It may sound like a riddle, but a strange new reality is taking shape in businesses across Arizona: No hire, no fire. Companies aren't handing out pink slips or hiring new employees. While the national economy managed to grow half a percentage point in 2025, employment moved a little slower in the Southwest. 

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The Tucson metro region added about 375 jobs last year, a far cry from the roughly 2,500 new positions the region managed a decade prior. But how did the Arizona economy shift into neutral, and what does it mean for the future?

Jennifer Pullen, executive director of the Economic and Business Research Center within the University of Arizona Eller College of Management, uses economics data to educate the community and empower local industry. To accomplish her work, Pullen often utilizes Making Action Possible for Southern Arizona – also known as the MAP Dashboard – which analyzes western metropolitan regions similar to Tucson: Albuquerque, Las Vegas and Salt Lake City, as well as parts of Colorado and Texas.

Pullen and her colleagues use the dashboard to compare how each region performs against the Old Pueblo. As it turns out, a variety of factors influence national and local economies, from federal policy to statewide legislation and regional appeal. 

Stepping away from the dashboard, Pullen discussed her research to explain how nuanced economic forces impact the Southern Arizona job market.

Q: How would you describe Southern Arizona's labor, and why has it become a defining factor in long-term growth?

A: Tucson and the rest of Southern Arizona have low labor force participation rates relative to other regions around the West, at about 81%. Some of that is driven by age distribution: A large number of highly educated retirees move to the region to either end their careers or retire while the prime working age of 25- to 54-year-olds have lower educational attainment than both nationality and many of our peer metropolitan areas.

When you look at labor force participation rates relative to education, those without a high school degree participate less than 50% while those with a college degree participate in the labor force over 70% of the time. When we factor in certificates and apprenticeships, participation rates go up to around 80%.

Q: Tucson's affordability advantage is fading. What does the data show, and what does it mean for attracting workers?

A: Housing affordability has declined significantly across the state over the past few years as home prices increase substantially faster than income. Someone earning the local median income in Tucson in 2025 needs to spend more than 43.7% of that money to afford the local median home price. That is substantially higher than the 30% cutoff that we generally consider as affordable. 

While Tucson is well above that cutoff, the region remains relatively affordable compared to other parts of the Western U.S., particularly California and Washington. We have lost some of our affordability edge in recent years, and we are now more similar to regions like San Antonio and Colorado Springs. That means when people are considering moving from state to state, they are comparing Tucson against those areas.

Q: Which industries are hiring, and which are becoming competitive?

A: Nationally, government employment increased in 2025 while manufacturing and trade, transportation and utilities experienced job losses. In contrast, government employment declined in both Arizona and the Tucson region.

The difference reflects the composition of government employment. Nationally, declines in federal employment were more than offset by job growth at the state and local levels, resulting in a net increase in government employment. In Arizona, and especially in the Tucson area, the workforce has a greater concentration of federal employees. As a result, reductions in federal employment had a larger impact and were not fully offset by gains in state and local government employment.

Despite these differences, one trend was consistent across all geographies: Private education and health services were the largest source of job growth in 2025 at the national, state and local levels.

Q: Employment remains flat while output continues to rise. What is driving that phenomenon, and what role do artificial intelligence and automation play?

A: Employment and output typically run parallel, but I think one of the most interesting things we've seen in the data since 2024 is the divergence between employment growth and real GDP. Right now, real GDP is increasing at about 2%, while employment is flat both nationally and statewide. That tells us we are in a jobless expansion where productivity is increasing.

I think a lot of people are quick to point to AI as the reason, but I don't necessarily think that generative AI is being picked up in this data yet. It's the impact of automation that occurred during the pandemic.

I think a lot of people parallel what is happening right now with the computer boom. We saw a lot of capital investment in computers, but we didn't see productivity gains until down the road because it takes a lot of time for these kinds of changes to appear in the data.