Phoenix MSA Second Quarter 2026 Forecast Flash

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By George W. Hammond, EBRC research professor

Phoenix growth accelerates modestly in the near term

This post briefly describes the Phoenix MSA Second Quarter 2026 forecast update, completed in May 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 April 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 25% probability and the optimistic scenario has a 25% probability.

According to the current revised (benchmarked) estimates, Phoenix MSA jobs rose by just 0.3% for the year in 2025 (non-seasonally adjusted). Growth that slow was somewhat puzzling, particularly after the U.S. Bureau of Labor Statistics (BLS) took the unusual step of also revising the 2024 data. The revision to the 2024 data significantly increased growth during that year.

The forecast calls for Phoenix job growth to rise from 0.3% in 2025 to 0.7% in 2026 and 1.2% in 2027. Even so, growth is expected to remain slow compared to past history, even the slow recovery from the Great Recession.

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 39,564 in 2025 to 38,509 in 2026 and again to 37,681 in 2028, as permit activity responds to slowing population gains.

After slow growth of 5.2% in 2025, Phoenix personal income rebounds 5.7% in 2026 and 6.2% in 2027.

Nominal retail sales (broadly defined to include retail, food, restaurants and bars, and gas) rebounded to 4.0% in 2025, after little growth in 2024. The forecast calls for sales growth to spike to 4.9% in 2026, driven by high gas prices and overall inflation. Growth moderates to 3.9% in 2027 as gas prices fall.

The pessimistic scenario assumes slower growth in the U.S. economy in the near term (compared to the baseline), but no recession. Slower growth is driven by higher energy prices, lower stock valuations, and weakening consumer spending driven by the war with Iran. This generates slower growth in Phoenix as well, with small annual average job losses 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.