Philly Fed Survey Sees Sharp Drop in Unemployment

The Federal Reserve Bank of Philadelphia’s latest survey of professional forecasters indicates that the US unemployment rate will drop to 8.1% by the fourth quarter of this year. That’s down sharply from the survey’s previous forecast of an 8.7% unemployment rate in the fourth quarter of 2012. The drop is expected to buoy President Obama’s re-election hopes.

The forecasters also see a drop in first quarter and full year GDP growth, from 2.4% to 2.2% in the first quarter and from 2.4% to 2.3% for the full year. The survey foresees non-farm payroll growth of 160,100 jobs/month in the first quarter, leveling off at 141,900 jobs/month for the full year. The previous headline inflation forecast is unchanged at 2% for the year, with personal consumption spending inflation rising just 1.7%, also unchanged.

From the report:

The forecasters are more optimistic about conditions in the labor market over the next four years than they were three months ago. Yet, their expectations for real GDP growth over the next two years are nearly unchanged. The forecasters also see lower risks of a downturn over the next four quarters. For the current quarter, the forecasters peg the odds of a downturn at 9.5 percent, down from 16.6 percent previously.

The full report is here.