC research professor

Phoenix MSA growth rebounds modestly in 2026

This post briefly describes the Phoenix MSA First Quarter 2026 forecast update, completed in February 2026. Keep in mind that the Phoenix forecasts now include projections for both Maricopa and Pinal counties.

The detailed 10-year forecast data for Arizona, Phoenix, and Tucson 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 2026.

The U.S. baseline forecast assumes the U.S. economy continues to expand at rates of growth that are near the long-run trend. Thus, on a quarterly basis, the forecast calls for real GDP to increase through 2035 (no near-term recession).

For the current U.S. and Arizona forecasts, the baseline projections are assigned a 50% probability. The pessimistic scenario has a 20% probability and the optimistic scenario has a 30% probability.

Phoenix MSA growth is projected to modestly accelerate in 2026, following two years of disappointing performance. The forecast calls for job growth to rise from 0.6% in 2025 to 1.1% in 2026 and 1.4% in 2027.

Phoenix population growth is projected to remain stable in 2026 at 1.5%, then to decelerate to 1.4% per year in 2027 and 2028. Falling natural increase drives this result.

Housing permits are forecast to fall from 38,364 in 2025 to 37,781 in 2026 and again to 37,045 in 2028, as permit activity responds to slowing population gains.

After slow growth of 4.8% in 2025, Phoenix personal income rebounds to a more normal pace of 6.3% in 2026 and 6.1% in 2027.

Retail sales (broadly defined to include retail, food, restaurants and bars, and gas) rebounded to 3.8% in 2025, after little growth in 2024. The forecast calls for sales to rise by 3.9% in 2026 and 4.3% in 2027.

The pessimistic scenario assumes a moderate U.S. recession beginning in the first quarter of 2026 and ending in the second quarter of 2026. That is driven by tighter financial conditions caused by tariff-induced inflationary pressures and restrictions on immigration (including additional deportations). This generates small job losses in 2026 and little growth in 2027. 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.