The preliminary quarterly update to the Economic and Revenue Forecast Council’s forecast of the state economy was posted on Wednesday. The summary memo to the Governor’s Council of Economic Advisers is here. Detailed tables are here. The preliminary forecast will be reviewed at a public meeting in Olympia on May 31, and may be revised before the June revenue forecast update is released on June 20.

Compared to the February economic forecast, state personal income is up a bit in the new forecast due to federal legislation extending the payroll tax cut and emergency unemployment benefits through the end of the year. The forecast for employment is little changed, with the positive impact of this federal legislation offset by the negative news that Boeing employment would peak at the end of this year and decline gradually thereafter, even as production rates climb, as the result of improving labor productivity.

The probability of a negative "shock" driving the economy into recession remains unusually high. The situation in Europe is one potential source of such a shock. A second is the fiscal situation of the U.S. federal government, where, under current law, large tax increases and spending cuts will kick in at the beginning of 2013.