Forecasters Predict Higher Near-Term Growth and Job Gains
The near-term outlook for the U.S. economy looks better now than it did three months ago, according to 34 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict the economy will expand at an annual rate of 2.1 percent this quarter and 2.0 percent next quarter, up from the predictions of 1.5 percent in the last survey. On an annual-average over annual-average basis, the forecasters expect real GDP to grow at an annual rate of 2.5 percent in 2024 and 1.9 percent in 2025. These annual projections are 0.1 percentage point higher than the previous estimates of three months ago.
The projections for the unemployment rate are nearly unchanged from those of the previous survey. On an annual-average basis, the forecasters predict the unemployment rate will increase from 3.9 percent in 2024 to 4.1 percent in 2027.
On the employment front, the forecasters see job gains in the current quarter at a rate of 200,000 per month. The employment projections for the current quarter and the following three quarters show upward revisions from those of the previous survey. The projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 212,600 in 2024 and 140,600 in 2025. Both projections are higher than their respective previous estimates. (These annual-average projections are computed as the year-to-year change in the annual-average level of nonfarm payroll employment, converted to a monthly rate.)
Median Forecasts for Selected Variables in the Current and Previous Surveys
| Real GDP (%) | Unemployment Rate (%) | Payrolls (000s/month) | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Previous | New | Previous | New | Previous | New | ||||
| Quarterly data: | |||||||||
| 2024:Q2 | 1.5 | 2.1 | 3.9 | 3.9 | 119.8 | 200.0 | |||
| 2024:Q3 | 1.5 | 2.0 | 4.0 | 4.0 | 114.6 | 147.3 | |||
| 2024:Q4 | 1.7 | 1.5 | 4.0 | 4.0 | 122.4 | 129.7 | |||
| 2025:Q1 | 1.8 | 1.8 | 4.1 | 4.1 | 133.5 | 144.2 | |||
| 2025:Q2 | N.A. | 2.0 | N.A. | 4.1 | N.A. | 108.7 | |||
| Annual data (projections are based on annual-average levels): | |||||||||
| 2024 | 2.4 | 2.5 | 3.9 | 3.9 | 190.0 | 212.6 | |||
| 2025 | 1.8 | 1.9 | 4.1 | 4.1 | 111.7 | 140.6 | |||
| 2026 | 2.2 | 1.9 | 4.1 | 4.1 | N.A. | N.A. | |||
| 2027 | 1.7 | 2.1 | 4.0 | 4.1 | N.A. | N.A. | |||
The charts below provide some insight into the degree of uncertainty the forecasters have about their projections for the rate of growth in the annual-average level of real GDP. Each chart presents the forecasters’ current estimates of the probability that growth will fall into each of 11 ranges. (Note that beginning with this survey, we made changes to the definition of the probability bins for real GDP growth over the next four years. Comparisons with the results of the previous survey are not possible.)
Notably, in each of the next four years, the forecasters predict year-over-year real GDP growth will most likely be in the range of 1.5 percent to 2.4 percent.
- Mean Probabilities for Real GDP Growth in 2024(chart)
- Mean Probabilities for Real GDP Growth in 2025(chart)
- Mean Probabilities for Real GDP Growth in 2026(chart)
- Mean Probabilities for Real GDP Growth in 2027(chart)
The forecasters’ density projections for unemployment, shown below, shed light on uncertainty about the labor market over the next four years. Each chart presents the forecasters’ current estimates of the probability that unemployment will fall into each of 10 ranges. (Note that beginning with this survey, we made changes to the definition of the probability bins for the unemployment rate over the next four years. Comparisons with the results of the previous survey are not possible.)
The forecasters predict the unemployment rate will most likely be in the range of 3.7 percent to 4.2 percent in each of the next four years.
- Mean Probabilities for Unemployment Rate in 2024(chart)
- Mean Probabilities for Unemployment Rate in 2025(chart)
- Mean Probabilities for Unemployment Rate in 2026(chart)
- Mean Probabilities for Unemployment Rate in 2027(chart)
Upward Revisions to the Projections for Inflation
The forecasters expect current-quarter headline CPI inflation will average 3.4 percent at an annual rate, up from the prediction of 2.5 percent in the previous survey. Headline PCE inflation over the current quarter will also be higher at an annual rate of 3.1 percent, up from the previous estimate of 2.1 percent. The predictions for current-quarter core CPI and core PCE inflation are also higher than those of the previous survey.
The forecasters predict higher inflation at nearly all other forecast horizons for both the headline and core measures of CPI and PCE inflation, compared with their previous estimates of three months ago.
Over the next 10 years, 2024 to 2033, the forecasters predict headline CPI inflation will be an annual-average rate of 2.33 percent. The corresponding estimate for 10-year annual-average PCE inflation is 2.10 percent. These 10-year projections are 0.09 percentage point and 0.10 percentage point higher than those of the previous survey.
