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Fourth Quarter 2011 Survey of Professional Forecasters

Listen to an interview with a research analyst about this quarter's survey. Audio Interview

Forecasters Predict Lower Growth and Higher Unemployment in 2012 and 2013

The outlook for growth and unemployment in the U.S. economy looks a little weaker now than it did three months ago, according to 45 forecasters surveyed by the Federal Reserve Bank of Philadelphia. The forecasters predict lower real GDP growth and higher unemployment rates in 2012 and 2013 than they did in August. Our panelists expect real GDP to grow at an annual rate of 2.6 percent this quarter, unchanged from the previous estimate. On an annual-average over annual-average basis, the forecasters see real GDP growing 1.8 percent in 2011 (1.7 percent previously). The forecasters predict real GDP will grow 2.4 percent in 2012 (2.6 percent previously) and 2.7 percent in 2013 (2.9 percent previously). The downward revision in 2012 and 2013 is accompanied by an upward revision for growth in 2014.

Upward revisions to unemployment and downward revisions to job growth accompany the current outlook for growth. Unemployment is projected to be an annual average of 9.0 percent in 2011, before falling to 8.8 percent in 2012, 8.4 percent in 2013, and 7.8 percent in 2014. The estimates for 2012, 2013, and 2014 are higher than the projections in the last survey. On the employment front, the forecasters have revised downward the growth in jobs over the next two years. The forecasters see nonfarm payroll employment growing at a rate of 115,300 jobs per month this quarter and 121,000 jobs per month next quarter. The forecasters’ projections for the annual average level of nonfarm payroll employment suggest job gains at a monthly rate of 106,500 in 2011, and 123,200 in 2012, 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.)

 
Real GDP (%)
Unemployment
Rate (%)
Payrolls
(000s/month)
 
Previous
New
Previous
New
Previous
New
Quarterly data:
2011:Q4
2.6
2.6
9.0
9.0
148.7
115.3
2012:Q1
2.2
2.4
8.8
8.9
180.3
121.0
2012:Q2
2.9
2.4
8.7
8.9
138.0
126.3
2012:Q3
3.2
2.8
8.6
8.8
187.0
152.4
2012:Q4
N.A.
2.7
N.A.
8.7
N.A.
126.3
Annual data (projections are based on annual-average levels):
2011
1.7
1.8
9.0
9.0
111.5
106.5
2012
2.6
2.4
8.6
8.8
150.1
123.2
2013
2.9
2.7
8.1
8.4
N.A.
N.A.
2014
3.1
3.5
7.6
7.8
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. The charts show that the estimates of uncertainty about growth in 2012, 2013, and 2014 are nearly the same as those of the previous survey.

The forecasters’ density projections, as shown in the charts below, shed light on the odds of a recovery in the labor market over the next four years. Each chart presents the forecasters’ previous and current estimates of the probability that unemployment will fall into each of 10 ranges. The forecasters have revised upward their estimate of the probability that the annual-average unemployment rate will fall into the range of 8.5 to 8.9 percent in 2012, 2013, and 2014.

Little Change in the Outlook for Inflation

The forecasters have left their short-term projections for inflation in 2012 and 2013 nearly unchanged from their previous projections. Headline CPI inflation in 2012 will average 1.9 percent, down from 2.0 percent previously. Headline CPI inflation will rise to 2.2 percent in 2013, up 0.1 percentage point from the previous estimate. Core CPI inflation in 2012 will average 1.8 percent, unchanged from the previous survey, and rise to 2.0 percent in 2013. The projections for headline and core PCE inflation follow a similar pattern.

Over the next 10 years, 2011 to 2020, the forecasters expect headline CPI inflation to average 2.5 percent at an annual rate. This estimate is up slightly from 2.4 percent in the last survey. Over the same period, headline PCE inflation will average 2.16 percent at an annual rate, down slightly from last survey’s estimate of 2.25 percent.

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
Quarterly
2011:Q4
2.0
2.0
1.7
1.7
1.7
1.8
1.5
1.4
2012:Q1
2.0
2.0
1.6
1.8
1.8
1.7
1.5
1.6
2012:Q2
2.1
1.9
1.9
1.8
1.6
1.6
1.7
1.6
2012:Q3
2.0
2.0
2.0
1.8
1.8
1.8
1.7
1.7
2012:Q4
N.A.
2.0
N.A.
1.8
N.A.
1.7
N.A.
1.6
Q4/Q4 Annual Averages
2011
3.2
3.6
2.0
2.2
2.5
2.8
1.7
1.8
2012
2.0
1.9
1.8
1.8
1.8
1.7
1.6
1.6
2013
2.1
2.2
1.8
2.0
2.0
2.0
1.7
1.8
Long-Term Annual Averages
2011-2015
2.30
2.40
N.A.
N.A.
2.10
2.10
N.A.
N.A.
2011-2020
2.40
2.50
N.A.
N.A.
2.25
2.16
N.A.
N.A.

