Economists see stronger US growth but warn of persistent inflation and slower job gains
United States economic growth prospects improved, but the outlook for jobs and inflation remained clouded, according to the latest National Association for Business Economics (NABE) survey released Monday. Panelists projected the Federal Reserve would cut rates once more this year, with further easing expected in 2026.
The NABE’s panel of 40 professional forecasters marked up their estimates for US gross domestic product (GDP), now expecting inflation-adjusted GDP to rise 1.8% in 2025, up from 1.3% in June.
“The median forecasts for economic growth for 2025 and 2026 have been revised upward from those in the June NABE Outlook Survey, although nearly all panelists still expected tariffs to be a drag on activity,” Emily Kolinski Morris, NABE president and global chief economist at Ford Motor Company, said.
“Real GDP is now expected to rise 1.8% in 2025, up from 1.3% in the June survey, while the economy is expected to grow at a similar 1.7% in 2026.
"Panelists look for the Federal Reserve to lower its interest rate target by another quarter of a percentage point by year-end, followed by three-quarters of a percentage-point reduction in 2026.”
Job market softens as long-term unemployment rises
Despite the brighter growth outlook, the job market is expected to remain fragile. NABE panelists forecast average monthly payroll gains of just 60,000 for the rest of 2025, down from the 87,000 predicted in June.
The percentage of long-term job seekers—those unemployed for 27 weeks or more—has climbed to 26%, the highest in over three years, according to the Federal Reserve Bank of St. Louis.
Layoffs have also accelerated, with 946,426 jobs cut through September, the largest tally since 2020, Challenger, Gray & Christmas data showed.
Inflation remains stubborn as Fed weighs next move
Inflation continues to run above the Fed’s 2% target. NABE expects the personal consumption expenditures (PCE) price index to rise at a 3% annualized rate through 2025, cooling to 2.5% by the end of 2026.
“The inflation forecast for this year remains elevated, with the change in the personal consumption expenditure price index—the Federal Reserve’s preferred inflation measure—forecasted to be 3.0% from the fourth quarter of 2024 to the fourth quarter of 2025,” said Kathy Bostjancic, NABE Outlook Survey chair and chief economist at Nationwide.
“While inflation is projected to cool to 2.5% by the end of 2026, this still exceeds the Fed’s 2% target.”
Fed signals patience as mortgage sector watches closely
Federal Reserve Chair Jerome Powell is set to address the NABE annual meeting tomorrow, with markets watching for any signals on the timing and pace of future rate cuts.
Federal Reserve governor Christopher Waller expressed support for further interest rate cuts. Waller’s stance aligns with the Federal Open Market Committee’s recent decision to cut rates by a quarter percentage point, with signals of two more reductions likely before year-end. New York Federal Reserve president John Williams also indicated support for additional interest rate cuts this year.
While economists see brighter growth ahead and anticipate another Fed rate cut this year, the mortgage industry faces a complex landscape of persistent inflation and a softening labor market, factors that will shape lending and housing activity into 2026.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
