September 30, 2025

Why Policy Still Matters: The 2025 Arizona “Job Killers” List.

Introduction 

The 2025 Arizona “Job Killers” report, a collaboration between CSI Arizona and the Arizona Chamber Foundation, underscores Arizona’s choice: do we elect growth, or stagnate? After a decade of robust progress, the state faces a slowdown, with job growth turning negative in May and June 2025 – the first such declines since the pandemic. The State of Arizona has limited homebuilding in parts of suburban Maricopa County, some Scottsdale residents tried to stop new affordable housing construction, and Tucson’s council turned down the opportunity for new high-tech investment. This report examines the critical role of state-level policy in sustaining Arizona’s economic momentum, contrasting its trajectory with peers like Colorado and California, and highlighting the risks posed by proposed legislation and policies that could stifle growth.

This report emphasizes that deliberate, pro-growth policies are essential for Arizona to maintain its economic edge and avoid the pitfalls seen in states like Colorado.

Key Findings

• Arizona’s Growth Decade: Since 2016, Arizona’s economy has outpaced Colorado’s, with real GDP growth averaging 3.2% annually (vs. 2.8% in Colorado) and capturing 2.8% of U.S. economic growth since 2017, despite being less than 2% of the U.S. economy a decade ago. Pro-growth policies—lower taxes, smaller government, and reduced regulation—have driven this success.
•  Policy-Driven Disparities: States like Idaho, Utah, Florida, Texas, and Arizona, with business-friendly policies, accounted for most of the growth in the U.S. since 2017. Conversely, states like Colorado and California, with increasing regulatory burdens, have seen slower growth, particularly in sectors like natural resources – where job growth slowed 160% recently – and manufacturing. 
• The Regulatory Threat: In 2025, 88 bills were introduced that could have imposed $45.9 billion in annual costs, potentially cutting employment by 660,000 jobs (-20%), per-capita income by $4,600 (-7%), and GDP by $64 billion (-15%). Significant proposals included tax hikes ($3.7 billion), labor cost increases ($30 billion, including right-to-work repeal), and new environmental regulations ($8 billion).
• Lessons from Next Door: Colorado’s regulatory overreach contrasts with Arizona’s restraint – so far, none of the bills tracked on these lists were enacted by our legislature. The lesson is plain: once a top-performer, Colorado’s economy has slowed dramatically, and now seriously lags Arizona.  

Why Policy Still Matters

Figure 1

As CSI Arizona and its partners at the Arizona Chamber Foundation embark on their third annual “job killers” report, we find Arizona at a crossroads.

As CSI has been pointing out in its monthly employment reports, job growth in Arizona has been slowing since early 2024. In fact, monthly job growth turned negative in May and June 2025 – the first consecutive month-over-month declines in state employment since the pandemic. This is part of a broader slowdown in the state economy over the past year, led by its once-booming manufacturing sector, likely at least partly attributable to its struggling housing market, over-sold water woes, and lack of clear economic policy direction.

But policy still matters, and the states story since the Great Recession – and particularly since the pandemic – remains illustrative. 

Prior to 2019, Arizona and Colorado were on very similar growth trajectories. Besides being regional neighbors, the two states in 1990 were peers in terms of population, economy, and political environment. That close relationship would persist for more than two decades. In 1990, Arizona had 3.7 million residents; Colorado was 10% smaller. By 2015 Arizona’s population had increased 86%; Colorado by a slower but comparable 65%. Between 1990 and 2015 Colorado’s labor market would expand at an average rate of 2.1%/year, versus 2.4%/year in neighboring Arizona. 

Similarly, Gross Domestic Product in the two states has historically been similar. During the 2000s, Colorado grew faster than Arizona in terms of GDP, despite fewer people. The combined trials of the Great Recession (which was particularly hard on Arizona) and the American fracking revolution and commodity price surge (particularly valuable to Colorado with its rich supply of oil and gas) fueled Colorado’s growth advantage relative to Arizona during and after the Great Recession. Between 2000 and 2015, Colorado’s real Gross Domestic Product grew at an average rate of 1.9%/year versus just 0.7%/year in Arizona. 

After 2015, though, something remarkable happens here and Arizona’s growth outlook shifts dramatically. Average annual output nearly quintuples to 3.2%/year, and since 2019, Arizona’s economy has grown faster than Colorado’s (3.4% and 2.8%, respectively). Over the past five years, cumulative real GDP growth in Arizona has been 30% larger in Arizona than in Colorado.

This raised the two key research questions which led to our original report: 

• What happened in Arizona, beginning approximately 10 years ago? Why did the state shift to a much higher growth trajectory after 2016 than it had experienced previously?
•  Why wasn’t this change uniform across states? For example, while U.S. manufacturing employment reversed decades of decline after enactment of the Tax Cuts & Jobs Act in 2017, California’s manufacturing sector saw almost no growth between 2017 and 2022, while Arizona’s grew by 20%. More recently, following a change in focus nationally – to subsidies for favored industries and regulation, particularly environmental regulation – growth has slowed or even reversed.