Arizona’s job market continues to cool

The state lost 10,900 nonfarm jobs in March, even though Arizona historically gains more than 10,000 jobs that month, according to the Arizona Office of Economic Opportunity.

The unemployment rate in Arizona rose to 4.7% in March, up from 4.6% in February and 4.5% in January, while the labor force shrank.

Doug Walls, chief economist for the Arizona Office of Economic Opportunity, said in an interview on May 5 that the March report showed a “continuation of the slowdown or the cooling in Arizona’s previous economic momentum.”

But that cooling does not mean every part of Arizona’s economy is weak. Some state indicators, including sales tax and income-tax withholding collections, remain positive, said Dennis Hoffman, an economist at the W.P. Carey School of Business, Arizona State University and director of the college's Center for Competitiveness and Prosperity Research.

Hiring is a different story.

“We got a number of things going pretty positively in the state, but new job creation is not one of them,” Hoffman said. The March report, combined with more than 900 planned or possible job cuts flagged in April layoff notices, points to a tougher job market for Arizona workers.

Arizona Gov. Katie Hobbs said May 8 that Arizona’s workforce remains a strength for companies, though tariff-related uncertainty is making it harder for some businesses to plan for growth and hiring.

Arizona lost jobs in a month that usually brings gains

Arizona saw “losses of over 10,000 jobs in a month where we would historically have gained on average over 10,000 jobs," Walls said.

That amounted to a 0.3% decline from February, according to the Office of Economic Opportunity. Before the pandemic, from 2010 to 2019, Arizona gained an average of 10,800 jobs in March, the state report said.

Only three of 12 major sectors added jobs in March: health care and social assistance, other services and construction.

The largest losses came in trade, transportation and utilities, which lost 3,600 jobs; financial activities, which lost 3,300 jobs; and leisure and hospitality, which lost 2,200 jobs.

Walls said several sectors reported above-average losses or below-average gains, continuing a trend seen in January and December.

The leisure and hospitality industries historically gain about 6,300 jobs in March, but the sector lost 2,200 jobs this March, Walls said.

Food services and drinking places lost 3,100 jobs in March, even though the sector historically gains about 4,200 jobs during the month, he said.

The March report followed a February report that looked more positive. Arizona gained 31,200 nonfarm jobs in February, and 11 of 12 major sectors added jobs that month, according to the state.

But Walls said February’s stronger numbers may have reflected timing or seasonal hiring differences.

Unemployment rose above the national rate

Arizona’s seasonally adjusted unemployment rate rose to 4.7% in March, up from 4.6% in February and 4.5% in January, according to the state report. Meanwhile, the U.S. unemployment rate fell to 4.3% in March from 4.4% in February.

The unemployment rate on its own may not necessarily signal a broader economic slowdown, but Walls said the concern is that unemployment is rising while other labor-market indicators are also weakening.

Walls pointed to job losses across sectors, a recent decline in the labor force and slower hiring and job openings.

“Taking all of those together, all of those are pointing in the same direction,” Walls said.

The Common Sense Institute Arizona, a nonpartisan public policy research group, also found signs of weakness in the March labor market.

In a May 6 report, the group said Arizona lost 2,600 nonfarm jobs on a seasonally adjusted basis in March, the 12th-worst monthly employment performance among states and Washington, D.C.

The group also noted that March marked Arizona’s seventh consecutive month of year-over-year job losses, while a falling labor force participation rate and rising unemployment rate pointed to a “souring labor market” in the state.

Hobbs pushed back on the unemployment trends, and says Arizona workforce remains a strength.

Asked whether Arizona’s workforce remains strong enough to support the state’s economic growth plans as unemployment has ticked above the national average, Gov. Hobbs said May 8 that the workforce remains a selling point for companies looking to start, grow or relocate in Arizona.

“The tariff war that we’ve been in for the last year-plus has created a lot of uncertainty for businesses,” Hobbs said after a Farmers for Free Trade roundtable at the Arizona Chamber of Commerce in Phoenix.

