(The Center Square) – Arizona saw its seventh consecutive month of year-over-year job losses, according to a new report.
Common Sense Institute Arizona released a report showing that Arizona lost 8,600 jobs year over year in March. This ranked 16th worst nationwide, the report said.
Zachary Milne, a senior economist for CSI, told The Center Square that there is evidence to suggest Arizona’s labor market is “souring to a degree.”
“With seven months of year-over-year job losses, combined with rising unemployment and falling labor force participation, these are concerning signs for the labor market,” he said.
Lee McPheters, an economic professor at Arizona State University, told The Center Square by email that Arizona has “lost 14,000 jobs” between January and March. He added that Arizona ranked 43rd among states in job creation during this period.
He said this “is an unusual situation for Arizona.”
“As recently as 2024 the state ranked 3rd, adding 62,000 jobs. A national slowdown began in 2025, in response to uncertainty about tariffs, fed policy, and geopolitical issues,” he said.
“Arizona followed the 2025 trend of slowing labor markets, adding only 4,500 new jobs and ranking 32nd among all states,” the professor added. “As we have seen in previous slowdowns, Arizona often tends to be hit harder than the nation as a whole, and that is what we saw in 2025 and that continues now.”
The CSI report noted Arizona lost 2,600 jobs in March. In month-to-month figures, Milne said there can be “volatility in those numbers,” adding that people need to “take monthly [numbers] with a grain of salt.”
Doug Walls, labor market information director for the Arizona Office of Economic Opportunity, told The Center Square by email that the job losses “spread across a majority of industry sectors, including leisure and hospitality, government, financial activities, trade, transportation and utilities, construction, and manufacturing.”
Walls said the one industry that continues to perform well is the healthcare and social assistance industry. According to Walls, this industry has added 10,400 jobs year over year.
March data reflects a continued softening of Arizona’s labor market, he said.
“Several indicators confirm the cooling trend. The unemployment rate climbed to 4.7%, widening the gap above the national rate of 4.3%, and job softness spread across a majority of industry sectors simultaneously,” Walls said.
“When that many measures move in the same direction at the same time, the data tells a consistent story: the pace of economic activity in Arizona is slowing,” he added.
According to McPheters, the “big question is whether the economy (national and Arizona) will turn around by the second half [of 2026].”
He noted “even if that happens, it is likely that Arizona employment will increase by a mere 1% at best,” which will “avoid a recession” and “delay stronger [job] growth into 2027 and beyond.”
But despite the current slowdown, McPheters said Arizona’s “long-term outlook continues [to be] bright for a number of reasons.”
He cited the state’s population growth historically and recent investments in “infrastructure supporting distribution, healthcare, manufacturing and particularly high technology enterprises.”
“For now, businesses and job seekers face challenges, but these are short-term, and a reasonable bet would be that within two to three years, Arizona will rebound to be among the nation’s leading growth states once again,” he said.
Jim Rounds, an Arizona-based economist and CEO of Rounds Consulting Group, also had a positive outlook for the state’s economy. “Arizona’s economy is not crashing. We’re stronger than we’ve been in a long time.”
“If I was gonna be in any state during the next downturn and expansion, it would be Arizona. We’ve advanced our economy more than any other state since the Great Recession,” he said.
