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posted on 13 August 2017

Third Quarter 2017 Survey of Professional Forecasters Predict Weaker Outlook for Growth and Lower Unemployment

from the Philadelphia Fed

The outlook for growth in the U.S. economy over the next three years looks slightly weaker overall than that of three months ago, according to 39 forecasters surveyed by the Federal Reserve Bank of Philadelphia.

The panel expects real GDP to grow at an annual rate of 2.6 percent this quarter and 2.3 percent next quarter. On an annual-average over annual-average basis, the forecasters see real GDP growing 2.1 percent in 2017, unchanged from the previous survey. The forecasters predict real GDP will grow 2.4 percent in 2018, 2.2 percent in 2019, and 2.0 percent in 2020.

All of the projections for unemployment were revised slightly downward in comparison with the May 2017 survey. The forecasters predict the unemployment rate will be an annual average of 4.4 percent in 2017, before falling to 4.2 percent in 2018, and then increasing slightly to 4.3 percent for 2019, and remaining steady at 4.3 percent in 2020.

On the employment front, the forecasters have revised downward their estimates for job gains in 2017 but increased their estimates for job gains in 2018. The forecasters' projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 180,400 in 2017, down from the previous estimate of 182,600, and 165,800 in 2018, up from the previous estimate of 162,800. (These annual-average estimates 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)







Quarterly data:
2017:Q3 2.5 2.6 4.4 4.3 170.7 186.4
2017:Q4 2.4 2.3 4.4 4.2 165.2 161.0
2018:Q1 2.4 2.2 4.3 4.2 166.7 155.6
2018:Q2 2.7 2.4 4.3 4.1 159.3 162.5
2018:Q3 N.A. 2.4 N.A. 4.1 N.A. 165.4
Annual data (projections are based on annual-average levels):
2017 2.1 2.1 4.5 4.4 182.6 180.4
2018 2.5 2.4 4.3 4.2 162.8 165.8
2019 2.1 2.2 4.4 4.3 N.A. N.A.
2020 2.3 2.0 4.5 4.3 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 2017, the panelists are more certain now than they were in the previous survey that real GDP growth will fall between 2.0 percent and 2.9 percent. For 2018, 2019, and 2020, the probabilities are also slightly higher now than they were in the survey of three months ago for real GDP growth between 2.0 percent and 2.9 percent.

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 estimates of the probability that unemployment will fall into each of 10 ranges. The charts show the forecasters are more certain now than they were three months ago that unemployment over the next four years will average between 4.0 percent and 4.9 percent.

Short-Term CPI and PCE Inflation Revised Downward Overall

Measured on a fourth-quarter over fourth-quarter basis, the inflation outlook is weaker for headline CPI inflation and headline PCE inflation. Headline CPI inflation is expected to average 1.7 percent in 2017, 2.2 percent in 2018, and 2.3 percent in 2019. The projections for headline PCE inflation are 1.5 percent for the current year, 1.9 percent for 2018, and 2.0 percent for 2019.

Over the next 10 years, 2017 to 2026, the forecasters expect headline CPI inflation to average 2.25 percent at an annual rate, down slightly from their previous estimate of 2.30 percent. The corresponding estimate for 10-year annual-average PCE inflation is 2.00 percent, also slightly down from the previous estimate of 2.09 percent.

Median Short-Run and Long-Run Projections for Inflation (Annualized Percentage Points)

Headline CPI

Core CPI

Headline PCE

Core PCE









2017:Q3 2.2 1.6 2.2 1.8 1.9 1.4 1.9 1.6
2017:Q4 2.3 2.3 2.2 2.1 2.0 2.0 1.9 1.8
2018:Q1 2.4 2.2 2.3 2.2 2.1 1.9 1.9 1.8
2018:Q2 2.2 2.1 2.2 2.1 2.0 1.9 2.0 1.8
2018:Q3 N.A. 2.2 N.A. 2.2 N.A. 1.9 N.A. 1.9
Q4/Q4 Annual Averages
2017 2.3 1.7 2.2 1.7 1.8 1.5 1.9 1.5
2018 2.3 2.2 2.3 2.1 2.0 1.9 2.0 1.8
2019 2.4 2.3 2.4 2.2 2.0 2.0 2.0 2.0
Long-Term Annual Averages
2017-2021 2.35 2.20 N.A. N.A. 2.06 1.94 N.A. N.A.
2017-2026 2.30 2.25 N.A. N.A. 2.09 2.00 N.A. N.A.

