September 2026 Labor Market Update
By: Niaoniao You, EBRC Senior Economic Forecaster
At a glance
- Arizona added 22,700 nonfarm payroll jobs over the year in September, while its unemployment rate remained at 4.9%. Phoenix continued to lead statewide job gains, and Tucson and Prescott also added jobs.
- Nationally, payroll employment rose by 29,000 in September, unemployment edged up to 4.2%, and July and August payroll gains were revised down
Arizona’s labor market improved marginally in September, according to the employment report released by the Arizona Office of Economic Opportunity on October 15. Non-seasonally adjusted nonfarm payroll employment increased by 22,700, or 0.7%, from September 2025 to September 2026. Seasonally adjusted payroll employment increased by 0.6% over the year but edged down by 300 jobs over the month. Exhibit 1 shows the non-seasonally adjusted payroll employment growth over the year in Arizona counties and metropolitan areas.
Exhibit 1: September 2026 Arizona County and Metro Payroll Employment Changes, Percent, Year-Over-Year
In the labor force part of the employment report from household surveys, the seasonally adjusted unemployment rate stayed at 4.9% for the fourth consecutive month. The number of unemployed fell by 3,125 from August (-1.7% m/m), while the civilian labor force declined by 10,704 (-0.3% m/m).
Compared to continued improvement in Arizona, national job growth slowed in September. Nonfarm payroll employment rose by 29,000, and the U.S. unemployment rate edged up to 4.2% from 4.1%, according to the BLS employment situation released on October 2. Health care added 17,000 jobs, below its prior 12-month average of 33,000. Construction added 11,000 jobs, Manufacturing added 9,000, and Financial Activities lost 7,000. Labor force participation was 61.8%, and the employment-population ratio was 59.2%. Along with this release, July and August payroll employment numbers were revised down: July payroll growth was revised from a gain of 21,000 to a loss of 10,000, and August growth was revised from 162,000 to 133,000.
In Arizona, Private Education and Health Services and Professional and Business Services continued to lead job gains. Construction; Trade, Transportation, and Utilities; Other Services; Natural Resources and Mining; and Information sectors also added jobs over the year. Those gains were partly offset by losses in Leisure and Hospitality, Financial Activities, Government, and Manufacturing. Exhibit 2 shows Arizona net job changes, not seasonally adjusted, by industry from September 2025 to September 2026.
Exhibit 2: September 2026 Arizona Net Job Change and 2025 Annual Wages per Worker
Job gains in the Phoenix-Mesa-Chandler MSA exceeded the statewide total. Non-seasonally adjusted nonfarm payroll employment increased by 23,600, or 1.0%, over the year in September. The industries gaining and losing jobs matched the statewide pattern (Exhibit 3). Private Education and Health Services added 12,700 jobs, while Professional and Business Services added 8,400. Phoenix’s Construction gain exceeded the statewide gain, indicating a net decline elsewhere in Arizona. Financial Activities and Leisure and Hospitality posted the largest losses, followed by Government and Manufacturing.
Exhibit 3: September 2026 Phoenix MSA Net Job Change and 2025 Annual Wages per Worker
The Tucson MSA added 2,000 nonfarm payroll jobs, or 0.5%, over the year in September (Exhibit 4). Private Education and Health Services led growth, adding 2,500 jobs, followed by Other Services and Professional and Business Services. Natural Resources and Mining, Information, and Government also added jobs. Employment was unchanged in Construction and in Trade, Transportation, and Utilities. Leisure and Hospitality posted the largest decline, followed by Financial Activities and Manufacturing.
Exhibit 4: September 2026 Tucson MSA Net Job Change and 2025 Annual Wages per Worker
The Prescott MSA added 500 nonfarm payroll jobs, or 0.7%, over the year in September (Exhibit 5). Government led gains with 700 jobs, followed by Private Education and Health Services and Other Services. Manufacturing and Leisure and Hospitality each lost 200 jobs, while Mining and Construction and Financial Activities each lost 100. Employment was unchanged in Trade, Transportation, and Utilities; Information; and Professional and Business Services. Outside Phoenix, Tucson, and Prescott, all other Arizona metros recorded numerical payroll declines over the year.
Exhibit 5: September 2026 Prescott MSA Net Job Change and 2025 Annual Wages per Worker
Nationally, month-over-month state unemployment rates were lower in 5 states and stable in the remaining 45 states and the District of Columbia in September. Nonfarm payroll employment increased in 2 states, decreased in 1 state, and changed little in the remaining 47 states and the District. South Dakota had the lowest unemployment rate at 2.0%, while the District of Columbia had the highest at 5.6%. These BLS classifications refer to statistically significant changes.
In September, year-over-year metropolitan unemployment rates were lower in 226 of the 387 metropolitan areas, higher in 138, and unchanged in 23. The not-seasonally adjusted rates were 4.8% in Tucson (4.7% in September 2025) and 4.2% in Phoenix (same as September 2025). Yuma had the highest rate in Arizona at 14.5% (16.5% in September 2025) and the second highest nationally, behind El Centro, California, at 20.8%. Bismarck, Rapid City, and Sioux Falls had the lowest rates at 1.7% each. Among Arizona metros, numerical annual payroll declines were 2,800 in Flagstaff, 500 each in Lake Havasu City-Kingman and Yuma, and 100 in Sierra Vista-Douglas.
U.S. job openings were 7.5 million in September, with an openings rate of 4.5%, according to the November 3 Job Openings and Labor Turnover Survey (JOLTS). Hires were 5.4 million, with a rate of 3.4%, and total separations were 5.3 million, with a rate of 3.3%; all changed little over the month. Quits increased to 3.4 million, while their rate changed little at 2.1%. Layoffs and discharges were little changed at 1.6 million and 1.0%. Accommodation and Food Services recorded increases in hires (+158,000) and quits (+197,000), while layoffs and discharges declined in Health Care and Social Assistance (-70,000).