Median Short-Run and Long-Run Projections for Inflation (Annualized Percentage Points)
| Headline CPI | Core CPI | Headline PCE | Core PCE | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Previous | Current | Previous | Current | Previous | Current | Previous | Current | |||||
| Quarterly | ||||||||||||
| 2024:Q2 | 2.5 | 3.4 | 2.7 | 3.5 | 2.1 | 3.1 | 2.1 | 3.0 | ||||
| 2024:Q3 | 2.4 | 2.8 | 2.6 | 3.0 | 2.1 | 2.4 | 2.1 | 2.5 | ||||
| 2024:Q4 | 2.4 | 2.5 | 2.4 | 2.7 | 2.1 | 2.2 | 2.1 | 2.4 | ||||
| 2025:Q1 | 2.3 | 2.4 | 2.4 | 2.7 | 2.0 | 2.2 | 2.1 | 2.4 | ||||
| 2025:Q2 | N.A. | 2.3 | N.A. | 2.5 | N.A. | 2.1 | N.A. | 2.3 | ||||
| Q4/Q4 Annual Averages | ||||||||||||
| 2024 | 2.5 | 3.1 | 2.7 | 3.4 | 2.1 | 2.8 | 2.1 | 2.9 | ||||
| 2025 | 2.2 | 2.4 | 2.3 | 2.5 | 2.0 | 2.2 | 2.0 | 2.2 | ||||
| 2026 | 2.3 | 2.3 | 2.3 | 2.4 | 2.0 | 2.1 | 2.0 | 2.1 | ||||
| Long-Term Annual Averages | ||||||||||||
| 2024-2028 | 2.30 | 2.50 | N.A. | N.A. | 2.05 | 2.21 | N.A. | N.A. | ||||
| 2024-2033 | 2.24 | 2.33 | N.A. | N.A. | 2.00 | 2.10 | N.A. | N.A. | ||||
The charts below show the median projections (the red line) and the associated interquartile ranges (gray areas around the red line) for 10-year annual-average CPI and PCE inflation. The charts provide historical perspective on the marginally higher 10-year inflation expectations in the current survey.
- Projections for the 10-Year Annual-Average Rate of CPI Inflation (chart)
- Projections for the 10-Year Annual-Average Rate of PCE Inflation (chart)
The figures below show the probabilities that the forecasters are assigning to each of 10 possible ranges for fourth-quarter over fourth-quarter core PCE inflation in 2024 and 2025. For both years, the forecasters have noticeably raised their estimates for the probability that core PCE inflation will be 2.5 percent or higher, compared with their predictions in the previous survey.
- Mean Probabilities for Core PCE Inflation in 2024(chart)
- Mean Probabilities for Core PCE Inflation in 2025(chart)
Lower Risk of Negative Quarter-over-Quarter Growth in 2024
The forecasters see the risk of a downturn in real GDP this quarter at 14.4 percent, down from the previous estimate of 23.9 percent. They have also lowered their probability estimates for negative growth for the last two quarters in 2024, compared with their previous estimates.
Risk of a Negative Quarter (%)
Survey Means
| Quarterly data: | Previous | New |
|---|---|---|
| 2024:Q2 | 23.9 | 14.4 |
| 2024:Q3 | 25.6 | 18.7 |
| 2024:Q4 | 25.6 | 22.5 |
| 2025:Q1 | 25.2 | 25.6 |
| 2025:Q2 | N.A. | 25.6 |
Technical Notes
New Probability Ranges for Real GDP and Unemployment
Beginning with this survey (2024:Q2), our researchers made changes to the definition of the probability bins for real GDP growth and the unemployment rate over the next four years.
Moody’s Aaa and Baa Historical Rates
The historical values of Moody's Aaa and Baa rates are proprietary and, therefore, not available in the data files on the Bank’s website or on the tables that accompany the survey’s complete write-up in the PDF.
The Federal Reserve Bank of Philadelphia thanks the following forecasters for their participation in recent surveys:
William Adams, Comerica Bank; Ed Al-Hussainy and Alexander Spitz, Columbia Threadneedle Investments; Scott Anderson and Doug Porter, BMO Capital Markets; Robert J. Barbera, Johns Hopkins University Center for Financial Economics; Peter Bernstein, RCF Economic and Financial Consulting, Inc.; Wayne Best and Michael Brown, Visa, Inc.; Jay Bryson, Wells Fargo; Christine Chmura, Ph.D., and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; Grant Collins, AIM Research, LLC; Rajeev Dhawan, Georgia State University; Bill Diviney, ABN AMRO Bank NV; Gabriel Ehrlich, Daniil Manaenkov, and Yinuo Zhang, RSQE, University of Michigan; Michael R. Englund, Action Economics, LLC; Michael Feroli, J.P. Morgan; Tani f*ckui and Shan Ahmed, MetLife Investment Management; Sacha Gelfer, Bentley University; James Glassman, Independent Economist; Jan Hatzius, Goldman Sachs; Steve Kihm, Citizens Utility Board of Wisconsin; Yaniv Konchitchki, University of California, Berkeley; Thomas Lam, Independent Economist (Singapore); Brian Martin, Australia New Zealand Bank (ANZ); Robert McNab, Old Dominion University; R. Anthony Metz, Pareto Optimal Economics, LLC; R. M. Monaco, TitanRM; Joel L. Naroff, Naroff Economics, LLC; Nomura Securities International; Brendon Ogmundson, BC Real Estate Association; Perc Pineda, Ph.D., Plastics Industry Association; Joel Prakken and Chris Varvares, S&P Global Market Intelligence; Jason Prole, Capital Risk Management; Michael Roberts, Dan Roberts, and Jeffrey Baldwin, Roberts Capital Advisors, LLC; Parker Ross, Arch Capital Group; Philip Rothman, East Carolina University; Allen Sinai and Lu Yu, Decision Economics, Inc.; Sean Snaith, University of Central Florida; Stephen Stanley, Santander US Capital Markets; Charles Steindel, Editor, NABE Business Economics; Susan M. Sterne, Economic Analysis Associates, Inc.; Edward Sullivan, Portland Cement Association; Ryan Sweet, Oxford Economics USA, Inc.; Jordan Vickers and Maira Trimble, Eaton Corporation; Lawrence Werther, Daiwa Capital Markets America; Mark Zandi, Moody’s Analytics; Ellen Zentner, Morgan Stanley.
This is a partial list of participants. We also thank those who wish to remain anonymous.
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