S&P Global U.S. Forecast Update September 2025
Stronger data releases but weakening unemployment
S&P Global have released their September 2025 forecast update for the U.S. The current forecast is based on the following assumptions:
- This forecast includes the One Big Beautiful Bill Act (OBBBA), which indefinitely extends cuts to marginal personal tax rates enacted in the 2017 Tax Cuts and Jobs Act and adds new deductions for tip income and overtime pay, among other personal tax provisions. The OBBBA includes increased federal direct spending but reduces outlays for Medicaid, ACA insurance premium tax credits, and SNAP benefits. It also introduces new expensing provisions and expanded deductions for businesses and corporations, while rescinding most of the clean-energy tax credits introduced by the Inflation Reduction Act. S&P Global assumes a cumulative 255,000 federal layoffs through October 2025.
- This forecast incorporates the existing Section 232 tariffs, along with newly proposed Section 232 tariffs ranging from 10% to 25% on lumber, semiconductors, pharmaceuticals, and critical minerals, effective in fourth-quarter 2025. S&P Global assumes International Emergency Economic Powers Act (IEEPA) tariffs related to fentanyl flows and immigration, including a 20% tariff on imports from China, a 35% tariff on imports from Canada, and a 25% tariff on imports from Mexico, with the latter two declining to 12% by mid-2026. The forecast also includes “reciprocal” tariffs announced on August 1 or later, ranging from 10% to 50%, including the recent 50% tariff on imports from India.
- Deportations, combined with a sharply reduced inflow of immigrants, will lower U.S. aggregate supply and aggregate demand. This forecast assumes net international migration will be reduced, relative to Census projections, by roughly 500,000 per year over the four years of the Trump presidency.
- Unspent pandemic-era funds, as well as monies authorized under the Infrastructure Investment & Jobs Act (IIJA), mitigated pressures to reduce state and local government spending. States generally remain fiscally sound and are expected to take on a larger share of Medicaid benefits as federal spending is reduced.
- The Fed is expected to cut rates at the September 2025 meeting by 25 basis points, then continue cutting by 25 basis points at every other meeting, bringing the funds rate to a neutral rate of 3.00%-3.25% by September 2026.
- Real foreign GDP rose 2.1% in 2024. The forecast calls for growth to slow to 2.0% in 2025 and further to 1.9% in 2026. Foreign CPI inflation is projected to ease to 2.3% in 2025 and 2.2% in 2026. Foreign sovereign bond yields average 2.9% from 2025–2029.
- Brent crude oil prices rose to $113 per barrel in the second quarter of 2022, up from $80 in the fourth quarter of 2021. Prices are forecast to fall to $68 in 2025 and $56 in 2026, rebound to $62 in 2027, and then gradually rise at the rate of inflation.
The baseline forecast (summarized here) is assigned a 50% probability. The pessimistic scenario is assigned 20%, and the optimistic scenario is assigned the remaining 30%. Relative to the prior forecast, the pessimistic scenario is 10% lower, while the optimistic scenario is 10% higher.
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 2.3% in 2026. On a quarterly basis, the forecast calls for real GDP to increase through 2035 (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 fall further to 2.8% in 2025, then drop to 2.6% in 2026 and 2.3% in 2027 and 2028.
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 4.2% in 2025 and 4.5% from 2026-2028 before gradually decreasing.
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. Job growth is forecast to slow further to 0.9% in 2025 and 0.5% in 2026 and 2027.
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 fall to 1.36 million in 2025 and 1.31 million in 2026-2027, as high interest rates and inflation take a toll on housing activity.
Exhibit 1 summarizes the September 2025 forecast from S&P Global. Exhibit 2 shows the August 2025 projections and Exhibit 3 shows the difference.
Exhibit 1: S&P Global September 2025 Forecast for the U.S., Over-the-Year Percent Change or Level
Exhibit 2: S&P Global August 2025 Forecast for the U.S., Over-the-Year Percent Change or Level
Exhibit 3: Differences in S&P Global U.S. Projections: September 2025 Versus August 2025 (Percentage Point Differences, Except for Housing Starts)
