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Third Quarter 2019 Survey of Professional Forecasters

Forecasters See Weaker Outlook for Near-Term Growth

The U.S. economy for the next three quarters looks slightly weaker now than it did three months ago, according to 35 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The panel predicts real GDP will grow at an annual rate of 1.8 percent this quarter, 2.0 percent next quarter, and 1.9 percent in the first quarter of 2020, marking downward revisions from the previous survey. On an annual-average over annual-average basis, the forecasters expect real GDP to grow 2.3 percent in 2019 and 1.9 percent in 2020. The projections for 2019 and 2020 are down from 2.6 percent and 2.0 percent, respectively, in the last survey.

A steady near-term outlook for the unemployment rate accompanies the outlook for growth. The forecasters predict the unemployment rate will average 3.7 percent in 2019 and 3.6 percent in 2020, both unchanged from the survey of three months ago. For 2021 and 2022, the panel sees the unemployment rate at 3.9 percent and 4.0 percent, respectively, projections slightly above those of the last survey.

On the employment front, the forecasters have marginally revised downward their estimates for job gains over the next two years. The projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 190,600 in 2019 and 141,200 in 2020. (These annual-average estimates 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)
Quarterly data:
2019:Q3 2.1 1.8 3.6 3.6 164.7 150.6
2019:Q4 2.2 2.0 3.6 3.6 154.9 148.1
2020:Q1 2.0 1.9 3.6 3.6 133.3 137.6
2020:Q2 1.7 2.0 3.6 3.6 154.2 145.8
2020:Q3 N.A. 2.0 N.A. 3.7 N.A. 108.3
Annual data (projections are based on annual-average levels):
2019 2.6 2.3 3.7 3.7 200.1 190.6
2020 2.0 1.9 3.6 3.6 142.3 141.2
2021 1.9 2.0 3.7 3.9 N.A. N.A.
2022 2.3 2.1 3.9 4.0 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’ previous and current estimates of the probability that growth will fall into each of 11 ranges. The charts show the forecasters have revised upward their estimates of the probability that real GDP will grow below 3.0 percent in 2019. Over the following three years, the estimates of uncertainty about growth are nearly the same as those in the previous survey.

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. The charts show the panelists are raising their density estimates for an unemployment rate below 4.0 percent for the next four years.

Lower Current-Quarter Headline Inflation

The forecasters expect current-quarter headline CPI inflation to average 1.9 percent, down from 2.1 percent in the last survey. Headline PCE inflation for the current quarter will be 1.7 percent, down 0.3 percentage point from the previous estimate.

The forecasters’ projections for inflation other than the current-quarter headline inflation are mostly unchanged compared with the previous survey.

The long-horizon inflation projections are also holding steady. Over the next 10 years, 2019 to 2028, the forecasters expect headline CPI inflation to average 2.20 percent at an annual rate, unchanged from the previous estimate. The corresponding estimate for 10-year annual-average PCE inflation is 2.00 percent, also unchanged from the estimate of three months ago.

Median Short-Run and Long-Run Projections for Inflation (Annualized Percentage Points)
Headline CPI
Core CPI
Headline PCE
Core PCE
2019:Q3 2.1 1.9 2.1 2.1 2.0 1.7 1.9 2.0
2019:Q4 2.1 2.1 2.1 2.1 2.0 1.9 1.9 1.9
2020:Q1 2.1 2.0 2.2 2.2 2.0 1.9 2.0 2.0
2020:Q2 2.0 2.0 2.2 2.1 1.9 1.8 2.0 1.9
2020:Q3 N.A. 2.1 N.A. 2.1 N.A. 1.9 N.A. 1.9
Q4/Q4 Annual Averages
2019 1.9 1.9 2.1 2.1 1.7 1.6 1.7 1.7
2020 2.1 2.0 2.2 2.2 1.9 1.9 2.0 2.0
2021 2.2 2.2 2.2 2.1 2.0 2.0 1.9 1.9
Long-Term Annual Averages
2019-2023 2.10 2.09 N.A. N.A. 1.96 1.90 N.A. N.A.
2019-2028 2.20 2.20 N.A. N.A. 2.00 2.00 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 the projections for 10-year annual-average CPI and PCE inflation. The charts highlight unchanged projections for the long-term inflation rate, compared with those of the last survey.

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 2019 and 2020. For both years, the forecasters have increased the probability that core PCE inflation will be between 1.5 and 1.9 percent and have decreased the probability that core PCE inflation will be between 2.0 and 2.4 percent.

