Phoenix MSA Fourth Quarter 2024 Forecast Flash

Nov. 12, 2024

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

Phoenix job gains stay strong this year, decelerate next year

This post briefly describes the Phoenix MSA Fourth Quarter 2024 forecast update, completed in November 2024. Keep in mind that the Phoenix forecasts now include projections for both Maricopa and Pinal counties. These forecasts do not include impacts of the recent elections.

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 October 2024.

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 Phoenix forecasts, the baseline projections are assigned a 55% probability. The pessimistic scenario has a 25% probability, and the optimistic scenario has a 20% 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 accelerate slightly from 3.0% in 2023 to 3.1% in 2024 and then decelerate to 2.3% in 2025. Growth in 2024 is forecast to be well 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 significantly next March.

Net migration drove Phoenix population gains last year, which translated into 1.8% growth. Population gains slow to 1.7% in 2024 and 1.6% in 2025, as slower job growth and reduced housing affordability impact mobility.

Housing permits rise from 45,616 in 2023 (revised actual) to 47,762 in 2024, then drop to 45,322 in 2025. 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 is forecast to accelerate to 7.0% in 2023 (historical data ends in 2022 for counties and metropolitan areas) and remain in the 6.5%-6.2% range through 2027.

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 gradually accelerate through 2027.

The pessimistic scenario assumes a modest national downturn during the first three quarters of 2025, driven by problems arising from escalations of conflicts in the Ukraine and the Middle East. 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.