July 2017 WSJ Forecasts

The WSJ economic forecasting survey published mostly good news. Surprisingly, the positive jobs report did little to change forecasts of payroll employment, however it has lowered expectations of a federal funds rate hike by December:

Most of the consensus revisions saw improvements over the next six months to a year, most notably with the probability of a recession dropping by almost one percentage point to 14.77 percent. The consensus also revised oil prices in December down by almost 3.5 dollars to 47.44. Though predicted GDP growth for the year increased slightly, predictions for Q2 fell by 0.2 percentage points to 2.72 percent. The table below summarizes the changes in forecasts for some key variables.

Inflation revisions seem correlated with significant drops in crude oil prices, however the unemployment revisions seem at odds with the federal funds rate revisions. If unemployment is expected to be better, forecasters should be predicting increasing federal funds rates. Perhaps they believe that their lower inflation forecasts imply a more accommodating stance from the Fed.