Greater Phoenix economic outlook: Uncertainty, growth and inflation

Two years after Phoenix topped the nation with an inflation rate of 13%, the rate is now among the lowest in major metro areas.

During a Tuesday webinar hosted by Greater Phoenix Economic Council, analyst Kristen Stephenson said, as of December, the rate was 1.6%. Only Houston and Riverside, California, were lower.

“So this is a very positive thing for us, that doesn't mean that we don't have to still deal with some of the issues that we've seen,” Stephenson said. “When you look at inflation, it doesn't necessarily mean prices are going down. It just means they're increasing less fast.”

She said the region’s overall cost of living is 7.2% higher than the national average. Houston, Albuquerque and Austin were all lower.

When asked about the greatest challenge facing the local economy in 2025, Stephenson said, “I think it's continuing to balance that economic growth with the inflation rates.”

On the employment front, she said, “Back this past spring, we were the best performing market. It wasn't just we saw the largest decrease in our unemployment rate, but at the same time, we also saw very substantial employment growth. We saw our labor force growing. So this was one of the hottest markets back in the spring. It continues to be a market that is performing very solidly above average.”

When it comes to housing, Tina Tamboer, senior analyst for the Cromford Report, cited uncertainty as the biggest challenge.

“Because you've got some investors, and those investors work off of their emotions. And if they're uncertain about whether or not we're going to go into a recession, have increased unemployment and so on, they're going to act in one way, and then those who believe we're going to have the soft landing … like the feds are trying to do, then they're going to act in another way. And what happens is, when they're not all in unison, you get wacko mortgage rates, just like what we've had the last couple of years.”

Tamboer was asked whether the wildfires in Los Angeles will cause Californians to move to the Valley. She said it’s not uncommon to see Californians move here after disasters.

“In general, we can expect to get some but they used to come here because our cost of living was so much lower, and they're finding, in some cases, that the cost of living here is just as high as parts of California, and that might push them to other places of the country,” Tamboer said.