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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!

Revisions ahead! We are rolling out an extra quarterly edition of the Forecaster because some of the underlying data further emerged since we sent out the edition last month. This bonus edition looks different than our normal publication because it is dedicated to just what we are changing. We are providing a lot of background to these revisions to our forecast because the context matters. In our discussions we are finding that most people feel like they are beginning to drown in economic data and unsure of what to make of some of it. Context matters, data quality matters and what we use to compare data with will really matter in the coming few years because of the outlier event of the past year plus. Take your time reading through this special edition. Join us for our next podcast where we will spend more time on the latest in our region’s economy.

This column typically attempts to summarize the contents of the edition while making some witty observation of the economy. Where does one even start with that task these days? Inflation – is it sticky or short-term? Does it matter? Labor – do we have shortages or are we challenged in how we count? How many people are going to re-enter the workforce and what type of work will they accept? Is this going to be the Summer of resignations as 20-40% of the labor market seeks new employment roles? Will that push up wages? Does that cause inflation? Will we all earn a degree in logistics and supply chain management when this over? From computer chips to sofas, delays are present everywhere. Lumber prices soar more than 200% with dozens of causes. The list goes on and on yet the market seems to be undaunted in its return to growth signaling that, for now, it is nearly all seen as short-term issues. We have spent the past few months reminding people to embrace the complexity of it all – do not rely on just one or two indices to be fully informed.

Spring is upon us. Birds chirp, plants bloom and we are starting to emerge into a post-pandemic world ever so slowly. As we put this edition to bed, we find ourselves wanting a couple more weeks to better understand the impacts of a huge stimulus, shifts in public policy and the emergence of COVID variants. But alas, no. We do know a lot more than 3 months ago but nagging questions persist. Public policy is becoming a much larger ingredient in the forecast – stimulus, low rates, increased child tax credits, monthly stipends, and more. Supply chain issues, consumer demand shifts, minimum wage discussions and more are competing for attention as well. In the following pages we explore all of it – or at least some of it as space allows. It is complex – as it should be. Longer explanations do help, and we offer those in our podcasts and in our public talks. We encourage you to investigate those options in the commentary section on the website or by reaching out to schedule a presentation at [email protected].

As we continue to battle COVID-19 and prepare to exit 2020, many questions still weigh on our minds. When will a vaccine become widely available? Will enough people be willing to get a vaccine? When will another stimulus bill be passed? We will discuss these questions and more in this quarterly publication as we delve into Q3 data. With the quick bounce-back in the rearview mirror, the recovery seems to be losing steam amid a deadly third wave, and much of the future is still uncertain. Many people seem to think that things will return to normal once a vaccine is released, but more challenges lie ahead and we are not yet in the clear. In the midst of a very dark and deadly winter, remember to exercise compassion wherever possible.

On our minds this quarter: a national election, a pandemic, remote working, remote learning, how families and businesses are impacted by all of it and an economy that is operating at about 80% of pre-COVID with strong variances by region. There is a lot to consider. Are we in recovery? What are the impacts of less sports? Will wage disparities create long-lasting issues? What will the impacts be on residential and commercial real estate as people change how/where they work and live? Economics appear to be getting better for some people and worse for others. Our new normal will not be the same one we had a year ago. Regional employment, both location and mix, will be different. Commercial space demand and use will shift. Education delivery will change. We will all adapt. In the meantime, mask up, be kind to your neighbors and lend a hand where you can. Together is how we get to normal.