Forecasters See Lower Risk of a Negative Quarter

The forecasters have revised downward the chance of a contraction in real GDP in any of the next four quarters. For the current quarter, the forecasters predict an 11.7 percent chance of negative growth, down from 13.1 percent in the survey of three months ago.

Risk of a Negative Quarter (%)
Survey Means
Quarterly data: Previous New


Natural Rate of Unemployment Estimated at 4.1 Percent

In third-quarter surveys, we ask the forecasters to provide their estimates of the natural rate of unemployment — the rate of unemployment that occurs when the economy reaches equilibrium. The forecasters peg this rate at 4.10 percent. The table below shows, for each third-quarter survey since 1996, the percentage of respondents who use the natural rate in their forecasts and, for those who use it, the median estimate and the lowest and highest estimates. Thirty-three percent of the 27 forecasters who answered the question report that they use the natural rate in their forecasts. The lowest estimate is 3.88 percent, and the highest estimate is 4.60 percent.

Median Estimates of the Natural Rate of Unemployment
Survey Date Percentage Who Use the Natural Rate Median Estimate (%) Low (%) High (%)
1996:Q3 62 5.65 5.00 6.00
1997:Q3 59 5.25 4.50 5.88
1998:Q3 45 5.30 4.50 5.80
1999:Q3 43 5.00 4.13 5.60
2000:Q3 48 4.50 4.00 5.00
2001:Q3 34 4.88 3.50 5.50
2002:Q3 50 5.10 3.80 5.50
2003:Q3 41 5.00 4.31 5.40
2004:Q3 46 5.00 4.00 5.50
2005:Q3 50 5.00 4.25 5.50
2006:Q3 53 4.95 4.00 5.50
2007:Q3 52 4.65 4.20 5.50
2008:Q3 48 5.00 4.00 5.50
2009:Q3 45 5.00 4.00 6.00
2010:Q3 50 5.78 4.50 6.80
2011:Q3 42 6.00 4.75 7.00
2012:Q3 49 6.00 4.75 7.00
2013:Q3 63 6.00 4.75 7.00
2014:Q3 65 5.50 4.50 6.70
2015:Q3 62 5.00 4.25 5.80
2016:Q3 56 4.80 4.50 5.50
2017:Q3 44 4.50 3.50 5.00
2018:Q3 34 4.30 3.80 4.60
2019:Q3 33 4.10 3.88 4.60

Technical Notes

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:

Lewis Alexander, Nomura Securities; Scott Anderson, Bank of the West (BNP Paribas Group); 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; Nathaniel Curtis, Ankura Consulting Group, LLC; Gregory Daco, Oxford Economics USA, Inc.; Rajeev Dhawan, Georgia State University; Bill Diviney, ABN AMRO Bank NV; Gabriel Ehrlich, Daniil Manaenkov, Owen Nie, and Aditi Thapar, RSQE, University of Michigan; Michael R. Englund, Action Economics, LLC; Michael Gapen, Barclays Capital; Sacha Gelfer, Bentley University; James Glassman, JPMorgan Chase & Co.; Jan Hatzius, Goldman Sachs; Brian Higginbotham, U.S. Chamber of Commerce; Peter Hooper, Deutsche Bank Securities, Inc.; Fred Joutz, Benchmark Forecasts; Sam Kahan, Kahan Consulting Ltd. (ACT Research LLC); N. Karp, BBVA Research USA; Walter Kemmsies, Jones Lang LaSalle; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, Sim Kee Boon Institute, Singapore Management University; L. Douglas Lee, Economics from Washington; John Lonski, Moody’s Capital Markets Group; Macroeconomic Advisers, IHS Markit; Robert McNab, Old Dominion University; R. Anthony Metz, Pareto Optimal Economics; R. M. Monaco, TitanRM; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Mark Nielson, Ph.D., MacroEcon Global Advisors; Brendon Ogmundson, BC Real Estate Association; Arun Raha and Maira Trimble, Eaton Corporation; Philip Rothman, East Carolina University; Chris Rupkey, MUFG Union Bank; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting/Montclair State University; Stephen Stanley, Amherst Pierpont Securities; Charles Steindel, Ramapo College of New Jersey; Susan M. Sterne, Economic Analysis Associates, Inc.; James Sweeney, Credit Suisse; Thomas Kevin Swift, American Chemistry Council; 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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Third Quarter 2019  PDF

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The survey for 2019 Q4 will be released on November 15, 2019.

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Tom Stark
Federal Reserve Bank of Philadelphia
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