MNI BRIEF: CBO Sees Slow US Labor Growth In Next Decade

U.S. economic growth will surge to 7.4% in 2021 before levelling of at 3.1% in 2022 and falling to 1.1% in 2023, with unemployment falling to 3.6% next year and moving up to 3.8% in 2023, according to a government forecast published by the nonpartisan Congressional Budget Office Thursday.

The annual growth of real GDP averages 2.8% during the five-year period from 2021 to 2025, exceeding CBO's 2.0% growth rate of real potential GDP, which also matches the Fed's estimate. Over the 2026–2031 period, CBO sees unemployment averaging 4.5% and real GDP growth averaging 1.6%, which is less than its long-term historical average, primarily "because the labor force is expected to grow more slowly than it has in the past," the office said.

Inflation is expected to rise sharply in 2021 and then moderate, with PCE inflation hitting 2.6% this year and 2.1% in 2022, CBO said.