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As you are reading this forecaster in February 2026, it is important to remember that we are forecasting employment growth and other indicators for the end of the year 2025 using data that ends in early fall. Data lags matter, especially when conditions are changing rapidly - whether thinking about the impact of policy decisions (including tariffs) or technology (think AI). The key question for 2026 is whether recent corporate restructuring represents a cyclical pause in hiring or a more sustained recalibration of labor demand. In short, the strong growth reflected in the initial forecast period should be interpreted within the context of a labor market that is recalibrating rather than collapsing. National signals point to greater employer caution, but not to a generalized contraction. For Puget Sound, the path forward will depend on how concentrated corporate downsizing interacts with the region’s broader economic base and its capacity to absorb sector specific shocks.

In this edition, we take a deeper look at both national and state-wide forecasts. We expand our analysis of retail and real estate. And in a wonderful twist of timing, we even talk with you about the weather. We did not produce our unusual forecast tables due to unavailability of government data. We will produce the forecast tables once data become available.

In this edition of the Puget Sound Economic Forecaster, we analyze second-quarter 2025 data and highlight the key trends shaping the region’s economy—both now and in the future. This forecaster also offers insights on a range of topics, including data reliability, interpreting economic signals ("Making Sense of the Noise"), the regional leading index, as well as current issues in housing and retail. We’re confident you’ll find this forecaster both engaging and informative, with plenty of opportunities for learning and exploration. Happy reading!

Well, that was fun! We want to thank you for your patience as we delayed publishing this edition of the Forecaster. Economists are struggling to deliver quality results due to a growing number of data challenges, which are rooted in consumer behavior, data availability, data revisions, and seemingly contradictory signals and historical patterns. We are faced with a mixed set of indicators in our region, much like on the national stage. For now, we are going to stick with the economy continuing to grow, but at a slower pace and with more volatility than we are used to seeing. It is also possible it may slow more than we are predicting. At the Federal level, we seem to have one foot on the gas and another on the brake, and very little overall policy consistency to know which is the better option. Layered on top is a similarly mixed bag of foreign policies. In July, we will hit record on the next podcast and see what we think of the next 30 days. Daily, we will post 6-8 noteworthy items in our social media stream. Be sure to join us for those! We also do live presentations throughout the state. If you are interested in having us talk with your group, please let us know.

Our regional and national economy are at a crossroads created by significant policy changes and uncertainty related to future changes coming from the other Washington. It is easy to be lulled into a state of complacency by looking at trend data without considering the scale of disruption that is occurring in real-time. Trend data relies on somewhat stable conditions. Due to data lags forecasts must first forecast the recent past before working forward. This compounds the potential risk for errors in the projections. On Tuesday morning Trump doubled the tariffs on Aluminum. The futures market and pricing adapted in real time – but will the tariffs actually persist? Who knows and that becomes the challenge. Consumer confidence is falling. Consumer spending is falling. Neither are a good indicator. As safety net programs are reduced it will impact spending more. It becomes self-feeding cycle quickly which starts the conversation that begins with r. Trend data is unlikely to warn us of a recession, but other data does – and it is flashing faster and faster. In mid-April we will hit record on the next podcast and see what we think of the next 30 days. Daily we will post 6-8 noteworthy items in our social media stream. Be sure to join us for those! We also do live shows throughout the state, if you are interested in having us talk with your group, please let us know.

Our current relationship status with the economy is complicated. On one hand there is a lot moving in the right direction and on the other hand we have a significant sense of foreboding conversations in the months ahead. This quarter we developed a number of topics to help you be the most informed person at your holiday gatherings – or at least armed with an alarming number of random facts to deflect dicey relatives. Prepare to work your way through discussions on future potential/threatened policies, consumer behavior, shopping trends, housing affordability (thank you Mathew Gardner!), retail sales, construction and to bring it all home, the Washington State forecast. In mid-January we will hit record on the next podcast and see what we think of the next 30 days. Daily we will post 6-8 noteworthy items in our social media stream. Be sure to join us for those! We also do live shows throughout the state, if you are interested in having us talk with your group, please let us know.

We are once again adding bonus pages to our quarterly report. There was simply too much fascinating and informative content to leave on the virtual editing floor. Being nerdy economists, we considered that it is your paper and ink in the end, and we found ourselves incentivized to keep all of it. We can save the debate on cost transfer for another day. Sit down with a large beverage and give yourself time to digest this quarter’s report. We want you to struggle with variations within the economy, national debt implications, trade implications, retail patterns and even housing. Find someone to debate these topics with. We hope that all of this will prepare you for the intense conversations in the months ahead as we look to elections and the implications that come with those decisions. In mid-October we will hit record on the next podcast and see what we think of the next 30 days. Daily we will post 6-8 noteworthy items in our social media stream. Be sure to join us for those! We also do live shows throughout the state, if you are interested in having us talk with your group, please let us know.

We find that we must once again remind you that data has lags and that while you are preparing your summer plans, we are still receiving data from last winter. Part of forecasting the future is also forecasting the recent past. When we printed this report and mailed them, we were very restricted when it came to word counts and graphics. We might have made the printing team cry with this edition. We cover all the usual economic topics, but we have added three special articles and pages that should engage your brain. Our friends at Chmura Economics and Analytics have provided a deep dive on employment projections for our region. The charts alone are worth your time. Our student researchers took time away from their finals and papers to explore the economics of protests and climate change which are meant to bring you pause and reflection. In mid-July we will hit record on the next podcast and see what we think of the next 30 days. Daily we will post 6-8 noteworthy items in our social media stream. Be sure to join us for those! We also do live shows throughout the state, if you are interested in having us talk with your group, please let us know.

As we prepare to hit send on this edition, life in the Pacific Northwest is emerging from the long dark and wet days into threats of a warm Spring. The past few weeks have brought not only daffodils from the ground but also a host of economic data that further paints an outline of the year ahead. We respond to a lot of topics this quarter with data – recession, stagflation, labor changes, retail challenges, consumer sentiment sprinkled with a little about commercial real estate. We have not dove in to the emerging drama at Boeing here – yet. There is still too much unknown and it is too important to just speculate. We provide you more insights in this edition of the PS forecaster.

We have expressed concern about the forecast over the past several quarters, noting different headwinds that the model might not “see”. In each forecast in 2023, the model called for modest growth. And each time we wrote in this article why we were concerned that the forecast might be a little optimistic. So, as we finish the year, we are simultaneously going to acknowledge the importance of letting the numbers tell a story, while also expressing concern - yet again. The numbers continue to suggest the sort of modest growth you see in this quarter’s forecast. Worries emerge when we think about this ‘immaculate disinflation’ story or the elusive soft landing. Is it really possible we will have an extended period where the yield curve was inverted… and no recession? Is it really possible that consumer spending can slow – surely it must, at some point, right? – and no recession? Then again, if you’ve read the last several issues of the newsletter – you know to work with the forecast as presented and ignore the concerns expressed here.