Summary: Alternative Mid-Year Economic Forecast Scenarios

Market Update

---

---

Introduction

All forecasts contain risk that can originate from the data used, the process of calculations, the assumptions, or a combination of each element. Indeed, an infinite number of alternative scenarios to the Baseline scenario exists, and each materializes with even small changes in assumptions.

The risks surrounding these scenarios remain high. They center on assessments regarding underlying strength of the economy and the headwinds that face the near-term economy. The key assessments include:

1.    the impact of administration policies on the economic fundamentals.

2.    Federal Reserve monetary policy actions.

3.    the strength and resiliency of consumer spending.

Data risks are also particularly important in this report. After the Baseline forecast was released, the Bureau of Labor Statistics (BLS) issued a massive revision regarding the labor market. According to the revision, 911,000 fewer jobs were created during March 2024 through March 2025. This suggests significantly greater weakness in the economy than perceived at the time of our Summer Forecast.

While the Baseline forecast remains unchanged, some adjustments have been made to the alternative scenarios given the new data. Inclusion of the new BLS data also impacts the probability of each scenario occurrence – with the odds favoring a more pessimistic outlook compared to Spring’s alternative forecasts.

---

Want to read more?

Subscribe to thesullivanreport.com to keep reading this exclusive post.

Subscribe Now