Tucson MSA Third Quarter 2026 Forecast Flash
Economic expansion continues at a measured pace
This post briefly describes the Tucson MSA Third Quarter 2026 forecast update, completed in August 2026. 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.
Tucson MSA growth across most indicators is projected to change little in 2026 and 2027 compared to the prior year.
Job growth is forecast to rise from 0.1% in 2025 to 0.2% in 2026 and 0.4% in 2027. This modest acceleration still leaves job growth at very low levels compared to Arizona overall, but it remains similar to the U.S. national average.
Tucson population increased by 0.7% in 2025, driven entirely by net migration (natural increase was negative). The current forecast calls for growth to decelerate to 0.6% in 2026 and 0.5% in 2027, as negative natural increase increasingly weighs on population growth.
Housing permits are forecast to decline by 10.6% in 2026, with additional declines in 2027 and 2028. Slowing population gains and high mortgage rates are expected to contribute to the downward trend in housing permits.
Personal income growth in 2026 (5.0%) is expected to be faster than in 2025 (4.3%), before accelerating to 5.7% in 2027.
Retail sales (broadly defined to include retail, food, restaurants and bars, and gasoline) rose by 2.1% in 2025, up from 0.3% in 2024. This forecast calls for retail sales growth to rise to 3.0% in 2026, driven by overall inflation and gas prices, and to change little, reaching 3.1% in 2027.
Exhibit 1 presents a summary of the current annual projections. Exhibit 2 provides a comparison to the prior forecast.
Exhibit 1: Summary of the Third Quarter 2026 Tucson MSA Forecast, Completed August 2026
Exhibit 2: Comparison of the Third Quarter 2026 (Current) and Second Quarter 2026 (Prior) Forecasts for Tucson 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 Tucson as well, with net job losses in 2026 and 2027.
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 Tucson 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 Second Quarter 2026 Tucson MSA Forecast, Baseline and Alternative Scenarios, Percent Change
