Economic Data Tracker – 
March Madness is upon us

Trend watch

March Madness – the scramble for men’s and women’s college basketball supremacy – is likely boosting the typical spring break traffic. It’s not exactly Taylor Swift’s Eras Tour or Beyoncé’s Cowboy Carter Tour big, but its still thousands of fans traveling to attend regional games, replete with dinners, hotel stays, and other associated spending (aka “merch”). Moreover, games are in non-spring break cities such as Dayton, Spokane, Cleveland, Birmingham, and Newark.

Weekly air passenger counts jumped 6.9% in the past week, crossing the 18 million mark for the first time since the week of Christmas. That’s well ahead of last year with a spring break peak of 17.8M and didn’t cross 18M until late May. Air passenger traffic continues to run ahead of 2024 and 2019 on a year-to-date basis, by 1.1% and 9.0%, respectively.

Yet, hotel occupancy appeared to have softened a bit in February, though it rose 0.5% from a year earlier. There seems to be several contributing factors to the deceleration in February, including a sharp pullback in travel by government employees and a decline in inbound international travel (down 2.4% for the month), especially from Canada. Moreover, Americans are still choosing to travel abroad, which is a trend that began several years ago post-COVID and has remained strong. 

Our take

We wanted to highlight that we published an Outlook update: Lowering growth rate as uncertainty casts a long shadow over the economy, on March 18^th. In it, we reduced our 2025 forecast for gross domestic product (GDP) to 1.9% from 2.5% and bumped our year-end unemployment up to 4.4%.

The marked down was triggered by the growing tangible signs of uncertainty impacting economic activity. Alas, the ever-changing tariff landscape appears to be taking a toll on consumers and businesses alike as evidenced by multiple months of sentiment surveys, which we have recounted here over the prior few weeks.

This uncertainty casts a long shadow over the economy, clouding decision making for businesses. Indeed, based on our conversations, businesses desperately want these trade issues to be resolved quickly. To wit, the most frequent sentiment has been, “even if tariffs are increasing – just tell us, but don’t hopscotch from one day to the next,” which would allow them to adjust and move forward.

Accordingly, many businesses are taking a ‘wait & see’ approach, which seems prudent. However, wait & see isn’t pro-growth either for the economy or for business profits. At the very least, it delays action that some businesses would have taken, while others may eventually choose to cancel plans all together due to the uncertainty. Furthermore, the longer this uncertainty drags on, the more impact it will have on the economy.

The Federal Reserve (Fed), which met this week, appears to agree with our assessment. Indeed, the Fed remains in in ‘wait & see’ mode, too.

The Fed’s updated economic projections – the so-called ‘dot plot’ – still foresees two rate cuts in 2025 but lowered the growth outlook and increased their views on inflation and the unemployment rate compared to their December projections.

The Fed also announced that it will downshift in the pace of their balance sheet runoff, beginning in April, which is meaningful and should contribute to lowering U.S. Treasury yields. Despite modestly slower growth and elevated policy uncertainty, we believe in the resilience of the U.S. economy, though we expect that the Fed will get a chance to lower rates later this year.

Bottom line

The U.S. economy remains resilient, and we believe solid growth will endure; however, it’s in a holding pattern awaiting resolution on the tariffs. Additionally, uncertainty regarding the impacts of policy shifts by the new presidential administration and Congress remain a further headwind for the economy in the near term. That has contributed to the recent bouts of volatility in financial markets, which we expect will continue for the foreseeable future.