Forecasters Upgrade Growth and Job Gains in 2023 and 2024

The outlook for the U.S. economy looks somewhat better now than it did three months ago, according to 34 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict the economy will expand at an annual rate of 1.3 percent this quarter, up slightly from the prediction of 1.2 percent in the last survey. On an annual-average over annual-average basis, the forecasters expect real GDP to increase 2.4 percent in 2023 and 1.7 percent in 2024. These annual projections are 0.3 and 0.4 percentage point higher than the estimates in the previous survey.

The forecasters see little change in the outlook for the unemployment rate from the survey of three months ago. On an annual-average basis, the forecasters expect the unemployment rate will increase from 3.7 percent in 2023 to 4.0 percent in 2026. These projections are within 0.1 percentage point of the projections from the last survey.

On the employment front, the forecasters predict higher job gains for 2023 and 2024. The projections for the annual-average level of nonfarm payroll employment imply job gains at a monthly rate of 296,500 in 2023 and 120,000 in 2024, up from the previous estimate of 288,600 and 94,800, respectively. (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:
2023:Q4 1.2 1.3 3.7 3.9 103.7 148.8
2024:Q1 1.1 0.8 3.9 4.0 56.5 65.7
2024:Q2 1.0 1.3 4.0 4.0 78.0 97.9
2024:Q3 1.3 1.5 4.1 4.2 77.9 81.5
2024:Q4 N.A. 1.7 N.A. 4.2 N.A. 118.8
Annual data (projections are based on annual-average levels):
2023 2.1 2.4 3.6 3.7 288.6 296.5
2024 1.3 1.7 4.0 4.1 94.8 120.0
2025 2.1 1.8 4.2 4.2 N.A. N.A.
2026 1.7 2.1 4.1 4.0 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 2023, the forecasters are increasing their probability estimates from the previous survey for real GDP growth in the range of 2.5 percent to 3.9 percent. Over each of the following three years, from 2024 to 2026, the probabilities are little changed compared with the survey of three months ago.

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 2023, the forecasters are raising their probability estimates from the previous survey for an unemployment rate in the range of 3.0 percent to 3.9 percent. Over each of the following three years, the probabilities for the unemployment rate are little changed compared with the previous survey.

Forecasters Raise Their Near-Term Projections for Headline Inflation

The forecasters expect current-quarter headline CPI inflation will average 3.3 percent at an annual rate, up from their prediction of 2.9 percent in the previous survey. Headline PCE inflation over the current quarter will also be slightly higher at an annual rate of 2.9 percent, marking an upward revision from the previous estimate. The predictions for current-quarter core CPI and core PCE inflation, on the other hand, are lower than those of the previous estimates.

Projections for headline and core CPI and PCE inflation in 2024 and 2025 are little changed compared with those of the previous survey.

Over the next 10 years, 2023 to 2032, the forecasters expect headline CPI inflation to average 2.40 percent at an annual rate, unchanged from the previous estimate. The corresponding estimate for 10-year annual-average PCE inflation is 2.22 percent, slightly higher than the estimate 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
2023:Q4 2.9 3.3 3.2 3.0 2.8 2.9 2.8 2.7
2024:Q1 2.6 2.8 2.9 2.8 2.5 2.5 2.6 2.7
2024:Q2 2.5 2.6 2.7 2.6 2.5 2.5 2.5 2.4
2024:Q3 2.6 2.5 2.6 2.5 2.4 2.3 2.3 2.3
2024:Q4 N.A. 2.4 N.A. 2.4 N.A. 2.3 N.A. 2.2
Q4/Q4 Annual Averages
2023 3.1 3.3 4.1 3.9 3.0 3.1 3.7 3.5
2024 2.5 2.5 2.7 2.6 2.4 2.4 2.4 2.4
2025 2.4 2.3 2.3 2.3 2.2 2.1 2.1 2.1
Long-Term Annual Averages
2023-2027 2.68 2.60 N.A. N.A. 2.50 2.46 N.A. N.A.
2023-2032 2.40 2.40 N.A. N.A. 2.20 2.22 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 provide perspective on the current survey’s unchanged projection for long-term CPI inflation and the nearly unchanged projection for long-term PCE inflation.

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 2023 and 2024. Notably, the forecasters have significantly raised their estimates for the probability that core PCE inflation in 2023 will be in the range of 3.0 percent to 3.4 percent, compared with their predictions in the last survey.

Higher Risk of a Contraction in Real GDP in 2024

The forecasters see the risk of a downturn in real GDP this quarter at 31.8 percent, down from the previous estimate of 34.4 percent. However, they have raised their probability estimates for negative growth for the following three quarters, compared with their previous estimates. The forecasters now predict a mid-30 percent to a near-40 percent chance of a contraction in real GDP in any of the four quarters in 2024.

Risk of a Negative Quarter (%)
Survey Means

Quarterly data: Previous New
2023:Q4 34.4 31.8
2024:Q1 37.6 40.9
2024:Q2 35.4 40.2
2024:Q3 34.4 36.8
2024:Q4 N.A. 34.7

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, Bank of Montreal-BMO; 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; 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; Oren Klachkin and Ryan Sweet, Oxford Economics USA, Inc.; 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; R. M. Monaco, TitanRM; 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; Michael Roberts, Dan Roberts, and Jeffrey Baldwin, Roberts Capital Advisors, LLC; 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; Jordan Vickers and Marie Dempsey, Eaton Corporation; Gary Wagner, University of Louisiana at Lafayette; Lawrence Werther, Daiwa Capital Markets America; 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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