The charts below show the median projections (red line) and the associated interquartile ranges (gray areas around the red line) for the projections for 10-year annual-average CPI and PCE inflation. The top and bottom panels highlight marginally lower levels of the long-term projection for CPI inflation and PCE inflation, respectively.

The figures below show the probabilities that the forecasters are assigning to the possibility that fourth-quarter over fourth-quarter core PCE inflation in 2017 and 2018 will fall into each of 10 ranges. For 2017 and 2018, the forecasters assign a higher chance than they previously predicted that core PCE inflation will be between 1.5 percent to 1.9 percent.

Risk of Decline in Real GDP Remains Low for 2017 and 2018

The forecasters see only a small chance of a contraction in real GDP in any of the next five quarters. For the current quarter, they predict a 6.7 percent chance of negative growth, down from 10.9 percent in the survey of three months ago. The forecasters see a lower probability of a negative quarter in 2017 and 2018 than they estimated three months ago.

Risk of a Negative Quarter (%)
Survey Means
Quarterly data: Previous New















Natural Rate of Unemployment Estimated at 4.5 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 peg this rate at 4.50 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 34 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 5.00 percent.

Median Estimates of the Natural Rate of Unemployment
Survey Date Percentage Who Use the Natural Rate Median Estimate (%) Low (%) High (%)
1996:Q3 62 5.65 5.00 6.00
1997:Q3 59 5.25 4.50 5.88
1998:Q3 45 5.30 4.50 5.80
1999:Q3 43 5.00 4.13 5.60
2000:Q3 48 4.50 4.00 5.00
2001:Q3 34 4.88 3.50 5.50
2002:Q3 50 5.10 3.80 5.50
2003:Q3 41 5.00 4.31 5.40
2004:Q3 46 5.00 4.00 5.50
2005:Q3 50 5.00 4.25 5.50
2006:Q3 53 4.95 4.00 5.50
2007:Q3 52 4.65 4.20 5.50
2008:Q3 48 5.00 4.00 5.50
2009:Q3 45 5.00 4.00 6.00
2010:Q3 50 5.78 4.50 6.80
2011:Q3 42 6.00 4.75 7.00
2012:Q3 49 6.00 4.75 7.00
2013:Q3 63 6.00 4.75 7.00
2014:Q3 65 5.50 4.50 6.70
2015:Q3 62 5.00 4.25 5.80
2016:Q3 56 4.80 4.50 5.50
2017:Q3 44 4.50 3.50 5.00

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.

New File Format

On May 12, 2017, the survey's data files on the Bank's website were changed to a .xlsx extension instead of .xls.

The Federal Reserve Bank of Philadelphia thanks the following forecasters for their participation in recent surveys:

Lewis Alexander, Nomura Securities; 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.; Christine Chmura, Ph.D., and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; Nathaniel Curtis, Navigant Consulting; Gregory Daco, Oxford Economics USA, Inc.; Rajeev Dhawan, Georgia State University; Robert Dietz, National Association of Home Builders; Gabriel Ehrlich, Daniil Manaenkov, Ben Meiselman, Owen Nie, and Aditi Thapar, RSQE, University of Michigan; Michael R. Englund, Action Economics, LLC; J.D. Foster, U.S. Chamber of Commerce; Michael Gapen, Barclays Capital; Sacha Gelfer, Bentley University; James Glassman, JPMorgan Chase & Co.; Jan Hatzius, Goldman Sachs; Keith Hembre, Nuveen Asset Management; Peter Hooper, Deutsche Bank Securities, Inc.; IHS Markit; Sam Kahan, Kahan Consulting Ltd. (ACT Research LLC); N. Karp, BBVA Research USA; Walter Kemmsies, Jones Lang LaSalle; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, Independent Economist; L. Douglas Lee, Economics from Washington; John Lonski, Moody's Capital Markets Group; Macroeconomic Advisers, LLC; R. Anthony Metz, Pareto Optimal Economics; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Mark Nielson, Ph.D., MacroEcon Global Advisors; Luca Noto, Anima Sgr; Brendon Ogmundson, BC Real Estate Association; Arun Raha and Maira Trimble, Eaton Corporation; Philip Rothman, East Carolina University; Chris Rupkey, MUFG Union Bank; John Silvia, Wells Fargo; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting; Stephen Stanley, Amherst Pierpont Securities; Charles Steindel, Ramapo College of New Jersey; Susan M. Sterne, Economic Analysis Associates, Inc.; James Sweeney, Credit Suisse; Thomas Kevin Swift, American Chemistry Council; Richard Yamarone, Bloomberg, LP; Ellen Zentner, Morgan Stanley.

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


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