Forecasters Predict Higher Output Growth and Brighter Labor Market in 2024

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, up from the prediction of 0.8 percent in the last survey. On an annual-average over annual-average basis, the forecasters expect real GDP to increase 2.4 percent in 2024, up 0.7 percentage point from the estimate in the previous survey.

A downward revision to the path for the unemployment rate accompanies the outlook for growth. The forecasters predict the unemployment rate will increase from 3.8 percent this quarter to 4.0 percent in the fourth quarter of 2024. In the previous survey, the unemployment rate was forecast to rise from 4.0 percent to 4.2 percent over the same period. On an annual-average basis, the forecasters expect the unemployment rate to average 3.9 percent in 2024, marking a downward revision from the previous estimate of 4.1 percent.

On the employment front, the forecasters see job gains in the current quarter at a rate of 235,800 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 190,000 in 2024, up from the previous estimate of 120,000. (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:Q1 0.8 2.1 4.0 3.8 65.7 235.8
2024:Q2 1.3 1.5 4.0 3.9 97.9 119.8
2024:Q3 1.5 1.5 4.2 4.0 81.5 114.6
2024:Q4 1.7 1.7 4.2 4.0 118.8 122.4
2025:Q1 N.A. 1.8 N.A. 4.1 N.A. 133.5
Annual data (projections are based on annual-average levels):
2024 1.7 2.4 4.1 3.9 120.0 190.0
2025 1.8 1.8 4.2 4.1 N.A. 111.7
2026 2.1 2.2 4.0 4.1 N.A. N.A.
2027 N.A. 1.7 N.A. 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. Notably for 2024, the forecasters are substantially increasing their probability estimates from the previous survey for real GDP growth in the range of 1.5 percent to 3.9 percent.

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 and previous estimates of the probability that unemployment will fall into each of 10 ranges. For 2024, the forecasters are raising their probability estimates from the previous survey for an unemployment rate in the range of 3.0 percent to 3.9 percent.

Forecasters Project Lower Near-Term Headline Inflation

The forecasters expect current-quarter headline CPI inflation will average 2.5 percent at an annual rate, down from their prediction of 2.8 percent in the previous survey. Headline PCE inflation over the current quarter will also be lower at an annual rate of 1.9 percent, down from the previous estimate of 2.5 percent. The predictions for current-quarter core CPI and core PCE inflation, on the other hand, are mixed. The forecasters predict lower core PCE inflation but higher core CPI inflation over the current quarter, compared with their predictions in the last survey.

Projections for both headline and core PCE inflation in 2024 will be lower at an annual rate of 2.1 percent, down from the previous predictions of 2.4 percent.

Over the next 10 years, 2024 to 2033, the forecasters predict headline CPI inflation will be an annual-average rate of 2.24 percent. The corresponding estimate for 10-year annual-average PCE inflation is 2.00 percent. These 10-year projections are 0.16 percentage point and 0.22 percentage point lower than those of the previous survey, which covered the 10-year horizon from 2023 to 2032.

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
2024:Q1 2.8 2.5 2.8 3.1 2.5 1.9 2.7 2.1
2024:Q2 2.6 2.5 2.6 2.7 2.5 2.1 2.4 2.1
2024:Q3 2.5 2.4 2.5 2.6 2.3 2.1 2.3 2.1
2024:Q4 2.4 2.4 2.4 2.4 2.3 2.1 2.2 2.1
2025:Q1 N.A. 2.3 N.A. 2.4 N.A. 2.0 N.A. 2.1
Q4/Q4 Annual Averages
2024 2.5 2.5 2.6 2.7 2.4 2.1 2.4 2.1
2025 2.3 2.2 2.3 2.3 2.1 2.0 2.1 2.0
2026 N.A. 2.3 N.A. 2.3 N.A. 2.0 N.A. 2.0
Long-Term Annual Averages
2023-2027 2.60 N.A. N.A. N.A. 2.46 N.A. N.A. N.A.
2024-2028 N.A. 2.30 N.A. N.A. N.A. 2.05 N.A. N.A.
2023-2032 2.40 N.A. N.A. N.A. 2.22 N.A. N.A. N.A.
2024-2033 N.A. 2.24 N.A. N.A. N.A. 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 10-year annual-average CPI and PCE inflation. The charts provide perspective on the lower 10-year inflation expectations in the current 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 2024 and 2025. For 2024, the forecasters have significantly raised their estimates for the probability that core PCE inflation will be in the range of 1.5 percent to 2.4 percent, compared with their predictions in the last survey.

