Bankrate’s Q3 Economic Indicator Survey: Recession odds stay low, but unemployment is expected to reach 4.5%
In the months since a key summer economic report revealed that even the formidable U.S. job market may now be losing steam, investors and some economists began sounding the alarm that a recession was starting to look inescapable.
Then came a surprisingly bold interest rate cut from the Federal Reserve.
The U.S. central bank’s half-point interest rate cut last month appears to have eased some of those recession concerns. Despite an unexpected increase in the nation’s unemployment rate in July, economists say the odds of a U.S. recession in the year ahead continue to hold near 1-in-3 (33 percent), according to the average forecast among participants in Bankrate’s Third-Quarter Economic Indicator Poll. In the previous two quarters, recession odds were 32 percent and 33 percent, respectively. Those odds are still down considerably from 46 percent in polling from the third quarter of 2023 and a 65 percent chance from the third-quarter of 2022 survey.
Experts in Bankrate’s survey also acknowledged still-robust consumer spending as reasons why they remain hopeful that the economy is cooling from a red-hot inflationary state – not falling off a cliff. Data for September showing that employers created the most jobs since March and the unemployment rate edged back down to 4.1 percent could further calm their recession fears.
Employers are projected to keep adding jobs over the next 12 months, though at a slower pace, Bankrate’s estimates also show. The unemployment rate is expected to edge higher, while inflation is projected to hit the Fed’s 2 percent target by the end of 2025.
The U.S. economy has weathered potential and actual threats, including wars and high tensions abroad, averted federal government shutdowns and elevated interest rates in response to historically high inflation. The resilience of the U.S. economy has been nothing short of remarkable.— Mark Hamrick, Bankrate Senior Economic Analyst
Bankrate has been polling the nation’s top economists on their expectations for the job market, inflation, the Federal Reserve, economic growth and more on a quarterly basis for a decade. Read on for the latest findings.
Key insights on the economy from Bankrate’s Q3 2024 Economic Indicator poll
Employers are projected to create almost half as many jobs over the next 12 months
Since October 2023, employers have created 203,000 jobs a month on average, data from the Labor Department shows. That’s after stretching into the 500,000 to 600,000 range during the Great Resignation era of 2022.
If economists’ projections come to fruition, job growth could slow even more over the next 12 months — averaging just 104,000 a month through September 2025, according to economists’ estimates in Bankrate’s latest poll. It’s a slightly slower estimate than prior-quarter estimates, with job growth projected to average 115,000 a month between July 2024 and June 2025 back in the second-quarter iteration of Bankrate’s poll.
Economists, however, still aren’t forecasting a pullback in hiring as drastic as they were when the Fed was aggressively and rapidly raising interest rates. Back in the first quarter of 2023, economists expected that employers would cut more positions than they created, with job losses averaging 21,000 a month between April 2023 and March 2024. Job growth ended up averaging 242,000 a month over the same period.
Responses in Bankrate’s latest poll ranged from a low of 25,000 jobs created each month on average through September 2025 to as many as 177,000, Bankrate’s polling found. Notably, no economist projects that job growth will pick up speed from its current pace.
The data suggests that companies’ demand for labor is slowing, resulting in fiercer competition for new positions.
What the nation’s top economists are saying about job growth
While the labor market is cooling, it is cooling toward a soft landing rather than a recession. With spending remaining solid and the Fed cutting rates at a quicker than expected pace, we think there are reasons to believe the labor market should continue to stay strong.— Tuan Nguyen, Economist at RSM
While the labor market continues to slow, it remains solid. Slowing of job additions mostly reflects rebalancing of overheated conditions that characterized the labor market during the pandemic.— Selma Hepp, chief economist, CoreLogic
As the economy slows amidst high levels of political and thus policy uncertainty, businesses will remain more cautious with hiring and investment decisions.— Sean Snaith, director, Institute for Economic Forecasting, University of Central Florida
The unemployment rate is expected to keep rising, hitting 4.5% by the end of September 2025
With job growth weakening, all but two economists expected that the unemployment rate would rise higher from its position at the time of polling (4.2 percent), according to Bankrate’s survey.
On average, the unemployment rate is expected to hit 4.5 percent by the end of the third quarter, the highest forecast in a year, economists said. Responses ranged from a low of 4.1 percent to a high of 5 percent.
Joblessness has been steadily climbing, starting off the year near a historic low of 3.7 percent, Labor Department data shows. It topped 4 percent in May for the first time since 2022, surged to a three-year high of 4.3 percent in July and edged down to 4.1 percent in September.
A 4.5 percent unemployment rate is slightly higher than the 4.4 percent level that Fed officials expect joblessness could reach by the end of 2025, according to their quarterly economic projections. But unemployment has yet to rise as high as economists have been expecting. Experts previously projected that unemployment would surge to 4.5 percent by September 2024.
Rate cuts from the Fed — expected to continue at its final meetings of the year in November and December — are designed to prevent the job market from worsening even more.
