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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.

Expectations. We all have them and yet they often vary even within small groups of people working with similar information. They are not entirely data driven but a mix of data and past experiences mixed with sprinkles of hopes, dreams and even fears. Many have expected a recession, some expect things to return to the way things were in 2019. Some would prefer another decade or two, but we will ignore that for today. These have in turn led people to take action and dig in for that coming reality that is clearly coming. Expectations are important because they allow the human in each of us to be prepared – to plan. They can also be limiting as we more easily dismiss contradictory information. In the articles ahead you will see this dissonance in our discussions. We encourage you to engage it, wrestle it, and question what you think you are so sure of. Do you belong to a group that would benefit from a discussion about our economy? Consider having us be your next speaker – drop us a note to learn more.

Transparency. It is a strange value sometimes. In our work here and within our research projects we strive to maintain a high level of transparency to allow for both a reader to have a good sense of the topic but also to be able to apply that knowledge to their specific situation. This quarter we start out with a discussion about concerns we have regarding the data that fuels our modeling and how it is rippling through while another article offers a great deal of comfort in the accuracy of our previous modeling. It is within the dichotomy we advise you to read carefully and consider how this may reveal itself in your economic reality. In the story of recovery/expansion/recession from a pandemic we are getting to the potentially really interesting part – the part where it is possible all the forecasts can actually happen but just not everywhere for everyone. Read and consider carefully. Engage with us on social media or have us come talk with your gathering. Be sure to catch our next podcast.

The optimism of Spring in the northern hemisphere is undeniable. Everything seems to be getting brighter, warmer and more full of life. We have found ourselves with far more emerging datapoints than we would prefer as this hits your mailbox. Labor data, inflation trends, housing affordability, construction and even retail are all talking to us. Yet, there is much to feel good about, many indicators to find comfort in. In this edition we explore all of it and invite you to join us in our next podcast in April where we will dig in more along with the monthly updates for our digital subscribers. Our social media stream will also continue to push out a daily barrage of informative articles and research that will help you keep a steady hand in your own economic discussions. Dig in, pull some weeds, find the signs of renewed growth and grab the vision for what is emerging.

As we head in to the season of merry and bright the regional and national economy is full of emotions. Some components are having a party and others are finding a lump of coal. We talk about the economy as if there is just one. Your economy may be different than your neighbors – an aspect that gets lost in averages and medians. There is simply a lot going on within the economy. Commodities are heavily influenced by externalities (and maybe some speculation). The employment landscape is complicated by those out of the workforce and changes in consumer demand. We sprinkle in interest rates, housing markets and a list of other ingredients and you do not get a sugar cookie. The reality is – a lot is going in the right direction and the year ahead has more of that return to normal that everyone asked Santa for. From all of us at WWU we wish you the happiest holiday season!

The return to normal is a reoccurring theme. It is basic human psychology at work that seldom aligns with the reality of a constant state of change. The pace of that change is the variable most of us are uncomfortable with. We do not get to “go back” but we do get to go forward, and things do get to settle back to a more comfortable state of discomfort. Rates – inflation, interest, unemployment, etc. all are starting to show a return to more usual levels some are there, and some are on a path to there. How consumers behave will have very real implications for the next 6-9 months – and how they perceive the world around them will play a large role in that. In this edition we take time to explain the complications – we encourage you to embrace the complexity and take the time to ask questions.

Our work is fueled by helping people make actionable sense of data. There seems to be no shortage of data, but the data can be hard to interpret. Our economy is always changing and the data we use to describe it has limits. Moreover, different people experience the economy in very different ways. The theme underlying this edition is understanding data gaps and challenges. Consumer confidence data tells us one thing; consumer behavior something different. The data on tax burden versus what people say about taxes. And so on. Please take your time with this edition and think about the challenges in finding, using, and interpreting the data. How you apply these thoughts is ultimately up to you. These are complicated times which all too often leads to suboptimal decisions. There is a lot to consider as the Fed attempts to slow the economy and tame inflation (policies, rates, markets, commodities, health, war, and more). We are sure of this – it will be uncomfortable.

As with many things, there are expectations and then there is data. More than in many decades we are all realizing how interconnected the world is. Falling case counts and mask mandates in the US are being countered by rising cases, war and conflict in other places. Commodities a world away are a part of rising prices at your corner store. Uncertainty abounds, still. And yet, Spring is knocking on the door and a sense of renewed normalcy is emerging into our lives. There is a lot to consider this quarter with our forecast – it gets complicated, but the complication also brings opportunity.

Those early mornings where the sun is peeking out of the clouds and the sky has all the assurances that it will clear, and it will be bright, sunny and warm. That is where we are on the economics front as we go to print this quarter. With thoughts of variants, boosters, policy changes and international distractions we observe that the largest threat may actually be people and what they perceive to be real – as opposed to what is real. Is inflation really a large risk for 2022? Economists say no but the general public is unsure. Our own discussions are filled with caveats this week. Our next podcast, recorded in mid-January, will explore what we learn in the next 30 days, and we hope you will join us for that discussion. You can access our podcasts through the website and your favorite podcast platform. From all of us at Western Washington University, we wish you and yours the very best of this wonderful time of the year!