In a curious economic shift, businesses across Arizona find themselves in a paradoxical state: hiring freezes and stagnant job cuts. While the national economy recorded a modest growth of 0.5% in 2025, the employment rate in the Southwest region has been noticeably sluggish.
The Tucson metropolitan area, for instance, managed to add just 375 jobs last year, a stark contrast to the approximately 2,500 jobs created a decade earlier. What factors have contributed to this economic plateau in Arizona, and what implications might it hold for the future?
Jennifer Pullen, the executive director of the Economic and Business Research Center at the University of Arizona’s Eller College of Management, provides insights into these questions. Utilizing the Making Action Possible for Southern Arizona (MAP Dashboard), Pullen examines economic trends in regions comparable to Tucson, such as Albuquerque, Las Vegas, and Salt Lake City, as well as areas in Colorado and Texas.
Through this analysis, Pullen and her team assess diverse factors influencing both national and local economies, ranging from federal and state policies to the distinct appeal of regions.
Understanding Southern Arizona’s Labor Market
Q: How would you describe Southern Arizona’s labor, and why has it become a defining factor in long-term growth?
A: Southern Arizona, including Tucson, has a lower labor force participation rate compared to other western regions, standing at around 81%. This is partly due to the area’s demographic composition: a significant influx of highly educated retirees and a lower educational attainment among the 25-54 age group.
Participation in the workforce varies significantly based on educational attainment. Individuals without a high school degree have a participation rate below 50%, while those holding a college degree engage in the labor force over 70% of the time. Including certificates and apprenticeships, participation rates can reach approximately 80%.
The Shifting Affordability of Tucson
Q: Tucson’s affordability advantage is fading. What does the data show, and what does it mean for attracting workers?
A: The state’s housing affordability has sharply declined, with home prices rising more rapidly than incomes. In 2025, a Tucsonan earning the median income would need to allocate over 43.7% of their earnings to afford a median-priced home—a figure that exceeds the 30% affordability benchmark.
Although Tucson remains more affordable than regions in California and Washington, its competitive edge has eroded, aligning more closely with places like San Antonio and Colorado Springs. This shift influences how Tucson is perceived by potential movers comparing it to other states.
Industry Dynamics and Job Trends
Q: Which industries are hiring, and which are becoming competitive?
A: While the national landscape saw a rise in government employment in 2025, sectors such as manufacturing and trade experienced job losses. Conversely, government employment in Arizona and Tucson specifically saw a decline.
This difference is due to the composition of government roles, where national increases in state and local employment balanced out federal declines. In Arizona, particularly Tucson, the greater federal employment concentration meant reductions impacted the region more significantly.
Nonetheless, a consistent trend across all regions was the growth in private education and health services, which became the largest source of job growth in 2025.
Employment Stagnation Amid Rising Output
Q: Employment remains flat while output continues to rise. What is driving that phenomenon, and what role do artificial intelligence and automation play?
A: Typically, employment and economic output progress together, but post-2024 data reveals a divergence, with real GDP growing at about 2% while employment remains flat. This indicates a jobless expansion characterized by rising productivity.
While many attribute this trend to AI, Pullen suggests that the impact of automation accelerated during the pandemic is more significant. She likens the current situation to the computer boom, where productivity gains from investments took time to manifest in economic data.
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