Tucson MSA First Quarter 2025 Forecast Flash

Feb. 13, 2025

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

Tucson growth continues, but at a slow pace

This post briefly describes the Tucson MSA First Quarter 2025 forecast update, completed in February 2025.

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 January 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 2034 (no 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.

Tucson MSA growth is projected to continue at a slow pace as the economy adjusts to slowing national growth.

Tucson job growth decelerated from 1.6% in 2023 to 0.9% in 2024 (preliminary annual average). The forecast calls for growth to remain in the 1.0% per year range through 2027.

Net migration drove Tucson population gains last year, translating into 0.6% growth. Population growth is forecast to tick up to 0.8% in 2025 before dropping to 0.7% in 2026.

Housing permits are forecast to rise from 5,272 in 2024 to 5,390 in 2025, then drop to 4,889 in 2026 due to slow population growth and reduced affordability.

Tucson personal income growth accelerated to 6.9% in 2023 (historical data). It is forecast to decelerate to 5.2% in 2024 before accelerating modestly to 6.0% in 2025.

Real retail sales (broadly defined to include retail, food, restaurants and bars, and gas) are forecast to decline in 2024 (down 2.1%) and then gradually pick up steam through 2027.

The pessimistic scenario assumes U.S. growth below the baseline through 2028, but no recession. That is driven by tighter financial conditions caused by tariff-induced inflationary pressures and more restrictions on immigration (additional deportations). 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.