Tucson MSA Second Quarter 2026 Forecast Flash

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By George W. Hammond, EBRC research professor

Forecast calls for continued slow growth in Tucson

This post briefly describes the Tucson MSA Second Quarter 2026 forecast update, completed in May 2026.

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.

Tucson MSA growth across most indicators is projected to modestly accelerate in 2026 and 2027. However, growth is expected to remain very slow.

Tucson job growth is forecast to rise from 0.1% in 2025 to 0.2% in 2026 and 0.4% in 2027. This modest acceleration leaves job growth at very low levels.

Tucson population increased by 0.7% in 2025, driven entirely by net migration (natural increase was negative). The forecast calls for growth to decelerate to 0.6% in 2026 and 0.5% in 2027, as negative natural increase increasingly weighs on growth.

Housing permits are forecast to decline by 7.8% in 2026, with additional declines in 2027 and 2028. Slowing population gains cause the downward trend in housing permits.

Personal income growth in 2026 (5.1%) is expected to be faster than in 2025 (4.4%). Growth accelerates again to 5.6% in 2027.

Retail sales (broadly defined to include retail, food, restaurants and bars, and gas) rose 1.9% in 2025, up from 0.3% in 2024. The forecast calls for growth to spike to 3.9% in 2026, driven by gas prices. Growth moderates to 2.7% 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 lower growth in the Tucson MSA as well, with net job losses in 2026 and 2027. 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.