(The Center Square)- A new report shows Arizona lost 15,000 jobs from January 2025 to January 2026.
The Common Sense Institute Arizona recently released the report, which ranked the state 43rd in the nation for jobs. The report said Arizona is one of 24 states that suffered job losses.
Glenn Farley, CSI’s director of policy and research, said Arizona’s jobs market has been slowing down “for a long time.” He told The Center Square that the state’s market peaked in 2022.
For the last year, Farley said, Arizona’s economy has grown at 1%, which is less than the 2% to 3% seen during 2022.
A healthy growth rate for Arizona is between 2.5% and 3%, Farley said.
Arizona has had 22 consecutive months of annual job growth below 2%, according to the report.
The last time Arizona saw a decline in jobs was in 2021, Farley told The Center Square.
Despite year-over-year job losses, Arizona experienced job growth during January, adding 5,100 non-farm jobs. This ranked 25th in the country for job growth.
Farley said the disconnect between Arizona losing jobs year-over-year and gaining jobs month-over-month is due to revisions to the job numbers.
When the federal government revises numbers often, it makes “monthly numbers less reliable than the yearly numbers,” Farley noted.
Doug Walls, the Arizona Office of Economic Opportunity’s labor market information director, told The Center Square that January 2026 was the “fifth consecutive month of year-over-year [job] losses.”
According to Walls, this shows a “slower hiring market” in Arizona, which came sooner than originally anticipated based on preliminary data.
Arizona’s unemployment rate is 4.5%, which is tied for 33rd in America.
Eight of 12 major industry sectors in Arizona posted year-over-year job losses, Walls said.
The report showed that major industries such as manufacturing, construction, leisure and hospitality and professional and business services all lost jobs year over year.
Arizona has a large concentration of jobs in the leisure and hospitality and professional and business services industries, Farley said.
According to Farley, Arizona’s labor market is tighter than the national average.
Chad Heinrich, the Arizona state director for the National Federation of Independent Business, told The Center Square that small businesses are “on the front lines of hiring.” Based on the information he has been receiving from small business owners, Heinrich said it is not surprising to see the report show job losses in Arizona.
Small business owners have job openings that they want to fill, but they can’t because of the lack of qualified applicants, Heinrich noted.
He said he doesn’t see Arizona’s economy turning around quickly.
Wages are rising in Arizona, but the number of jobs is falling, Heinrich said, adding that when this happens, small businesses face “margin compression” because they are “paying more to their employees” and seeing lower profits.
The report found that Arizonans’ average hourly wages increased 3.2% year-over-year, ranking 29th in the country. On top of this, Arizona’s labor force participation rate is at 62%, which hasn’t changed since January 2025, the report said.
Looking ahead, Walls said the health care industry will be a big driver of Arizona’s job growth over the next 12 to 18 months. He added this industry has been “one of the fastest growing industry sectors over the last three decades.”
