- Key Insight: Bank economists at 16 large and midsize banks said they are "optimistic but cautious" about U.S. economic growth.
- What's at Stake: The risk of recession is 1-in-4 this year, but 1-in-3 by the end of next year, the panel said.
- Supporting Data: The committee is forecasting a U.S. unemployment rate of 4.6% during the first half of next year.
The U.S. economy is still poised to grow this year and next year, but key economic indicators are predicted to deteriorate as a result of persistent inflation and a weakening labor market.
That's the updated consensus from the American Bankers Association's Economic Advisory Committee. The panel, which is composed of 16 chief economists from large and midsize banks, said Wednesday that it expects economic growth of 1.3% in 2025 and 1.8% in 2026.
Six months ago, the group was more optimistic,
The latest forecast is "optimistic but cautious," Luke Tilley, chair of the committee and chief economist at M&T Bank's Wilmington Trust told reporters Wednesday.
"We really do see a U.S. economy that is fundamentally strong with a lot of strong fundamental pillars, but is going through a period of adjustment," Tilley said during a virtual press conference. "We expect it to still come through without going into a recession."
The risk of recession is 1-in-4 this year and 1-in-3 by the end of 2026, the committee said. In March, it pegged the recession risk at 30% for this year and next year.
Concerns about the job market have increased since the group's last meeting. Last week, the Federal Reserve
The ABA committee said it now expects the U.S. unemployment rate to increase and peak at 4.6% during the first half of 2026 before declining to 4.4% in the back half of the year. In March, the group concluded that the unemployment rate was likely to increase to 4.2% by the end of 2025.
The national unemployment rate was 4.3% in August, up from 4.2% in July, according to the Labor Department. While companies have reduced the number of job openings due to slower economic growth and ongoing macro-economic uncertainty, layoffs have remained low, Tilley said.
"The dynamic is sort of hard to figure out," he said. "There's a lot of debate over whether the slowdown in job growth is on the demand side … or is it on the supply side because we have much lower immigration induced by changes in policy? In truth, it's really both factors."
The second Trump administration has made aggressive changes to immigration policy, including actions that have curtailed the arrival of new immigrants. Last week, the administration announced the Trump Gold Card, a new visa program in which applicants, if approved to be lawful permanent residents of the U.S., would be required to pay "a gift" of $1 million "as sufficient evidence that the individual will substantially benefit the United States."
The administration is also
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But currently, it seems like the job demand factor is outweighing the job supply side, Tilley said. In other words, he attributed the jobs slowdown more to caution by employers than a dearth of available workers.
As for inflation, the committee expects it to remain above the Fed's 2.0% target. The group of economists is predicting three more 25-basis-point cuts between now and the middle of next year, putting the federal funds rate between 3.25% and 3.5%.
The Fed has not committed to additional rate cuts this year.
