Phoenix MSA Fourth Quarter 2025 Forecast Flash

Nov. 5, 2025

By George W. Hammond, research professor

Phoenix MSA growth slows in 2025

This post briefly describes the Phoenix MSA fourth quarter 2025 forecast update, completed in November 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 October 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 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 be relatively slow again this year as the economy adjusts to slowing national growth.

After a surprising downward revision to job growth in 2024, which put over-the-year growth at 1.6%, the forecast calls for slower gains this year, with jobs up just 0.9%. Growth is forecast to accelerate to 1.6% in 2026 and 1.7% in 2027.

Net migration drove Phoenix population gains last year, which translated into 1.5% growth. Population growth is expected to sustain gains at that pace for the next few years.

Housing permits drop from 45,884 (revised actual) in 2024 to 39,049 in 2025 and then to 38,900 in 2026. This reflects relatively slow population gains and reduced housing affordability.

Nominal personal income growth accelerated to 7.1% in 2023 (historical data). It is forecast to slow to 6.5% in 2024 and 5.7% in 2025.

Real retail sales (broadly defined to include retail, food, restaurants and bars, and gas) rose 0.7% in 2024, before adjustment for inflation. With inflation accelerating in 2025, nominal growth rebounds relatively quickly. Real retail sales growth improves slowly over the next four years.

The pessimistic scenario assumes a moderate U.S. recession beginning in the fourth quarter of 2025 and ending in the first quarter of 2026. That is driven by tighter financial conditions caused by tariff-induced inflationary pressures, restrictions on immigration (additional deportations), and federal spending cuts. This generates slower growth in the Phoenix MSA as well, with almost no annual average job growth in 2026. 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.