The Arizona economy is not roaring full steam ahead. A longtime economist explains why

Arizona's Finance Advisory Committee has a warning for state lawmakers as they enter the next era of budgeting: The Arizona economy is not roaring full steam ahead.

That could spell trouble as legislators attempt to adjust to the incoming tax cuts from Trump's spending bill passed by Congress and championed by the in July 2025.

Randie Stein is a longtime Arizona economist who has served on this committee for 15 years. She’s also managing director at Stifel Nicolaus, Incorporated.

Stein told The Show there’s one word for the state of our state’s economy right now: sluggish.

Full conversation

RANDIE STEIN: A couple reasons for that. I think there's some uncertainty in the economy, which makes people a little bit cautious. What we didn't discuss at the meeting is population growth. You know, 20 or 30 years ago, I think it was widely held that Arizona grew on growth and population and people coming in. And the forecast, the projections for population growth into the future, while they're not negative, are substantially lower than they have been in previous decades.

Just sort of laying an overall little bit of a steady headwind against the state, which we'll see how the state, how the economy reacts, how business reacts, and if we're able to overcome that. Or, we're just going to enter sort of a lower growth period.

LAUREN GILGER: It's really interesting. So you mentioned uncertainty in there. A lot of reasons for that, likely. I'm thinking of just lots of things that are happening in the news, right? You've got massive federal layoffs, uncertainty with tariffs, volatility in terms of spending, in that sense. Are we seeing that play out in terms of sales tax revenue, where people are willing to spend their money?

STEIN: I think that is what we are seeing in the sales tax revenue, that people are starting to react to that and businesses are having a difficult time planning. And I think that is a lot of the reason for the uncertainty. You know, you mentioned the tariffs. I think we also ought to state it's not just that there are tariffs, but the volatility of the tariffs.

It's not clear when they're going to be imposed, when they're going to be taken off, how big they're going to be, if they're going to come back. So again, leading to uncertainty. You also mentioned the federal layoffs. You know, one of the other issues out there is getting economic data. And that too has led to, I think, a little bit of uncertainty in the economy.

And, you know, most of us react to that. Not everybody in the population reacts to that, but most of us react to that and have a tendency to be more cautious on our spending.

GILGER: Yeah, yeah. There was a narrative that came out of this meeting from several of the economists there that the top chunk of earners, the top 10%, maybe, are doing fine, feeling good about the economy, spending a lot of money, but there's a whole lot of us on the other end of that, right.

Is that something that you're seeing happening?

STEIN: We think that is what's happening. And, you know, that is not an unusual phenomenon. But, it's obviously less significant if you are in the higher chunk of the earners, the uncertainty that's happening in the economy. And I think we've heard nationally, economists speaking about sort of two different experiences out there. I think I quipped that it was a tale of two economies - that if you're a wealthy individual and you've been invested in the stock market over the last several years, you've probably made a lot of money.

And, you know, the fact that there are tariffs and tariffs are on again, off again, that there are federal layoffs, is probably not impacting your spending. Meanwhile, the lower chunk of us, which is substantially larger than the upper echelon, are being impacted and we buy things also.

GILGER: So you mentioned one of the bright spots, it seems, in the economy right now, which is the stock market, which seems sort of odd to me. Do we know why that seems to be doing better?

STEIN: You know, maybe a couple things. I do think, and many economists have said this, you know, in the long term, both Arizona and the country are resilient economies. And I think that that may be a look to what will happen in the future and that we do have a generally good business environment overall.

We're not just talking about this year, the next two years, but looking into the future. The economy will be resilient. The economy will prosper. And I think there's some people who are seeing it.

GILGER: How does all of this impact state revenue, which is kind of the point of this meeting, right?

STEIN: Yeah. So, yes, the point of this meeting is state revenue. And that's why the focus is really - of that meeting - is over the next, you know, 18 to 24, 36 months. I think in the short term, I think the economists at the meeting were pointing out to the legislature that while we don't see a downturn in revenue coming for - you know, we've really just started fiscal year 26, but looking as they start budgeting for fiscal year 27, we're not necessarily seeing a downturn, but we are also not seeing stellar growth.

We're seeing some sluggish growth in the, you know, lower 1%, 2%, 3% range, not the long-term average that Arizona had previously seen, which is probably, you know, depending on the revenue source, closer to 5%, 6%, 7%.

GILGER: Yeah, but all of this is coming as Arizona and all, you know, states around the country have to kind of alter the tax code to deal with the tax cuts that came down in this so-called Big Beautiful Bill enacted by Congress earlier this year. Is this going to be a tough calculation to make?

STEIN: The Joint Legislative Budget Committee staff is working on making an estimate of how that will impact Arizona. They're trying to lay out, for the legislature, the decisions that they could make. But the legislative staff does see a pretty substantial hundreds of billions of dollars impact if in fact the state fully conforms to the individual income tax provisions that were in the federal bill.

Now, of course, legislators have to vote on that. They haven't done that yet. But again, the point is for legislators to have as much information as possible going into the budget cycle.

GILGER: Okay, so potentially big impact there. Let me ask you lastly about something you brought up at the beginning, which is this other kind of narrative here, which is that for a long time, for, you know, as long as I can remember in Arizona, the narrative, the kind of overarching thought we had behind our state is that we're growing, we're booming, we're the fastest growing metropolis in the country.

That's no longer the case. And that has really big economic implications going into the long term future, right?

STEIN: I think it does have implications going into the long term future. But more importantly, it points out the significance of both growing our small businesses but also attracting some of the larger economic development projects. And some of which are going on - we see it in the northwest Valley, we see some really big pockets of growth out west and out east.

But when you're not going to grow just by the fact that your population is increasing by two, three, 3.5% every year, it is a shift in what the economy can "export."

GILGER: Yeah. All right. We will see what comes of that. That is Randie Stein, an economist, managing director at Stifel Nicolaus, Incorporated. She has served on this committee for 15 years. Randie, thank you so much for coming on the show. I really appreciate you taking the time.

STEIN: Thank you very much for having me. Have a good day.

GILGER: Thank you.