Orders for durable goods in April were off their first-quarter pace by an annual rate of 18 percent. This is beginning to affect the labor data as jobless claims continue to increase in June. There are several risks to the forecast. First, if inflation re-emerges the Fed will have to continue to tighten beyond this summer. Second, high borrowing levels by households and corporations have led to a sharp increase in defaults and bankruptcies.
Household debt is at a record level relative to income.
Finally, there is the threat of a stock market correction. A slowing economy that may negatively impact corporate earnings and increases in interest rates beyond the expected quarter point increase would put the stock market at risk for a correction.