What the nation’s top economists are saying about the unemployment rate
The Federal Reserve is acutely aware of the increased risk to the maximum employment side of its mandate and is now focused on rate cuts to nail the soft landing and ensure the unemployment rate does not tick up much further.— Yelena Maleyev, Senior Economist at KPMG
We expect business leaders will continue to curb wage growth, hire with caution and proceed with strategic layoffs to contain costs heading into 2025.— Gregory Daco, Chief Economist at EY
Job monthly gains should average near trend. … The economy is expected to neither soften nor accelerate significantly over the next year.— Joel L Naroff, president, Naroff Economics
Odds of a recession over the next 12 months hold stable at 33%
When it comes to the odds of a U.S. recession, the majority of participants (94 percent) say they’re lower than 1-in-2 (or 50 percent). That includes 76 percent who put the odds at less than 40 percent and 29 percent who say the probability is less than 30 percent.
Just one economist put the odds of a recession by the end of the third quarter of 2025 at 100 percent, noting concerns about consumption losing steam. On the other end of the spectrum, one expert put the odds of a recession over that time frame at 10 percent, citing Fed easing and the momentum it could bring for the job market and spending.
What the nation’s top economists are saying about U.S. recession risks
With the Federal Reserve now in the process of lowering its federal funds rate target over the next few months, that should eventually help support sustainable economic growth. It appears we are now in the fabled land of a soft landing.— Bernard Markstein, President and Chief Economist at Markstein Advisors
We do expect a slowdown in consumption in 2025 as labor income growth slows (and) as employment and wage growth both cool, but we don't expect it to be a dramatic halt in spending.— Brian Coulton, chief economist, Fitch Ratings
The rising delinquency in credit card loans and auto loans, though not in mortgage loans, imply (that) consumers have given their last hurrah to the economy. The slowdown in consumer spending in 2025 will hamper growth.— Lawrence Yun, Chief Economist, National Association of Realtors
As the expansion ages the risk of recession will rise. … We see little evidence thus far that the Fed has waited too long to start the easing cycle, but there remains a chance that rates remained too high for too long.— Mike Englund, Chief Economist at Action Economics
Inflation estimated to hit Fed’s 2% target by end of next year
Inflation has slowed massively since the Fed started raising interest rates, coming in sight of the Fed’s 2 percent target in August when it hit a three-year low of 2.5 percent, Bureau of Labor Statistics data shows. The Fed’s preferred inflation gauge is telling an even better story. Prices increased just 2.2 percent in August from a year ago, according to the Department of Commerce’s personal consumption expenditures (PCE) index.
A larger majority of economists (71 percent) are starting to expect that inflation will officially retreat to 2 percent by the end of 2025. That’s up from 41 percent in the prior quarter poll, while another 41 percent projected that inflation wouldn’t hit 2 percent until 2026 or later.
About 3 in 10 respondents (29 percent) foresee inflation sticking above 2 percent until the end of 2026 or later, the poll found.
Experts cited sticky housing and services costs as reasons that could keep inflation persistent, along with government spending and deficits. A slowdown in the job market and economy, however, makes it less likely that price pressures could surge again.
What the nation’s top economists are saying about inflation
With growth moving back toward potential and the labor market in better balance, another significant acceleration in inflation is unlikely, but the risk is it gets stuck somewhat above the 2% target for a significant period of time.— Mike Fratantoni, Chief Economist at the Mortgage Bankers Association
Inflation will continue to moderate over the next year as it approaches the Fed's target. The impact to inflation from large federal deficits is minimal in the near-term, but elevated levels of (government) debt could push longer term inflation higher.— Dante DeAntonio, Senior Director of Economic Research at Moody’s Analytics
The underlying trend in price growth remains down, though the timing of when inflation will return to the Fed’s 2 percent target remains to be seen.— Odeta Kushi, Deputy Chief Economist at First American Financial Corporation
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The Third-Quarter 2024 Bankrate Economic Indicator Survey of economists was conducted Sept. 19-24. Survey requests were emailed to economists nationwide, and responses were submitted voluntarily online. Responding were: Mike Fratantoni, chief economist, Mortgage Bankers Association; Odeta Kushi, deputy chief economist, First American Financial Corporation; Yelena Maleyev, senior economist, KPMG US; Gregory Daco, chief economist, EY; Scott Anderson, chief U.S. economist, BMO; Dante DeAntonio, senior director, Moody’s Analytics; Lawrence Yun, chief economist, National Association of Realtors; Bernard Markstein, president and chief economist, Markstein Advisors; Bill Dunkelberg, chief economist, NFIB; Mike Englund, chief economist, Action Economics; Brian Coulton, chief economist, Fitch Ratings; John E. Silvia, founder, Dynamic Economic Strategy; Tuan Nguyen, economist, RSM; Lindsey Piegza, Ph.D., chief economist, Managing Director; Sean Snaith, director, Institute for Economic Forecasting, University of Central Florida; Joel L Naroff, president, Naroff Economics; and Selma Hepp, chief economist, CoreLogic.
