The outlook for the annual growth rate of the U.S. gross domestic product (GDP) for the next two years looks somewhat softer compared to what it was three months ago, according to a survey of 45 forecasters conducted by the Philadelphia Fed.
The forecasters' current estimates for average annual GDP growth are 2.6 percent for 2016 and 2.5 percent for 2017. Both of these figures represent downward revisions from their forecasts in August, when they predicted an annual growth rate of 2.8 percent for 2016 and 2.6 percent for 2017.
The prediction has been upwardly revised for 2018, however. Whereas the forecasters originally thought GDP growth for 2018 would be only 2.4 percent, they now believe it will be 2.8 percent. GDP growth has not averaged above 2.8 percent for an entire year since before the recession—in 2006, when it was 3.3 percent. In 2014, the GDP grew at an average annual rate of 2.4 percent.
The numbers for job gains during the first three quarters of 2016 have also been upwardly revised, according to the Philadelphia Fed. The forecasters are predicting nonfarm payroll employment to increase at an average monthly rate of 201,500 for Q3 and 188,200 jobs for Q4. Overall for 2015, the forecasters are predicting monthly job gains to average 241,800 for 2015 and 197,000 for 2016; following weak employment reports for August and September this year, there were 270,000 jobs added in October, beating expectations by about 50 percent.
The outlook for the unemployment rate is slightly improved, according to the survey. For the full year of 2015, forecasters are predicting an average rate of 5.3 percent, but they believe that number will fall to 4.8 percent in 2016, and down to 4.7 percent for both 2017 and 2018, both downward revisions from the last survey conducted in August. The more comprehensive U6 unemployment rate, which includes those marginally attached to the workforce, discouraged workers, and people employed part-time for economic reasons, was 9.8 percent in October 2015, the first time that number has been below 10 percent since before the recession. The labor participation rate remained at its lowest level since the late 1970s, however.
The survey of forecasters conducted by the Philadelphia Fed, released Friday, came one day after the Bureau of Labor Statistics (BLS) released its Job Openings and Labor Turnover Summary (JOLTS) for September 2015. The BLS reported approximately 5.5 million job openings (a rate of 3.7 percent) as of the end of September 2015, little changed from August; there were 5.0 million hires and 4.8 million separations during September, both numbers little changed from August.
While the all-important monthly employment summary has been highly touted as the primary source to which to look in order to determine if economic growth is sufficient for the Fed to raise rates in December, the JOLTS should not be discounted, and has in fact been cited by Fed Chairman Janet Yellen as a source for better understanding the labor market beyond traditional metrics.
“While it would seem good that the number of openings is increasing, demand for labor is rising, the fact that hiring and voluntary job separation remains low is an indication that there is a growing mismatch between the skills employers want and the skills employees have,” said Mark Fleming, Chief Economist at First American. “In other words, the labor supply isn’t aligning with labor demand. Anecdotal comments by employers that they can’t 'find' the right people for their jobs supports this. Interestingly this may be an indication of a tight labor market but not for the reasons we originally expected.”