Last night, ORION hosted our first ever Economic Update with Jim Rounds, of Rounds Consulting. I have known Jim since his days with another well known local economist, Elliot Pollack. Jim is featured on several local news radios and has become one of our local leading voices for Economic Updates for the Valley and State.
Here are some of my notes from last night:
Arizona and the U.S. are navigating a period of economic transition, with solid but moderate GDP growth likely to give way to a mild downturn in 2026. The situation may feel murky, but the state’s fundamentals remain strong—even as small businesses and households brace for rising costs, weak job growth, and policy uncertainty.
### Economic Growth: Strong, but Headwinds Ahead
Despite a track record of healthy performance, GDP growth in the U.S. is expected to moderate in coming quarters. The odds of a technical recession next year are about 50-50, but focusing too much on this label misses the point. The reality on the ground for businesses and workers—what the data shows—matters more than any single definition.
### Employment and Leading Indicators: Signs of Softness
Employment growth nationwide is now trending under 100,000 new jobs per month; in Arizona, job gains have slowed to near the bottom of the state rankings despite a history of leading the nation in previous years. Many leading economic indicators are weakening, and although consumer confidence remains fair, expectations are for both higher inflation and increased uncertainty through the end of the year and into 2026.
### The Inflation Puzzle and Housing Math
After a modest cooldown, inflation is projected to climb again—affecting both holiday and back-to-school spending. Grocery, utility, and transport costs all remain elevated. Affordable housing is especially grim across Arizona; the “golden handcuffs” effect (where moving up means substantially higher monthly payments) has locked many residents into their homes. Any hope of returning to “normal” housing affordability would require not just slowing inflation but outright deflation—an unlikely scenario in the current environment.
### Policy Impacts and Local Realities
The Fed’s rate-hiking campaign may have been too gradual, limiting their flexibility now. At the same time, the threat of new tariffs and their role as a “backdoor sales tax” means prices for both foreign and domestic goods could rise, further weighing on growth and confidence. Locally, the question of whether Arizona enjoys a “soft landing” will be shaped by state-level decisions on infrastructure, Medicaid funding, energy, and workforce training. For example, a $1 billion cut in Arizona’s Medicaid funding could alone cause over 36,000 lost jobs—demonstrating how public policy is closely tied to economic outcomes.
### Workforce, Education, and Socioeconomic Progress
The workforce challenge is real: future job growth will require everyone—higher ed and trade schools alike—to step up. The state’s population inflow, once a major growth tailwind, is slowing, and meeting future labor needs will mean making education and skill-building more productive and accessible. Socioeconomic development—childcare, foster care reform, safety, and K-12 flexibility—remains crucial for broad-based progress.
### The Optimist’s Case
Though the hurdles are significant, a mild downturn is the base case—not a crisis. Arizona offers high wage growth, manageable budgets, and remains one of the best-positioned states for success through the remainder of the decade. Navigating this period requires careful planning, optimism, and a recognition that public policy decisions—like the curling “stone” analogy—can nudge the economy in better or worse directions. Arizona’s job isn’t to panic, but to keep moving up the mountain together.
If you would like a copy of the slide deck, shoot me an email and I would be happy to send it to you!
Rounds Consulting Update for ORION Private Client Event Last Night at Gainey Ranch
Last night, ORION hosted our first ever Economic Update with Jim Rounds, of Rounds Consulting. I have known Jim since his days with another well known local economist, Elliot Pollack. Jim is featured on several local news radios and has become one of our local leading voices for Economic Updates for the Valley and State.
Here are some of my notes from last night:
Arizona and the U.S. are navigating a period of economic transition, with solid but moderate GDP growth likely to give way to a mild downturn in 2026. The situation may feel murky, but the state’s fundamentals remain strong—even as small businesses and households brace for rising costs, weak job growth, and policy uncertainty.
### Economic Growth: Strong, but Headwinds Ahead
Despite a track record of healthy performance, GDP growth in the U.S. is expected to moderate in coming quarters. The odds of a technical recession next year are about 50-50, but focusing too much on this label misses the point. The reality on the ground for businesses and workers—what the data shows—matters more than any single definition.
### Employment and Leading Indicators: Signs of Softness
Employment growth nationwide is now trending under 100,000 new jobs per month; in Arizona, job gains have slowed to near the bottom of the state rankings despite a history of leading the nation in previous years. Many leading economic indicators are weakening, and although consumer confidence remains fair, expectations are for both higher inflation and increased uncertainty through the end of the year and into 2026.
### The Inflation Puzzle and Housing Math
After a modest cooldown, inflation is projected to climb again—affecting both holiday and back-to-school spending. Grocery, utility, and transport costs all remain elevated. Affordable housing is especially grim across Arizona; the “golden handcuffs” effect (where moving up means substantially higher monthly payments) has locked many residents into their homes. Any hope of returning to “normal” housing affordability would require not just slowing inflation but outright deflation—an unlikely scenario in the current environment.
### Policy Impacts and Local Realities
The Fed’s rate-hiking campaign may have been too gradual, limiting their flexibility now. At the same time, the threat of new tariffs and their role as a “backdoor sales tax” means prices for both foreign and domestic goods could rise, further weighing on growth and confidence. Locally, the question of whether Arizona enjoys a “soft landing” will be shaped by state-level decisions on infrastructure, Medicaid funding, energy, and workforce training. For example, a $1 billion cut in Arizona’s Medicaid funding could alone cause over 36,000 lost jobs—demonstrating how public policy is closely tied to economic outcomes.
### Workforce, Education, and Socioeconomic Progress
The workforce challenge is real: future job growth will require everyone—higher ed and trade schools alike—to step up. The state’s population inflow, once a major growth tailwind, is slowing, and meeting future labor needs will mean making education and skill-building more productive and accessible. Socioeconomic development—childcare, foster care reform, safety, and K-12 flexibility—remains crucial for broad-based progress.
### The Optimist’s Case
Though the hurdles are significant, a mild downturn is the base case—not a crisis. Arizona offers high wage growth, manageable budgets, and remains one of the best-positioned states for success through the remainder of the decade. Navigating this period requires careful planning, optimism, and a recognition that public policy decisions—like the curling “stone” analogy—can nudge the economy in better or worse directions. Arizona’s job isn’t to panic, but to keep moving up the mountain together.
If you would like a copy of the slide deck, shoot me an email and I would be happy to send it to you!