First Quarter 2025 Survey of Professional Forecasters

Forecasters See Brighter Outlook for Growth and Employment in 2025

The near-term outlook for the U.S. economy looks better now than it did three months ago, according to 40 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict the economy will expand at an annual rate of 2.5 percent this quarter, up from the prediction of 1.9 percent in the last survey. On an annual-average over annual-average basis, the forecasters expect real GDP to increase 2.4 percent in 2025, up 0.2 percentage point from the estimate in the previous survey.

A small downward revision to the path for the unemployment rate accompanies the outlook for growth. The forecasters predict the unemployment rate will increase from 4.1 percent this quarter to 4.3 percent in the fourth quarter of 2025. In the previous survey, the unemployment rate was forecast to rise from 4.2 percent to 4.3 percent over the same period. On an annual-average basis, the forecasters expect the unemployment rate to average 4.2 percent in 2025, marking a slight downward revision from the previous estimate of 4.3 percent.

On the employment front, the forecasters predict job gains in the current quarter at a rate of 152,100 per month. The employment projections for both the current quarter and the following quarter show upward revisions from those of the previous survey. The projections for the annual-average level of nonfarm payroll employment suggest job gains at a monthly rate of 145,000 in 2025, up from the previous estimate of 134,100. (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.) 

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. The current real GDP growth probability projections for the next three years are little changed compared with the previous estimates.

• Mean Probabilities for Real GDP Growth in 2025 (chart)
• Mean Probabilities for Real GDP Growth in 2026 (chart)
• Mean Probabilities for Real GDP Growth in 2027 (chart)
• Mean Probabilities for Real GDP Growth in 2028 (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 2025 and 2026, the forecasters are raising their probability estimates from the previous survey for an unemployment rate in the range of 3.7 percent to 4.2 percent.

• Mean Probabilities for Unemployment Rate in 2025 (chart)
• Mean Probabilities for Unemployment Rate in 2026 (chart)
• Mean Probabilities for Unemployment Rate in 2027 (chart)
• Mean Probabilities for Unemployment Rate in 2028 (chart)

Forecasters Predict Higher Inflation

The forecasters expect current-quarter headline CPI inflation will average 3.0 percent at an annual rate, up from their prediction of 2.3 percent in the previous survey. Headline PCE inflation over the current quarter will also be higher at an annual rate of 2.5 percent, up from the previous estimate of 2.2 percent. The predictions for current-quarter core CPI and core PCE inflation are also higher compared with their predictions in the last survey.

Projections for headline and core CPI and PCE inflation at other forecast horizons have also been revised upward compared with those in the survey of three months ago.

Over the next 10 years, 2025 to 2034, the forecasters predict headline CPI inflation will be an annual-average rate of 2.30 percent. The corresponding estimate for 10-year annual-average PCE inflation is 2.11 percent. These 10-year projections are 0.07 percentage point and 0.01 percentage point higher than those of the previous survey, which covered the 10-year horizon from 2024 to 2033.

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 historical perspective on the current survey’s slightly higher projections for 10-year CPI inflation and 10-year PCE inflation.

• 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 2025 and 2026. Notably, for 2025, the forecasters have raised their estimates for the probability that core PCE inflation will be 2.5 percent or higher compared with their predictions in the last survey.

• Mean Probabilities for Core PCE Inflation in 2025 (chart)
• Mean Probabilities for Core PCE Inflation in 2026 (chart)

Lower Risk of a Contraction in Real GDP in 2025

The forecasters see the risk of a downturn in real GDP this quarter at 9.7 percent, down from the previous estimate of 15.0 percent. Moreover, they have also lowered their probability estimates for negative growth for the following two quarters compared with their previous estimates.

Forecasters State Their Views on House Price Growth over the Next Two Years

In a special question in this survey, panelists were asked to provide their forecasts for fourth-quarter over fourth-quarter growth in house prices, as measured by several alternative indices. The panelists were allowed to choose their measure from a list of indices or to write in their own index. For each index of their choosing, the panelists provided forecasts for growth in 2025 and 2026.

Seventeen panelists answered the special question. Some panelists provided projections for more than one index. The table below provides a summary of the forecasters’ responses. The number of responses (N) is low for each index. The median estimates for the six house price indices listed in the table below range from 3.5 percent to 4.3 percent in 2025 and from 2.2 percent to 4.1 percent in 2026.

Improved Long-Term Output and Productivity Growth and Higher Returns on Fixed-Income Securities

In our first-quarter surveys, the forecasters provide their 10-year annual-average projections for an expanded set of variables, including growth in output and productivity, as well as returns on financial assets.

As the table below shows, the forecasters expect real GDP to grow at an annual-average rate of 2.10 percent over the next 10 years, slightly higher than their projection in the first-quarter survey of 2024. Ten-year annual-average productivity growth is now expected to be 1.60 percent, up from 1.50 percent previously.

The forecasters predict the S&P 500 returning an annual-average 7.00 percent over the next 10 years, unchanged from the previous estimate in the first-quarter survey of 2024. The forecasters see the rate on 10-year Treasuries averaging 4.00 percent over the next 10 years, up from 3.60 percent in last year’s first-quarter survey. Three-month Treasury bills will return an annual-average 3.17 percent over the next 10 years, up from 2.78 percent previously.

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, BMO Capital Markets; 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; Seth Carpenter, Morgan Stanley; 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; Ben Herzon and Patrick Newport, S&P Global Market Intelligence; Steve Kihm, Citizens Utility Board of Wisconsin; Yaniv Konchitchki, University of California, Berkeley; Thomas Lam, Independent Economist (Singapore); Matthew Luzzetti, Deutsche Bank; Brian Martin, Australia New Zealand Bank (ANZ); Robert McNab, Old Dominion University; R. Anthony Metz, Pareto Optimal Economics, LLC; R. M. Monaco, TitanRM; Joel L. Naroff, Naroff Economics, LLC; Nomura Securities International; Brendon Ogmundson, BC Real Estate Association; Panos N. Patatoukas, U.C. Berkeley, Haas School of Business; Perc Pineda, Ph.D., Plastics Industry Association; Jason Prole, Capital Risk Management; Michael Roberts, Dan Roberts, and Jeffrey Baldwin, Roberts Capital Advisors, LLC; Parker Ross, Arch Capital Group; Philip Rothman, East Carolina University; Allen Sinai and Anqi Liu, 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; Patrick P. Sullivan, Sullivan Economic Consulting, LLC; Ryan Sweet, Oxford Economics USA, Inc.; Jordan Vickers and Maira Trimble, Eaton Corporation; Lawrence Werther, Daiwa Capital Markets America; Mark Zandi, Moody’s Analytics.

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

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