The U.S. economy will likely see stronger growth and add more jobs next year than previously expected, according to a quarterly survey of economists conducted by the Federal Reserve Bank of Philadelphia.
The economists see a brighter future for real GDP growth than they did when the Philadelphia Fed conducted the last Survey of Professional Forecasters three months ago.
The economy is forecast to grow 1.9% this quarter, a jump from the previous estimate of 0.6%. Growth will likely be over 1% in the fourth quarter of this year and throughout the first three quarters of 2024 — an improvement over the prior expectation of zero growth for the fourth quarter.
Respondents also predict greater job growth than they did before.
Unemployment will continue to grow, but not by as much as some economists once thought, likely increasing from 3.6% to 4% between now and the second quarter of 2024, they predict. Three months ago, economists expected unemployment to rise to 4.2% over the same period.
They project the U.S. will add an average of 288,600 jobs per month in 2023, an increase from the 257,500 projection of three months ago. And although job growth is expected to drop substantially next year, the predicted average of 94,800 jobs added each month is still 38,700 more than the the earlier forecast.
The respondents seem to feel better about some economic conditions than they did in the past, but their hopes for inflation are not getting brighter.
They now predict the inflation rate might not plummet quite as much as the Fed hopes, a slightly more pessimistic view than they once had.
Fed officials are trying to lower the inflation rate to 2% without driving the economy into a recession. Three months ago, economists predicted that the core personal consumption expenditures index would reach 2% at the end of 2025. Now, the 2025 PCE expectation is 2.1%, a slight uptick from before.
Still, inflation will fall over the next year, the economists predict — a forecast largely in line with their previous projection.
The PCE, the Fed’s preferred measure of inflation, is projected to fall to 2.8% in the fourth quarter of this year. Core PCE, which excludes the volatile food and energy categories, will drop to 2.3% in the third quarter of 2024, they expect.
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