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Arizona to Experience Moderate Growth in 2018

February 13, 2018
By Robert A. Dye, Ph.D., Daniel Sanabria

The Arizona economy will continue to grow at a moderate pace in 2018, supported by ongoing job growth. Phoenix, which makes up about 75 percent of the state’s economy, gained 37,300 jobs in 2017. Tucson, which makes up about 12 percent of the Arizona economy was up a modest 2,000 jobs last year. Both areas are experiencing tighter labor markets. In December, the unemployment rate was down to 3.8 percent in Phoenix and 4.5 percent in Tucson, both near nine-year lows. However, the Phoenix area is attracting more in-migration. According to U-Haul, Tempe saw the largest increase in one-way truck rentals in the nation, up 39 percent in 2017. Recent gains in Phoenix’s population have boosted the area’s labor force which was up 2.6 percent in 2017. This means that the Phoenix labor market still has some room to run. Labor force growth for Tucson was up by 1.2 percent in 2017. This sets up our expectations for another year of modest job growth in Southern Arizona. There is certainly some upside potential for growth in the near term. The recently passed federal tax reform, along with improving business sentiment and positive U.S. economic outlook, may lead to increased investment amongst state businesses. Rising domestic demand and consumer sentiment will be supportive of the state’s tourism industry. Arizona’s trade with Mexico is a risk factor for the state economy given the unresolved NAFTA renegotiation process. The state’s total trade with Mexico was about $15.7 billion in 2016. The next round of NAFTA negotiations is scheduled to place at the end of February in Mexico City.

For a PDF version of this report click here: AZ_Outlook_0218

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