Third Quarter 2024 Survey of Professional Forecasters

Upward Revisions to Current Year Growth Expectations, but Downward Revisions to Employment

The outlook for the U.S. economy is more mixed than three months ago, according to 36 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The panelists predict GDP will grow at an annual rate of 1.9 percent this quarter, down from 2.0 percent in the previous survey. However, the panelists revised upward their expectations for GDP growth in the fourth quarter of 2024 from 1.5 percent in the previous survey to 1.7 percent in the current survey. Overall, the forecasters revised upward their expectations for 2024 GDP growth on an annual-average over annual-average basis from 2.5 percent to 2.6 percent.

The forecasters see higher unemployment rates across all horizons compared with the previous survey. On an annual-average basis, the forecasters revised upward their expectations by 0.2 percentage point for both 2024 and 2025 to 4.1 percent and 4.3 percent, respectively. The forecasters expect the unemployment rate to be 4.2 percent in both 2026 and 2027, each up 0.1 percentage point from the last survey.

On the employment front, the panelists have slightly lowered their expectations for the next three quarters compared with the previous survey. The forecasters see job gains at a monthly rate steadily decreasing from 143,900 in the current quarter to 116,200 in the second quarter of 2025. However, in the third quarter of 2025, the forecasters expect monthly job gains to bounce back to 145,800. Overall, annual-average projections for nonfarm payroll employment decreased from a monthly rate of 210,100 in 2024 to 130,000 in 2025, both lower than those in the previous survey. (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’ current and previous estimates of the probability that growth will fall into each of 11 ranges.

The forecasters deem the most likely growth rate in all four years to be in the range of 1.5 percent to 2.4 percent, which matches the expectations of the previous survey.

• 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 and previous estimates of the probability that unemployment will fall into each of 10 ranges.

The forecasters predict the unemployment rate will most likely be in the range of 3.7 percent to 4.2 percent for 2024 and 2027, matching the expectations for the highest probability of the previous survey. However, for 2025 and 2026, the forecasters have shifted their highest unemployment rate expectations from a range of 3.7 percent to 4.2 percent in the previous survey to 4.3 percent to 4.8 percent in the current survey.

• 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)

Forecasters Revise Down Inflation Expectations at Most Horizons

The forecasters have lowered their expectations for all current-quarter measures of inflation. Current-quarter headline CPI and PCE inflation are now expected to be 2.3 percent and 2.1 percent, respectively, down from 2.8 percent and 2.4 percent in the previous survey. Similarly, current-quarter core CPI and PCE inflation expectations were also revised downward to 2.6 percent and 2.4 percent, respectively.

Predictions at all other horizons for both headline and core CPI and PCE inflation have either been revised downward or remain the same when compared with the previous survey. The only two exceptions to this are the second quarter of 2025 projections for headline CPI and PCE inflation, both of which were revised upward by 0.1 percentage point to 2.4 percent and 2.2 percent, respectively.

Over the next 10 years, 2024 to 2033, the forecasters predict headline CPI inflation will be an annual-average rate of 2.30 percent, down from 2.33 percent in the previous survey. The corresponding estimate for 10-year annual-average PCE inflation is 2.10 percent, unchanged from 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 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. In 2024, the forecasters expect the most likely range for core PCE inflation to be in the range of 2.5 percent and 2.9 percent. In 2025, the forecasters see the most likely range to be lower than that in 2024, placing expectations in the range of 2.0 percent and 2.4 percent.

• 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, but Higher Risk in 2025

The forecasters see a lower risk of a contraction in real GDP for both quarters of 2024 than in the previous survey but have revised upward their risk expectations for 2025. They see the least amount of risk of a contraction in the current quarter, which they estimate to be 16.2 percent, and the highest amount of risk in the second quarter of 2025, which they estimate to be 27.6 percent.

Natural Rate of Unemployment Estimated at 4.40 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 estimate this rate at 4.40 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. Forty-four percent of the 27 forecasters who answered the question report that they use the natural rate in their forecasts. The lowest estimate is 3.50 percent, and the highest estimate is 5.16 percent.

Technical Note

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; 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.

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

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