Phoenix economy sends mixed signals as housing strengthens

Article originally posted on AZ Big Media on September 15, 2026

The Phoenix economy entered the second half of 2026 with a complicated mix of signals: a shrinking labor force and rising unemployment contrasted with modest payroll growth, resilient consumer spending and a housing market that continued to gain momentum, according to the Economic and Business Research Center (EBRC).

Data for the Phoenix-Mesa-Chandler MSA, which includes Maricopa and Pinal counties, show the region’s civilian labor force fell 3.1% year over year to 2.67 million in June. Demographic forces, including baby boomer retirements and low net migration, are likely contributing to the decline, according to Niaoniao You, senior economic forecaster with the University of Arizona Economic and Business Research Center.

Resident employment also weakened during the first half of 2026. Phoenix employment fell 3.9% year over year in June to 2.54 million, with the region losing approximately 95,000 jobs between January and June based on the household survey.

The unemployment rate reflected that softness, rising from 3.8% in April to 4.1% in May and 4.9% in June. However, volatility in local unemployment data and seasonal factors make short-term changes difficult to interpret.

Payroll employment offered a more encouraging picture. Seasonally adjusted nonfarm jobs edged up 0.1% year over year in June, while non-seasonally adjusted employment increased by 33,200 jobs, or 1.4%. Professional and business services, construction, other services, and trade, transportation and utilities led the gains. Financial activities, leisure and hospitality, manufacturing, and government lost jobs.

One potential concern for workers is cooling wage growth. Average hourly earnings increased 2.4% year over year during the second quarter, down from 3.7% growth during the first quarter. June wages averaged $37.40 per hour, equivalent to approximately $77,792 annually for a full-time worker.

Consumers keep spending

Despite labor market concerns, Phoenix-area consumers remained active.

Retail sales excluding food and gasoline reached $6.67 billion in May, up 2.8% from a year earlier. Restaurant and bar sales totaled $1.60 billion in April and $1.56 billion in May, representing year-over-year gains of 7.1% and 5.8%, respectively.

Hotel and motel sales also continued growing, although the pace moderated from double-digit increases during the first quarter. Sales rose 7.2% in April and 7.8% in May.

Gasoline sales surged 30.5% from March through June to $694.7 million, driven by higher prices.

Housing provides a bright spot

Greater Phoenix housing delivered some of the strongest economic indicators.

Total housing permits jumped 14.2% year over year in June to 3,714, snapping three consecutive months of annual declines. The improvement was concentrated outside single-family construction, however, as single-family permits declined 2.6% to 1,993 and remained below year-earlier levels throughout the first half of 2026.

Existing-home activity showed stronger momentum. The value of Phoenix-area housing sales reached $3.93 billion in July, a 10.7% increase from the previous year, according to Arizona Regional Multiple Listing Service data. Units sold increased 4.1%, while the average sales price climbed 6.3% to $609,000.

Taken together, the numbers paint a Phoenix economy that remains resilient but is undergoing a transition. Housing and consumer activity continue to generate momentum, while labor-force contraction, rising unemployment and slower wage growth represent challenges to watch as the region moves toward 2027.