Third Quarter 2025 Survey of Professional Forecasters

Forecasters See Higher Growth in 2025

The near-term outlook for growth in the U.S. economy looks better now than it did three months ago, according to 36 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters expect real GDP to grow at an annual rate of 1.3 percent this quarter, up from the previous estimate of 0.9 percent. On an annual-average over annual-average basis, the forecasters expect real GDP to increase 1.7 percent in 2025, up 0.3 percentage point from the estimate in the survey of three months ago.

A slight downward revision to the path for the unemployment rate accompanies the outlook for growth. The unemployment rate is projected to be an annual average of 4.2 percent in 2025 and 4.5 percent in 2026 before falling to 4.4 percent in 2027, and 4.3 percent in 2028. In the previous survey, the unemployment rate was forecast to rise from 4.3 percent to 4.4 percent over the same four-year period.

On the employment front, the forecasters predict job gains in the current quarter at a rate of 73,000 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 132,800 in 2025, down from the previous estimate of 140,900. (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. Notably, the chart for 2025 shows the forecasters have significantly revised upward their estimates of the probability that real GDP growth will be in the range of 1.5 percent to 2.4 percent.

• 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 that the annual average unemployment rate will be in the range of 4.3 percent to 4.8 percent.

• 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 Mostly Lower Inflation

The forecasters expect current-quarter headline CPI inflation will average 3.0 percent at an annual rate, down from their prediction of 3.5 percent in the previous survey. Headline PCE inflation over the current quarter will also be lower at an annual rate of 2.9 percent, down from the previous estimate of 3.4 percent. The predictions for current-quarter core CPI and core PCE inflation are also lower compared with their predictions in the last survey.

Projections for headline and core CPI and PCE inflation at most other forecast horizons have also been revised downward 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 2.31 percent, slightly lower than the estimate of 2.35 percent in the previous survey. The corresponding estimate for 10-year annual-average PCE inflation is 2.20 percent, unchanged from the previous estimate.

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 slightly lower projection for long-term CPI inflation and the unchanged projection for long-term 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. For 2025, the forecasters have raised their estimates for the probability that core PCE inflation will be 3.4 percent or lower compared with their predictions in the last survey. For 2026, the probabilities are little changed compared with the survey of three months ago.

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

Lower Risk of a Contraction in Real GDP

The forecasters have revised downward the chance of a contraction in real GDP in the last two quarters of 2025. For the current quarter, the forecasters predict a 22.8 percent chance of negative growth, down from 36.1 percent in the survey of three months ago. As the table below shows, the forecasters are keeping mostly unchanged their risk estimates for a downturn in the first two quarters of 2026, compared with their previous estimates.

Natural Rate of Unemployment Estimated at 4.25 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 4.25 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 3.70 percent, and the highest estimate is 4.50 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.; 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; James Egelhof, BNP Paribas; 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; Tim Quinlan, Wells Fargo; 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, 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.; 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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