WASHINGTON (MNI) – The following is the text of a Philadelphia
Federal Reserve survey of professional forecasters. The forecasters have
revised downwards their outlook for the U.S. economy since three months
ago:
Forecasters See Slower Pace of Economic Recovery
The outlook for growth in the U.S. economy looks weaker now than it
did just three months ago, according to 36 forecasters surveyed by the
Federal Reserve Bank of Philadelphia. The forecasters see real GDP
growing at an annual rate of 2.3 percent this quarter, down from the
previous estimate of 3.3 percent.
On an annual-average over annual-average basis, the forecasters
expect slower real GDP growth in 2010, 2011, and 2013.The forecasters
see real GDP growing 2.9 percent in 2010, down from their prediction of
3.3 percent in the last survey. The forecasters predict real GDP will
grow 2.7 percent in 2011, 3.6 percent in 2012, and 2.6 percent in 2013.
The downward revision to growth is accompanied by weaker conditions
in the labor market. Unemployment is now projected to be an annual
average of 9.6 percent in 2010, before falling to 9.2 percent in 2011,
8.2 percent in 2012, and 7.3 percent in 2013. These estimates are higher
than the projections in the last survey. On the jobs front, the
forecasters have revised downward the growth in jobs over the next four
quarters. The forecasters see nonfarm payroll employment growing at a
rate of 8,000 jobs per month this quarter and 114,100 jobs per month
next quarter.
The forecasters’ projections for the annual average level of
nonfarm payroll employment suggest job losses at a monthly rate of
45,200 in 2010. Job gains in 2011 are seen averaging 143,800 per month,
as the table below shows. (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.)
Forecasters Reduce Projections for Inflation, but See Little Risk
of Deflation
The current outlook for the headline and core measures of CPI and
PCE inflation during the next two years is lower than it was in the last
survey. Over the next 10 years, 2010 to 2019, the forecasters expect
headline CPI inflation to average 2.3 percent at an annual rate, down
from 2.4 percent in the last survey. The 10-year outlook for PCE
inflation of 2.11 percent is slightly lower than that of the last
survey.
Increased Chance of a Negative Quarter
A slightly higher chance of a downturn accompanies the forecast.
The forecasters have revised upward the chance of a contraction in real
GDP in any of the next four quarters. For the current quarter, they
predict a 14 percent chance of negative growth, up from 9.8 percent in
the survey of three months ago.
Equilibrium Unemployment Pegged at 5.78 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 5.78 percent, the highest rate over the last 15 years. 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. Sixty-four percent of the 25 forecasters who answered the
question report that they use the natural rate in their forecasts. The
lowest estimate is 4.50 percent and the highest estimate is 6.80
percent.
** Market News International Washington Bureau: 202-371-2121 **
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