Second Quarter 2025 Survey of Professional Forecasters

Forecasters Predict Lower Growth and Employment in 2025

The outlook for the U.S. economy looks dimmer now than it did three months ago, according to 36 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict the economy will grow at an annual rate of 1.5 percent this quarter, down from the prediction of 2.1 percent in the last survey. On an annual-average over annual-average basis, the forecasters expect real GDP to increase 1.4 percent in 2025, down 1.0 percentage point from the estimate in the survey of three months ago.

An upward revision to the path for the unemployment rate accompanies the outlook for growth. The forecasters predict the unemployment rate will increase from 4.2 percent this quarter to 4.5 percent in the first quarter of 2026. In the previous survey, the unemployment rate was forecast to rise from 4.2 percent to 4.3 percent over the same period. On an annual-average basis, the forecasters expect the unemployment rate to average 4.3 percent in 2025, marking a slight upward revision from the previous estimate of 4.2 percent. The forecasters also predict higher unemployment rates over the next three years, compared with those in the previous survey.

On the employment front, the forecasters predict job gains in the current quarter at a rate of 141,400 per month. The employment projections for both the current quarter and the following three quarters show downward 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 140,900 in 2025, down from the previous estimate of 145,000. (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.) 

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 1.4 percent or lower over each of the next four years.

• 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)
• Mean Probabilities for Real GDP Growth in 2028 (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 and previous estimates of the probability that unemployment will fall into each of 10 ranges. For each of the next four years, the forecasters are raising their probability estimates from the previous survey for an unemployment rate of 4.3 percent or higher.

• Mean Probabilities for Unemployment Rate in 2025 (chart)
• Mean Probabilities for Unemployment Rate in 2026 (chart)
• Mean Probabilities for Unemployment Rate in 2027 (chart)
• Mean Probabilities for Unemployment Rate in 2028 (chart)

Forecasters See Higher Inflation

The forecasters expect current-quarter headline CPI inflation will average 3.1 percent at an annual rate, up from their prediction of 2.8 percent in the previous survey. Headline PCE inflation over the current quarter will also be higher at an annual rate of 3.2 percent, up from the previous estimate of 2.4 percent. The predictions for current-quarter core CPI and core PCE inflation are also higher compared with their predictions in the last survey.

Projections for headline and core CPI and PCE inflation at nearly all other forecast horizons have also been revised upward compared with those in the survey of three months ago.

Over the next 10 years, 2025 to 2034, the forecasters predict headline CPI inflation will be an annual-average rate of 2.35 percent. The corresponding estimate for 10-year annual-average PCE inflation is 2.20 percent. These 10-year projections are 0.05 percentage point and 0.09 percentage point higher than those of the previous survey.

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 current survey’s higher projections for 10-year CPI inflation and 10-year PCE inflation.

• 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 2025 and 2026. Notably, for both years, the forecasters have raised their estimates for the probability that core PCE inflation will be 3.0 percent or higher compared with their predictions in the last survey.

• Mean Probabilities for Core PCE Inflation in 2025 (chart)
• Mean Probabilities for Core PCE Inflation in 2026 (chart)

Higher Risk of a Contraction in Real GDP

The forecasters have revised upward the chance of a downtown in real GDP in any of the next four quarters. For the current quarter, the forecasters predict a 37.0 percent chance of negative growth, up from 15.4 percent in the survey of three months ago. The panelists have also made upward revisions to their probability estimates for the following three quarters.

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, 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; Seth Carpenter, Morgan Stanley; 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; Ben Herzon and Patrick Newport, S&P Global Market Intelligence; Steve Kihm, Citizens Utility Board of Wisconsin; Yaniv Konchitchki, University of California, Berkeley; Thomas Lam, Independent Economist (Singapore); Matthew Luzzetti, Deutsche Bank; 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; Panos N. Patatoukas, U.C. Berkeley, Haas School of Business; Perc Pineda, Ph.D., Plastics Industry Association; Jason Prole, Capital Risk Management; Luciano Rispoli, Advance Macro Research; Michael Roberts, Dan Roberts, and Jeffrey Baldwin, Roberts Capital Advisors, LLC; Parker Ross, Arch Capital Group; Philip Rothman, East Carolina University; Allen Sinai and Anqi Liu, Decision Economics, Inc.; Sean Snaith, University of Central Florida; Daniel Soques, University of North Carolina Wilmington; Stephen Stanley, Santander US Capital Markets; Charles Steindel, Editor, NABE Business Economics; Susan M. Sterne, Economic Analysis Associates, Inc.; Edward Sullivan, Portland Cement Association; Patrick P. Sullivan, Sullivan Economic Consulting, LLC; Ryan Sweet, Oxford Economics USA, Inc.; Jordan Vickers and Maira Trimble, Eaton Corporation; Lawrence Werther, Daiwa Capital Markets America; Mark Zandi, Moody’s Analytics.

This is a partial list of participants. We also thank those who wish to remain anonymous.

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