Downward Revisions Characterize the Short-run Outlook for Growth

The forecasters have cut their estimates for growth, but their revision is minor and largely confined to this year’s fourth quarter and next year’s first quarter. Growth this quarter will average 2.5 percent (annual rate), down just 0.1 percentage point from the previous estimate of 2.6 percent. Larger revisions (-0.2 percentage point) characterize the following two quarters, when growth is now expected to average 2.7 percent. Year over year, growth will average 1.9 percent this year, down from 2.1 percent in the last survey. The forecasters see growth rebounding, to 2.8 percent, in 2008.


Downward revisions to output growth are not translating into deteriorating conditions in the labor market. The unemployment rate is seen averaging 4.6 percent this year, unchanged from the estimate in the last survey, and 4.7 percent next year, down from 4.8 percent previously. Moreover, the forecasters are raising their estimate for monthly job gains this year, to 156,000 from 151,000 previously. Next year, payrolls will increase at a rate of 118,000 per month, down just a bit from the estimate of three months ago.


The accompanying charts provide some information on the degree of uncertainty the forecasters have about their views on year-over-year growth in real GDP in 2007 (see Chart) and 2008 (see Chart). Each chart presents, for the current and previous survey, the forecasters’ are raising their estimates of the probability that growth will fall into each of six ranges. The forecasters are raising their estimates of the probability that growth in 2007 will average either 1.0 to 1.9 percent or 2.0 to 2.9 percent, but they are cutting their estimates of the probability that growth will average even more. Their probability estimates for growth in 2008 are little changed from the estimates in the last survey.

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The article gives and explains the numbers and percentages, involving growth, unemployment, and real GDP growth, that economic forecasters have predicted for 2008. In 2007, overall growth was predicted to decline from 2.1% to about 1.9%, but growth is expected to rise to around 2.8% in 2008. In 2008, unemployment rate is expected to bel lowered and mor monthly jobs will be made available. The growth of real GDP is not expected to change much as seen in the charts.

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