The charts below show the median projections (the red line) and the associated interquartile ranges (the gray area around the red line) for 10-year annual-average CPI and PCE inflation. The median projection for 10-year annual-average CPI inflation has risen in the current survey. However, the projection for 10-year annual-average PCE inflation is slightly lower.

The figures below show the probabilities that the forecasters are assigning to the possibility that fourth-quarter over fourth-quarter core PCE inflation in 2011 and 2012 will fall into each of 10 ranges. The estimates for 2012 are nearly the same as those of the previous survey, suggesting that the forecasters’ assessment of the uncertainty about future inflation is holding steady.

Lower Risk of a Negative Quarter

The forecasters have revised downward the chance of a contraction in real GDP in any of the next four quarters. For the current quarter, they predict an 11.8 percent chance of negative growth, down from 20.9 percent in the survey of three months ago. As the table below shows, the forecasters have also made downward revisions to their forecasts for the following three quarters. Over each of the quarters of 2012, the forecasters peg the chance of a downturn at slightly less than one out of five.

Risk of a Negative Quarter (%)
 
Previous
New
Quarterly data:
2011: Q4
20.9
11.8
2012: Q1
20.8
16.6
2012: Q2
19.4
17.3
2012: Q3
19.0
17.1
2012: Q4
N.A.
17.0

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

Robert J. Barbera, Mount Lucas Management; Christine Chmura, Ph.D. and Xiaobing Shuai, Ph.D., Chmura Economics & Analytics; Gary Ciminero, CFA, GLC Financial Economics; David Crowe, National Association of Home Builders; Rajeev Dhawan, Georgia State University; Shawn Dubravac, Consumer Electronics Association; Michael R. Englund, Action Economics, LLC; Stephen Gallagher, Societe Generale; Timothy Gill, NEMA; James Glassman, JPMorgan Chase & Co.; Ethan Harris, Bank of America-Merrill Lynch; Keith Hembre, Nuveen Asset Management; Peter Hooper, Deutsche Bank Securities, Inc.; IHS Global Insight; Peter Jaquette, PIRA Energy Group; Fred Joutz, Benchmark Forecasts and Research Program on Forecasting, George Washington University; Kurt Karl, Swiss Re; N. Karp, BBVA Compass; Walter Kemmsies, Moffatt & Nichol; Jack Kleinhenz, Kleinhenz & Associates, Inc.; Thomas Lam, OSK Group/DMG & Partners; L. Douglas Lee, Economics from Washington; Allan R. Leslie, Economic Consultant; John Lonski, Moody’s Capital Markets Group; Macroeconomic Advisers, LLC; Dean Maki, Barclays Capital; Jim Meil, Eaton Corporation; Anthony Metz, Pareto Optimal Economics; Ardavan Mobasheri, AIG Global Economic Research; Michael Moran, Daiwa Capital Markets America; Joel L. Naroff, Naroff Economic Advisors; Mark Nielson, Ph.D., MacroEcon Global Advisors; Michael P. Niemira, International Council of Shopping Centers; Luca Noto, Prima Sgr; Martin A. Regalia, U.S. Chamber of Commerce; David Resler, Nomura Securities International, Inc.; Philip Rothman, East Carolina University; John Silvia, Wells Fargo; Allen Sinai, Decision Economics, Inc; Tara M. Sinclair, Research Program on Forecasting, George Washington University; David Sloan, Thomson Reuters; Sean M. Snaith, Ph.D., University of Central Florida; Constantine G. Soras, Ph.D., CGS Economic Consulting; Neal Soss, Credit Suisse; Stephen Stanley, Pierpont Securities; Charles Steindel, New Jersey Department of the Treasury; Susan M. Sterne, Economic Analysis Associates, Inc.; Thomas Kevin Swift, American Chemistry Council; Andrew Tilton and Edward F. McKelvey, Goldman Sachs; Lea Tyler, Oxford Economics USA, Inc.; Jay N. Woodworth, Woodworth Holdings, Ltd.; 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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View Complete WRiteup

A complete writeup of this survey, including all tables, is available in PDF format.

Fourth Quarter 2011 PDF

Next Survey Release

The survey for 2012 Q1 will be released on February 10, 2012, at 10:00 a.m. ET.

For more up-to-date information, please view the SPF release schedule.

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Contact Us

For further information about the Survey of Professional Forecasters, contact:

Tom Stark
Federal Reserve Bank of Philadelphia
Ten Independence Mall
Philadelphia, PA 19106
PHIL.SPF@phil.frb.org E-mail