“It is making it more challenging for them to make decisions around whether to grow or expand or hiring new folks or keeping their workforce stable.”

Economists were more blunt about what the rising unemployment rate means for workers.

Hoffman said the increase reflects a tougher job market for Arizona workers.

“That’s certainly a reflection of how tough the labor market is in Arizona right now,” Hoffman said. “If you have a job, keep it. If you’re looking for a job, look harder," Hoffman said.

Job losses spread across most major sectors

The March report showed broad year-over-year losses across Arizona’s economy.

Arizona had 17,800 fewer nonfarm jobs in March than it had in March 2025, according to the Office of Economic Opportunity. Private-sector employment was down 9,700 jobs year over year, while government employment was down 8,100 jobs.

Leisure and hospitality lost 8,500 jobs compared with March 2025. Public sector government jobs, which represent local, state and federal positions, lost 8,100 jobs. Financial activities lost 6,900 jobs, and trade, transportation and utilities lost 6,000 jobs.

Healthcare and social assistance remained the largest bright spot, adding 10,400 jobs year over year.

Walls said year-over-year changes are useful because they strip out some month-to-month seasonal noise. In a growing economy, he said, sectors would generally be expected to show year-over-year gains.

“We may see year-over-year losses in one or two, maybe three industry sectors, but we’re seeing losses recorded in a majority of the industry sectors,” Walls said.

Construction in Arizona shows mixed picture

Construction showed a mixed picture in March. The sector gained 300 jobs month over month but was down 3,300 jobs year over year.

Walls said construction is showing a split picture. Industrial and commercial construction are still adding jobs year over year, he said, while residential construction and specialty trade contractors account for much of the weakness.

“We’re starting to see the long-term effects of higher interest rates play out in the Arizona economy,” Walls said.

Hoffman said the sluggish real estate market is weighing on job creation, and immigration policy may also be a factor. But he said the effect of immigration enforcement is difficult to measure.

Tariff uncertainty could delay projects because developers may not know what key materials and equipment will cost, he added.

“We don’t know exactly what’s at the root of that,” Hoffman said. “But certainly something must be there.”

April layoff notices add another warning sign

The March jobs report came before Arizona employers filed nine Worker Adjustment and Retraining Notification, or WARN, notices in April, flagging more than 900 planned or possible job cuts.

Under the federal WARN Act, employers with 100 or more workers generally must provide at least 60-day written notice before major layoffs or facility closures affecting 50 or more employees.

WARN notices offer an early look at planned layoffs.

Those notices touched several industries, including food service, nonprofit social services, youth residential programs, facilities maintenance, government contracting, manufacturing and beverage distribution.

Some of the April cuts were tied to company-specific events, including a pending sale, lost contracts, funding losses, program closures, financial strain and restructuring.

Walls said WARN notices can offer an early look at broader industry challenges.

“The WARN notices are a good kind of early indicator or could be kind of a canary in the coalmine,” Walls said.

But he cautioned that the notices cannot be tied directly to the monthly employment report. Companies filing WARN notices might not be part of the monthly survey, he said, though the survey can pick up broader industry trends over a 12-month period.

Which economic signs to watch next

The state’s next employment report, covering April, is scheduled for release May 21.

Walls said those figures could show whether March was a stumble or part of a continuing slowdown.

Seasonal context will matter, too. Walls said Arizona typically sees small losses to small gains in April, while the largest seasonal losses usually come in June.

Hoffman said job postings have not shown the kind of rebound that would suggest hiring is about to accelerate.

“I’m looking for bright lights to tell me that those job postings are about to jump up again,” Hoffman said, “but you’re kind of hard pressed to find these factors right now.”

State GDP data does not yet show whether the March labor-market slowdown coincided with a broader economic slowdown.

Arizona’s current-dollar GDP rose 4.9% in 2025, while inflation-adjusted real GDP grew about 2%, according to Federal Reserve Economic Data figures from the U.S. Bureau of Economic Analysis.