Fourth Quarter 2022 Survey of Professional Forecasters
Forecasters Predict Lower Growth and Higher Unemployment Rate
The outlook for the U.S. economy looks weaker now than it did three months ago, according to 38 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict the economy will expand at an annual rate of 1.0 percent this quarter, down from the prediction of 1.2 percent in the last survey. Over the next three quarters, the panelists also see slower output growth than they predicted three months ago. On an annual-average over annual-average basis, the forecasters expect real GDP to increase 0.7 percent in 2023 and 1.8 percent in 2024. These annual projections are lower than the estimates in the previous survey.
A higher path for the unemployment rate accompanies the outlook for growth. On an annual-average basis, the forecasters expect the unemployment rate will increase from 3.7 percent in 2022 to 4.2 percent in 2023 and remain little changed over the following two years. The projections for 2023, 2024, and 2025 are 0.3 to 0.4 percentage point above those projections from the last survey.
On the employment front, the forecasters raised their current-quarter estimate for job growth to a monthly rate of 217,600 but revised downward their estimates for the next three quarters. The projections for the annual-average level of nonfarm payroll employment put job gains at a monthly rate of 492,800 in 2022 and 143,600 in 2023. (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)|
|Annual data (projections are based on annual-average levels):|
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 are increasing substantially their probability estimates from the previous survey for real GDP growth in the range of 1.5 to 2.4 percent. Over each of the following three years, from 2023 to 2025, the forecasters see a higher probability than they predicted in the survey of three months ago that growth will be 1.4 percent or lower.
- Mean Probabilities for Real GDP Growth in 2022 (chart)
- Mean Probabilities for Real GDP Growth in 2023 (chart)
- Mean Probabilities for Real GDP Growth in 2024 (chart)
- Mean Probabilities for Real GDP Growth in 2025 (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 2022, the forecasters are raising their probability estimates from the previous survey for an unemployment rate in the range of 3.0 to 3.9 percent. Over each of the following three years, from 2023 to 2025, the forecasters expect a higher probability than they predicted in the previous survey that unemployment will fall into the ranges of 4.0 percent or higher.
- Mean Probabilities for Unemployment Rate in 2022 (chart)
- Mean Probabilities for Unemployment Rate in 2023 (chart)
- Mean Probabilities for Unemployment Rate in 2024 (chart)
- Mean Probabilities for Unemployment Rate in 2025 (chart)
Forecasters See Higher Inflation
The forecasters expect current-quarter headline CPI inflation will average 5.4 percent at an annual rate, up from the prediction of 4.3 percent in the previous survey. Headline PCE inflation over the current quarter will also be higher at an annual rate of 4.6 percent, up from the last estimate of 3.7 percent.
Projections for headline and core CPI and PCE inflation at nearly all other forecast horizons have also been revised upward, compared with those of the previous survey.
Over the next 10 years, 2022 to 2031, the forecasters expect headline CPI inflation will be at an annual-average rate of 2.95 percent, slightly higher than their previous estimate. The corresponding estimate for 10-year annual-average PCE inflation is 2.58 percent, also slightly higher than the estimate of three months ago.
Median Short-Run and Long-Run Projections for Inflation (Annualized Percentage Points)
|Headline CPI||Core CPI||Headline PCE||Core PCE|
|Q4/Q4 Annual Averages|
|Long-Term Annual Averages|
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 upward trend in 10-year inflation expectations in recent surveys.
- 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 2022 and 2023. The forecasters have raised their estimates for the probability that core PCE inflation in 2022 will be 4.0 percent or higher, compared with their prediction in the last survey. They have also raised their estimates for the probability that core PCE inflation in 2023 will be 3.5 percent or higher, compared with their prediction in the survey of three months ago.
- Mean Probabilities for Core PCE Inflation in 2022 (chart)
- Mean Probabilities for Core PCE Inflation in 2023 (chart)
Substantial Risk of a Contraction in Real GDP in 2023
The forecasters see the risk of a downturn this quarter at 36.3 percent, up marginally from the previous survey. However, they have substantially raised their probability estimates of a negative quarter for the following three quarters and predict a near-50 percent chance of a contraction in real GDP in any of the four quarters in 2023.
Risk of a Negative Quarter (%)
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:
Ed Al-Hussainy and Anwiti Bahuguna, Columbia Threadneedle Investments; Scott Anderson, Bank of the West (BNP Paribas Group); Jeff Baldwin, Dan Roberts, and Michael Roberts, Roberts Capital Advisors, LLC; 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; Rajeev Dhawan, Georgia State University; Bill Diviney, ABN AMRO Bank NV; Gabriel Ehrlich, Daniil Manaenkov, and Tereza Ranosova, RSQE, University of Michigan; Michael R. Englund, Action Economics, LLC; Sacha Gelfer, Bentley University; James Glassman, JPMorgan Chase & Co.; Jan Hatzius, Goldman Sachs; Sam Kahan, Kahan Consulting Ltd. (ACT Research LLC); N. Karp, BBVA Research USA; Steve Kihm, Citizens Utility Board of Wisconsin; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Yaniv Konchitchki, University of California, Berkeley; Thomas Lam, Sim Kee Boon Institute, Singapore Management University; 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; Joel Prakken and Chris Varvares, S&P Global Market Intelligence; Jason Prole, Capital Risk Management; Alfredo A. Romero, North Carolina A&T State University; Philip Rothman, East Carolina University; Allen Sinai and Lu Yu, Decision Economics, Inc.; Stephen Stanley, Amherst Pierpont Securities; Charles Steindel, Editor, NABE Business Economics; Susan M. Sterne, Economic Analysis Associates, Inc.; Edward Sullivan, Portland Cement Association; James Sweeney, Credit Suisse; Ryan Sweet, Oxford Economics USA, Inc.; Maira Trimble and Jordan Vickers, 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.
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