A new forecast for growth in US gross domestic product this year softened amid labor-fueled inflation, according to the “Outlook” survey report released today by the National Association for Business Economics. The forecast for jobs also declined.

Panelists’ projections for inflation in 2022 are significantly higher than those in the previous survey in December 2021. “They see a risk that inflation will remain higher than previously expected over the next three years, coming largely from the labor market,” said NABE President David Altig, executive VP and director of research, Federal Reserve Bank of Atlanta. “More than two-thirds of survey respondents cite rising wages as a risk factor.”

“Nearly two-thirds of the panelists indicate risks to US economic growth are tilted to the downside this year,” added Survey Chair Yelena Shulyatyeva, senior US economist, Bloomberg. “Thirty percent identify monetary policy missteps as the greatest downside risk. Seventy-seven percent of panelists suggest a wage price spiral is either already occurring or will be a major risk in 2022.”

Of the 57 professional forecasters surveyed for today’s report, the median forecast for real GDP called for a 2.9% annualized growth rate from the fourth quarter of 2021 to the fourth quarter of 2022. That’s down from the forecast of 3.6% growth in the December NABE survey.

The median projection for real GDP growth in the first quarter is 1.8%, down from 7.0% in the fourth quarter. It is expected to rise to 4.0% in the second quarter, and then decrease again to 3.0% in the third quarter.

In general, panelists anticipate further deceleration in GDP growth in 2023: the median forecast calls for GDP growth of 2.3%.

When it comes to jobs, the forecasters lowered the median projection for monthly nonfarm payroll employment growth in 2022 to 317,000, down approximately 6% from the 337,000 jobs forecast in the December survey. The panel anticipates that net hiring in 2023 will also soften, with the median forecast calling for 170,000 net new jobs per month in 2023.

The median projection for monthly nonfarm payrolls reflects a slowdown from a pace of 432,000 in the first quarter of 2022 to 225,000 in the fourth quarter. The pace of job growth is forecast to again decline gradually over the course of 2023, averaging 150,000 monthly payrolls in the fourth quarter 2023.

Other jobs forecast findings:

• The panel expects the unemployment rate to decline steadily from 3.9% in the first quarter of 2022 to 3.5% in the third quarter and hold at that level through the fourth quarter of 2023. The median forecast calls for the unemployment rate to average 3.6% in 2022 — lower than the 4.0% anticipated in the December survey, and then to average 3.5% in 2023.
• Nonfarm business compensation per hour is projected to increase 5.3% in 2022. The current 2022 forecast is up from the previous estimate of 3.8% in the December survey. Panelists anticipate hourly nonfarm business compensation growth to moderate to 4.2% in 2023.
• More than three-quarters of the panel indicate that a wage price spiral is either already occurring (30%) or that it is a major risk in 2022 (47%). Fifteen percent do not believe it is a concern, while 6% expect it to be mitigated by a significant increase in productivity growth.