S&P Global U.S. Forecast Update March 2025

March 14, 2025

By Delaney O’Kray-Murphy, EBRC Research Economist

“Growth recession” looms with below-potential growth

S&P Global have released their March 2025 forecast update for the U.S. The current forecast is based on the following assumptions:

This forecast assumes the implementation of a 10% universal tariff (phased in over one year) along with a 30% tariff on imports from China that ramps up to 45%, and a 25% tariff on all steel and aluminum imports, and a 25% general tariff on Canada and Mexico that goes into effect early April.
Deportations combined with a sharply reduced inflow of immigrants will reduce U.S. aggregate supply and aggregate demand. This forecast assumes net international migration will be reduced, relative to Census projections, by about 500,000 per year during the four years of the Trump presidency.
The Fiscal Responsibility Act, which suspended the debt-limit, ended on Jan. 1, 2025, and the Treasury has undertaken “extraordinary measures” to meet its obligations. The debt ceiling is assumed raised or suspended prior to the exhaustion of these measures. We assume a cumulative 255,000 federal layoffs through August 2025.
Personal income tax cuts related to the 2017 TCJA are extended. Some exclusion of tip and overtime pay from federal taxation is assumed to be adopted. Corporate tax policy now assumes a lower corporate tax rate on corporate income from 21% to 15% for corporations that produce domestically. Scheduled Social Security and Medicare benefits are paid beyond the projected exhaustion of those funds.
After cutting by 100 basis points (bps) in 2024, the Fed cuts once at the end of 2025, during the December meeting. Thereafter, the FOMC begins easing until eventually reaching a target range of 3.00% - 3.25% by late 2026.
Real foreign GDP contracted by 4.7% in 2020, rebounded to 5.6% in 2021, then slowed to 3.4% in 2022 and 2.0% in 2023 and 2024. The forecast calls for it to slow to 1.9% in 2025 before rebounding to 2.1% in 2026.
The price of Brent crude oil rose to $113 per barrel in the second quarter of 2022, up from $80 per barrel in the fourth quarter of 2021. The price is forecast to drop to $73 per barrel in 2025 and $69 in 2026 before gradually rising at the rate of inflation.

The baseline forecast (summarized here) is assigned a 50% probability. The pessimistic scenario is assigned 25%, and the optimistic scenario is assigned the remaining 25%. These probabilities are unchanged from February.

After increasing by 2.9% in 2023 and 2.8% in 2024, the baseline forecast calls for real GDP growth to drop to 1.9% in 2025 and 2026. On a quarterly basis, the forecast calls for real GDP to increase through 2034 (no recession).

Headline inflation spiked in 2022 to 8.0%, then decelerated to 4.1% in 2023 and 3.0% in 2024. It is forecast to rise to 3.2% in 2025, as tariffs and other policies take effect, then fall to 2.6% in 2026 and 2.0% in 2027.

The unemployment rate peaked at 8.1% in 2020 but fell to 5.4% in 2021 and again to 3.6% in 2022. It remained at 3.6% in 2023 and rose to 4.0% in 2024. Unemployment is forecast to rise to 4.3% in 2025 and 4.6% in 2026, then peak in 2027 and 2028 at 4.7%.

Nonfarm payroll jobs nationally dropped by 5.8% in 2020 but rebounded with growth of 2.9% in 2021 and 4.3% in 2022. Jobs rose by 2.2% in 2023 and slowed to 1.3% in 2024. Jobs are forecast to slow further to 1.0% in 2025 and 0.3% in 2026.

Housing starts surged in 2021 to 1.61 million units. Activity remained strong in 2022 at 1.55 million. Starts fell to 1.42 million in 2023 and 1.37 million in 2024. They are forecast to drop further to 1.36 million in 2025 and 1.33 million in 2026, as high interest rates and inflation take a toll on housing activity.

Exhibit 1 summarizes the March 2025 forecast from S&P Global. Exhibit 2 shows the February 2025 projections and Exhibit 3 shows the difference.