Summary
This report outlines the economic forecast for Arizona in 2025, indicating a growth rate of 1.0%, a decrease from 2.7% in 2024. Factors contributing to this slowdown include reduced inward migration, softer labor demand, and a decline in income growth. Employment growth has significantly moderated, leading to a potential increase in the unemployment rate. The tourism sector is expected to face challenges due to declining U.S. consumer confidence, which may impact discretionary spending and subsequently the service-providing sectors that employ a majority of the workforce in Arizona. Personal income growth is projected to be just under 5%, which is expected to exceed inflation rates. Additionally, residential construction is anticipated to grow, driven by population dynamics despite high mortgage rates. The report also notes that while rental vacancy rates are at a decade high, single-family construction is set to increase, with a forecast of nearly 60,000 new residential units added this year.
