Amid shifting uncertainties, veterinary practices can manage risk

Veterinarians can't control uncertainty, but practices can manage risks, according to AVMA Chief Economist Katelyn McCullock.

On October 8, McCullock delivered a sweeping analysis of the macroeconomic forces shaping the future of veterinary medicine at the 2025 AVMA Veterinary Business and Economic Forum in Denver, held in person for the first time since 2019.

"Uncertainty is all around us," she said. "We can't control it, but we can manage risk—to prevent significant losses and minimize impacts to our businesses."

Dr. Michael Q. Bailey, AVMA president, in his welcome address said that is what the forum is about: "How can we make what we do economically sustainable for our clients?"

At the forum, themed "Meeting of the Minds," McCullock addressed the biggest uncertainty areas, top risks in 2026, and the U.S. growth projection against a backdrop of shifting economic signals, consumer pessimism, and emerging technologies, such as artificial intelligence (AI).

Major uncertainties

McCullock discussed key areas of uncertainty involving the labor market, the Federal Reserve's dual mandate, and shifting historical data point implications, in which previous outcomes are no longer guaranteed indicators.

"I think we're going to see some major labor market upheaval as new technologies, particularly AI, come further into the workforce," she said, adding it will affect different industries at varying speeds.

Adding to the uncertainty is consumer sentiment that has not recovered since the COVID-19 pandemic, according to the Consumer Confidence Index.

"Typically, consumers build optimism between recessions—they feel better, and we see consumer sentiment increase," McCullock said. "And yet … consumers are really saying that this is possibly the worst they have felt in 40 years."

McCullock also drew attention to the delinquency rate, or the percentage of people who have not made payment in over 90 days, that rose in the second quarter.

"In Q2 of 2025, we're knocking on the door of the same levels of the 2008-09 recession," she said. "And yet with all that stress and pessimism, we have continued to spend money at a pretty good pace."

The data shows a tale of two trends, a divergence the Wall Street Journal recently described as the return of "the two-speed economy" between the high earners and lower-income households.

"We have some demographics of the country continuing to spend, while others are feeling significant financial pressure," McCullock said.

All the while, the Fed's dual mandate—to keep inflation low and employment high—faces new challenges. Inflation continues to edge upward, while unemployment remains relatively low at 4.3%, based on the latest available jobs data amid the government shutdown.

The central bank, which dropped interest rates by a quarter percentage point in September, is signaling two additional cuts by year end with just over two months left in 2025. "If those do happen," McCullock said, "it's a strong sign they're seeing significant weakness."

Risk factors

Among top risks heading into 2026, McCullock listed inflation, tariffs, policy disruptions, and changing worldviews—or how the U.S. interacts with global partners and how those in turn view the U.S.

Amid consumer pessimism, financial stress, and growing debt burdens, real wages have also been largely stagnant since 2021. Persistent inflation is eating into any modest nominal wage growth, including in the veterinary profession, raising further concerns about long-term consumer purchasing power.

"It probably takes more than one of these to push the economy into a consumer-driven recession," she said. "But multiple factors happening at once could be fairly impactful for the U.S. economy."

Meanwhile, a traditional recession signal—the inverted yield curve—has persisted longer than at any time in U.S. history, McCullock says.

The Fed calls the inverted yield curve—in which long-maturity Treasury yields fall below their short-maturity counterparts—a "powerful near-term predictor of recessions."

"It's unclear whether the indicator no longer works, or whether it's just taking longer this time," McCullock said.

Growth projection

Overall, the world economic outlook remains optimistic, with the International Monetary Fund predicting global growth at 3.1% in 2026, though down from 3.2% in 2025 and 3.3% in 2024.

That global forecast remained unchanged from its last update in July, but its projection for the U.S. economy ticked up slightly from 1.9% in July to 2% in October for 2025, and 2.1% in 2026, as the nation's biggest banks call the U.S. economy "resilient."

"While the global projection for the U.S. is optimistic, commentary around economic disruptions remain largely negative citing ongoing challenges to trade policy," McCullock said.

However, McCullock highlighted a general decline in "trade openness," or willingness "to share in economic gain"—from its highs in the 2000s to a plateau since the 2008 crisis.

Against this backdrop of uncertainty, risk, and "slowbalization," McCullock reported visits to veterinary practices have trended 2% to 3% lower over the past 12 months, according to data from the AVMA's Veterinary Industry Tracker, available through a partnership with Vetsource.

Despite these challenges, veterinarians can manage risks by evolving, staying attuned to economic signals and client behavior, and advocating for legislation and policies that benefit veterinary medicine.

During a panel discussion on the industry's outlook, Dr. Kent McClure, AVMA's assistant executive vice president and chief advocacy officer, noted increasing engagement among the profession.

"We're seeing many more young veterinarians asking us, 'How can I be a part of advancing my profession?'" Dr. McClure said. "I think we're going to see more and more engagement, and I think that bodes very well for us shaping the future of veterinary medicine."