Phoenix MSA Third Quarter 2026 Forecast Flash

This post briefly describes the Phoenix MSA Third Quarter 2026 forecast update, completed in August 2026. The Phoenix forecasts combine projections for both Maricopa and Pinal counties. Read the forecast flash for the state of Arizona here.

The detailed 30-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 July 2026. The U.S. baseline forecast assumes that the U.S. economy continues to expand at growth rate near its long-run trend of around 2%. 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. 

Phoenix MSA is projected to see modest job growth in the near term after historically slow growth during 2025.¹ The forecast calls for job growth to rise from 0.3% in 2025 to 1.0% in 2026 and 1.1% in 2027. These growth rates are comparable to the pace of the slow recovery from the Great Recession in the early 2010s, and are very low by the metropolitan area’s historical standards. 

Phoenix population growth is projected to remain stable in 2026 at 1.5%, then decelerate to 1.4% per year in 2027 and 2028, driven by falling birth rates and, in turn, slower natural increase.

Housing permits (seasonally adjusted) are forecast to fall from 39,699 in 2025 to 37,700 in 2026 and again to 37,010 in 2027, as permit activity responds to higher mortgage rates and slowing population gains.

After slow income growth of 5.2% in 2025, Phoenix personal income is forecast to rebound by 5.7% in 2026 and 6.3% in 2027.

Nominal retail sales (broadly defined to include retail, food, restaurants and bars, and gasoline) are forecast to grow by 4.9% in 2026, following growth of 4.2% in 2025 after little growth in 2024. The growth in 2026 is driven by overall inflation, high gas prices, and resilience in consumer spending. Growth moderates to 4.2% in 2027 as gas prices fall. 

^ ¹ According to the current revised (benchmarked) estimates, Phoenix MSA jobs rose by just 0.3% in 2025 (non-seasonally adjusted). Despite the U.S. Bureau of Labor Statistics (BLS) taking the unusual step of also revising the 2024 data, which significantly increased job growth during that year, the particularly slow job growth in 2025 remains somewhat puzzling to us. We will continue to monitor occasional revisions to the job data going forward. 

Exhibit 1 presents a summary of the current annual projections. Exhibit 2 provides a comparison to the prior forecast. 

Exhibit 1: Summary of the Second Quarter 2026 Phoenix MSA Forecast, Completed August 2026

Exhibit 2: Comparison of the Third Quarter 2026 (Current) and Second Quarter 2026 (Prior) Forecasts for Phoenix MSA, Percent Change

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 as the conflict in Iran continues to push energy prices higher and depress consumer demand, as well as lower stock valuations due to geopolitical uncertainties. This generates slower growth in Phoenix as well, with a small job loss in 2026. 

The optimistic scenario assumes the war in Iran to come to definitive end, leading to stronger consumer demand and a slightly amelioration in financial conditions nationally and, in turn, faster Phoenix job and income gains than under the baseline.

Exhibit 3 provides a comparison of the baseline and alternative scenarios for the current forecast.

Exhibit 3: Summary of the Third Quarter 2026 Phoenix MSA Forecast, Baseline and Alternative Scenarios, Percent Change