Forecasters Project Slower Growth with Lower Unemployment

The U.S. economy looks weaker now than it did in August, according to 37 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict real GDP will grow at an annual rate of 4.6 percent this quarter and 3.9 percent next quarter, down 0.6 percentage point each from the prediction in the last survey. Using the annual-average over annual-average computation, the panel expects real GDP will grow at an annual rate of 5.5 percent this year and 3.9 percent in 2022, down 0.6 percentage point and 0.5 percentage point, respectively, from the prediction of three months ago.

The downward revision to growth is accompanied by a more positive outlook for the unemployment rate. The forecasters predict unemployment will decrease from a projected 4.5 percent this quarter to 3.9 percent in the fourth quarter of 2022. Using the annual-average computation, the panelists predict the unemployment rate will decline from 5.4 percent in 2021 to 3.7 percent in 2024. The annual-average projections from 2021 to 2023 are each 0.2 percentage point below those of the last survey.

The forecasters are less optimistic about the near-term employment outlook. They have revised downward their estimates for job gains over the next three quarters. The projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 325,800 in 2021 and 439,700 in 2022. (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:
2021:Q4 5.2 4.6 4.9 4.5 508.8 469.4
2022:Q1 4.5 3.9 4.6 4.3 468.9 407.8
2022:Q2 3.4 4.0 4.4 4.1 404.8 310.9
2022:Q3 2.7 3.1 4.2 3.9 265.0 321.5
2022:Q4 N.A. 3.1 N.A. 3.9 N.A. 306.2
Annual data (projections are based on annual-average levels):
2021 6.1 5.5 5.6 5.4 309.4 325.8
2022 4.4 3.9 4.3 4.1 456.3 439.7
2023 2.5 2.6 3.8 3.6 N.A. N.A.
2024 2.0 2.3 3.6 3.7 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. For 2022, the forecasters have revised upward their estimate of the probability that real GDP will grow below 4.0 percent. However, the current real GDP growth probability projections for the following two years are little changed, compared with the previous estimates.

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 charts show the panelists are raising their probability estimates for an unemployment rate below 4.0 percent over each of the next four years, compared with their previous estimates.

Forecasters Expect Higher Inflation

The forecasters predict current-quarter headline CPI inflation to average 4.6 percent, up from 2.6 percent in the last survey. Headline PCE inflation over the current quarter will be 4.0 percent, up 1.4 percentage points from the previous estimate.

Projections for headline and core CPI and PCE inflation at most other forecast horizons beyond the current quarter have been revised upward, compared with those from the survey of three months ago.

Over the next 10 years, 2021 to 2030, the forecasters predict headline CPI inflation will average 2.55 percent at an annual rate. The corresponding estimate for 10-year annual-average PCE inflation is 2.30 percent. These 10-year projections are higher than those of the previous survey.

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
2021:Q4 2.6 4.6 2.5 3.5 2.6 4.0 2.2 3.0
2022:Q1 2.2 3.0 2.3 2.8 2.3 3.0 2.1 2.5
2022:Q2 2.3 2.6 2.3 2.6 2.2 2.5 2.1 2.4
2022:Q3 2.4 2.5 2.4 2.6 2.2 2.3 2.2 2.3
2022:Q4 N.A. 2.4 N.A. 2.4 N.A. 2.2 N.A. 2.1
Q4/Q4 Annual Averages
2021 4.9 5.8 4.2 4.5 4.1 4.9 3.7 4.1
2022 2.4 2.7 2.4 2.6 2.2 2.4 2.2 2.3
2023 2.3 2.4 2.4 2.4 2.3 2.2 2.1 2.1
Long-Term Annual Averages
2021-2025 2.75 2.90 N.A. N.A. 2.40 2.59 N.A. N.A.
2021-2030 2.44 2.55 N.A. N.A. 2.20 2.30 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 show the rising projections for the long-term inflation rate in recent surveys.

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 2021 and 2022. Notably, for 2021, the forecasters have significantly raised their estimates for the probability that core PCE inflation will be 4.0 percent or higher, compared with their estimates from three months ago. The forecasters have also raised their current probability projections for inflation higher than 2.4 percent in 2022, compared with their previous projections.

Higher (but Low) Risk of a Negative Quarter in 2022

The forecasters expect the likelihood of a contraction in real GDP in any of the next five quarters to remain low, even though their new estimates for the first three quarters in 2022 are above those of the previous survey. They have cut their probability estimates for the risk of a downturn this quarter to 9.1 percent, compared with 9.5 percent in the previous survey.

Risk of a Negative Quarter (%)
Survey Means

Quarterly data: Previous New
2021:Q4 9.5 9.1
2022:Q1 12.0 13.3
2022:Q2 12.3 15.0
2022:Q3 12.9 15.9
2022:Q4 N.A. 16.9

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:

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; Gregory Daco, Oxford Economics USA, Inc.; Tina Dhariwal, Gabriel Ehrlich, Daniil Manaenkov, and Tereza Ranosova, RSQE, University of Michigan; Rajeev Dhawan, Georgia State University; Bill Diviney, ABN AMRO Bank NV; Michael R. Englund, Action Economics, LLC; Sacha Gelfer, Bentley University; James Glassman, JPMorgan Chase & Co.; Jan Hatzius, Goldman Sachs; Fred Joutz, Benchmark Forecasts; Sam Kahan, Kahan Consulting Ltd. (ACT Research LLC); N. Karp, BBVA Research USA; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Yaniv Konchitchki, University of California, Berkeley; Rohan Kumar and Allen Sinai, Decision Economics, Inc.; Thomas Lam, Sim Kee Boon Institute, Singapore Management University; John Lonski, Moody’s Capital Markets Group; Matthew Luzzetti, Deutsche Bank Securities; 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; Nomura Securities International; Brendon Ogmundson, BC Real Estate Association; Perc Pineda, Ph.D., Plastics Industry Association; Jason Prole, Capital Risk Management; 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, Inc.; Stephen Stanley, Amherst Pierpont Securities; Charles Steindel, Editor, NABE Business Economics; Susan M. Sterne, Economic Analysis Associates, Inc.; James Sweeney, Credit Suisse; Maira Trimble, Eaton Corporation; Gary Wagner, University of Louisiana at Lafayette; 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.

Return to the main page for the Survey of Professional Forecasters.