Tucson MSA Fourth Quarter 2025 Forecast Flash

Nov. 5, 2025

By George W. Hammond, research professor

After job loss last year, Tucson employment stabilizes

This post briefly describes the Tucson MSA fourth quarter 2025 forecast update, completed in November 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 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.

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

Tucson’s job growth last year was revised down from a modest increase to a net decline of 0.5%. The forecast calls for small job losses in 2025, followed by a 0.6% increase in 2026.

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

Housing permits are forecast to drop from 5,250 last year to 4,904 in 2026, then fall again to 4,550 in 2027 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 4.8% in 2024 and 4.3% in 2025, before accelerating to 5.5% in 2026.

Nominal retail sales (broadly defined to include retail, food, restaurants and bars, and gas) rose 0.3% in 2024, while inflation-adjusted sales declined 2.4%. Nominal sales growth is forecast to rebound to 2.1% in 2025, reflecting accelerating inflation. Real sales fall in 2025 and 2026, before turning positive again in 2027.

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 Tucson MSA as well, with net job losses in 2025 and 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.