Lower Risk of a Contraction in Real GDP in 2024

The forecasters see the risk of a downturn in real GDP this quarter at 17.3 percent, down sharply from the previous estimate of 40.9 percent. Moreover, they have also lowered their probability estimates for negative growth for the following three quarters, compared with their previous estimates. The forecasters now predict a (nearly) one-in-four chance of a contraction in real GDP in each of the remaining three quarters in 2024.

Risk of a Negative Quarter (%)
Survey Means

Quarterly data: Previous New
2024:Q1 40.9 17.3
2024:Q2 40.2 23.9
2024:Q3 36.8 25.6
2024:Q4 34.7 25.6
2025:Q1 N.A. 25.2

Forecasters State Their Views on House Price Growth over the Next Two Years

In a special question in this survey, panelists were asked to provide their forecasts for fourth-quarter over fourth-quarter growth in house prices, as measured by several alternative indices. The panelists were allowed to choose their measure from a list of indices or to write in their own index. For each index of their choosing, the panelists provided forecasts for growth in 2024 and 2025.

Seventeen panelists answered the special question. Some panelists provided projections for more than one index. The table below provides a summary of the forecasters’ responses. The number of responses (N) is low for each index. The median estimates for the six house price indices listed in the table below range from 1.0 percent to 3.1 percent in 2024 and from  -1.1 percent to 2.5 percent in 2025.

Projections for Growth in Various Indices of House Prices
Q4/Q4, Percentage Points

(Q4/Q4 Percent Change)
(Q4/Q4 Percent Change)
Index  N   Mean     Median  N   Mean     Median
S&P CoreLogic Case-Shiller: U.S. National 6 1.7 1.5 6 1.8 2.5
S&P CoreLogic Case-Shiller: Composite 10 2 3.1 3.1 2 -0.1 -0.1
S&P CoreLogic Case-Shiller: Composite 20 8 2.9 2.1 8 2.4 2.1
FHFA: Purchase Only (U.S. Total) 10 3.5 2.7 10 2.1 2.5
CoreLogic: National HPI, incl. Distressed Sales (Single Family Combined) 1 2.3 2.3 1 -1.1 -1.1
NAR Median: Total Existing 2 1.0 1.0 2 1.8 1.8

Improved Long-Term Productivity Growth and Higher Returns on Fixed-Income Securities

In our first-quarter surveys, the forecasters provide their 10-year annual-average projections for an expanded set of variables, including growth in output and productivity, as well as returns on financial assets.

As the table below shows, the forecasters expect real GDP to grow at an annual-average rate of 2.00 percent over the next 10 years, unchanged from their projection in the first-quarter survey of 2023. Ten-year annual-average productivity growth is now expected to be 1.50 percent, up from 1.30 percent previously.

Mixed returns on financial assets over the next 10 years accompany the current long-term outlook for real GDP and productivity. The forecasters predict the S&P 500 returning an annual-average 7.00 percent over the next 10 years, down from the previous estimate of 7.50 percent in the first-quarter survey of 2023. The forecasters see the rate on 10-year Treasuries averaging 3.60 percent over the next 10 years, up from 3.35 percent in last year’s first-quarter survey. Three-month Treasury bills will return an annual-average 2.78 percent over the next 10 years, up from 2.65 percent previously.

Median Long-Term (10-Year) Forecasts (%)

  First Quarter 2023 Current Survey
Real GDP Growth 2.00 2.00
Productivity Growth 1.30 1.50
Stock Returns (S&P 500) 7.50 7.00
Rate on 10-Year Treasury Bonds 3.35 3.60
Bill Returns (3-Month) 2.65 2.78

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:

William Adams, Comerica Bank; Ed Al-Hussainy and Alexander Spitz, Columbia Threadneedle Investments; Scott Anderson and Doug Porter, Bank of Montreal-BMO; 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 Fukui 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; 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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