This forecast is based on a modified version of IHS Markit’s October 2020 Control forecast for the U.S. economy. We have adjusted real gross domestic product (GDP) to match the Blue Chip “Consensus” GDP forecast for 2020 and 2021. We now expect real GDP to decline 4.0% in 2020 followed by a 3.9% increase in 2021. In September we expected a 4.6% decline in 2020 followed by a 3.8% increase in 2021. In September we were guided by the IHS forecast for GDP growth in 2022-25 because the latest long term Blue Chip forecast was out of date. We now have a current long term Blue Chip forecast which indicates slower growth in those years. We now expect real GDP growth rates of 2.9%, 2.3%, 2.1%, and 2.0% in 2022 through 2025 compared to the September forecast of 3.9%, 2.8%, 2.5%, and 2.3%.
Washington Research Council economist Kriss Sjoblom assesses the report.
This preliminary economic forecast is a bit weaker that the economic forecast that was used for the September revenue forecast, with 39,400 fewer jobs in 2021 and 54,600 fewer jobs in 2022 under the new forecast compared to the old. Unemployment rates are correspondingly higher in the new forecast than in the old (7.1 percent vs. 6.6 percent for 2021, 5.9 percent vs. 5.2 percent for 2022). As a result of recently announced job cuts at Boeing, the forecast of aerospace employment is down by 6,900 in 2021 and 11,800 in 2022 compared to the September economic forecast.
The ERFC memo concludes:
We expect a 4.7% decline in Washington employment this year which is unchanged from the September forecast. We expect above-average growth through the remainder of the forecast as the economy recovers from this deep recession. We expect employment growth to average 1.9% per year in 2021 through 2025 compared to the 2.3% average rate expected in September. Our forecast for nominal personal income growth this year is 8.7%, up from 7.7% in the September forecast. The strong personal income growth this year is the result of extraordinary fiscal stimulus. Personal income will decline next year as the stimulus is withdrawn. We expect personal income to decline 2.3% next year compared to a 1.9% decline in the September forecast. Our new forecast for nominal personal income growth in 2023 through 2025 averages 4.2% per year, which is down from the 4.6% rate expected in the September forecast.
The final November economic forecast will use an updated national forecast from IHS Markit, which should be available next week. IHS Markit has delayed release of this forecast so that fiscal policy assumptions might reflect the results of the election. According to the Wall Street Journal, bond traders believe that there will be less stimulus spending because Republicans have retained control of the Senate.
We’d be surprised to see another big increase in the November revenue forecast.