Economists’ Survey: Unemployment Could Rise To A 4-Year High

Whether it’s from the continued strain of high interest rates or uncertainty about tariffs and President Donald Trump’s economic policies, the job market has cooled this year — and the nation’s top economists are finding it hard to ignore.

Economists expect the unemployment rate to hit 4.6 percent by June 2026, up from its current level of 4.2 percent, according to the average forecast among experts in Bankrate’s Second-Quarter Economic Indicator Poll. If that comes to fruition, it would be the highest unemployment rate since September 2021 when the U.S. economy was still healing from the coronavirus pandemic. Excluding that outbreak-induced slowdown, joblessness hasn’t been that high since 2017.

Economists have now downgraded their forecast for the labor market for three consecutive quarters, and their projections are the most downbeat since 2022.

Their forecasts are slightly worse than the Federal Reserve’s projections. Policymakers expect the unemployment rate to hit 4.5 percent in 2025 and stay there through 2026, according to their median estimate from June 2025. 

The strength of the job market could be a pivotal factor shaping the Fed’s decisions on how quickly it could cut, amid Trump’s repeated attacks on the U.S. central bank and its chair, Jerome Powell. Some Fed officials, such as Fed Governor Christopher Waller and Vice Chair Michele Bowman, have looked open to cutting rates sooner than later to protect the job market. 

Yet, even as economists expect a weaker job market in the year ahead, they put the current odds of a downturn within the next 12 months at 35 percent, down slightly from 36 percent in the prior-quarter poll. 

Bankrate has been polling the nation’s top economists on their expectations for the job market, inflation, the Federal Reserve, economic growth and more on a quarterly basis for a decade. Read on for the latest findings.

Key takeaways from experts’ forecasts for the U.S. economy

Economists’ job market outlook darkened again

The latest labor market data paints a picture of a job market in stasis. Layoffs are low, but so is hiring. Almost 1 in 5 workers have been unemployed for more than six months, and the number of workers who are continuing to refile for unemployment benefits each week is also the highest since 2021, the latest unemployment insurance (UI) data shows.

The challenge, however, is discerning whether the slowdown in the labor market is normal rebalancing — or something worse. Federal Reserve officials raised rates in the aftermath of the coronavirus pandemic partially to cool a red-hot labor market. When the job market was its most robust in the summer of 2022, job openings outnumbered the unemployed by a record 2-to-1.

Indeed, economists had a range of views about the direction of the job market. Forecasts for the unemployment rate by June 2026 ranged from as high as 5.1 percent to as low as 4.2 percent.

Yun was the economist with the most upbeat forecast for the labor market. He also projected that employers would create as many as 170,000 jobs each month over the next 12 months, the highest forecast among participants in Bankrate’s survey and faster than the current average monthly pace of 144,000. 

Almost a third of economists surveyed (35 percent) project that employers will create more than 100,000 jobs each month, on average, over the next 12 months, Bankrate’s survey also found. 

Yet, one expert expects employers to cut an average 35,000 jobs a month for the next year, the weakest projection among surveyed economists. She shared the same concerns as other economists — that stricter immigration, as well as uncertainty about tariffs and the economy, could weigh on hiring amid an ongoing slowdown. 

Economists continue to see a near 1-in-3 chance of a U.S. recession in the next 12 months

The last time economists expected unemployment to surge this high, a recession appeared almost inevitable. In the third quarter of 2022, recession odds peaked at almost 65 percent, the same quarter economists penciled in a 4.6 percent unemployment rate for December 2023.

Today, however, they’re perceived to be much lower — at a near 1-in-3 chance (or 35 percent). That’s down slightly from 36 percent in the prior quarter poll but up from 26 percent in the fourth quarter of 2024.

Tariffs are the clear wild card when it comes to predicting the U.S. economy. The higher the tariffs, the greater the risk of a recession, economists noted. But even the presence of a wild card at all can cause consumers to pull back and businesses to slow hiring, exacerbating the slowdown even more.

Economists’ recession forecasts were as high as 50 percent and as low as 10 percent. Almost half (47 percent) said the odds of a downturn were below 40 percent. Economists noted that tax cuts could juice up the economy more, and others cautioned against doubting the American consumer.

Economists still expect tariffs to push up inflation, but uncertainty is rising

Perhaps one of the biggest surprises of the tariff era: Inflation hasn’t picked up noticeably yet. 

Prices have risen less than expected for the past two months, and so far, they offer little evidence of tariffs pushing up prices. Only the “major appliances” category rose 4.3 percent in May, the sharpest gain since August 2020. Yet, goods prices were steady when excluding the volatile food and energy categories, and clothing as well as used and new vehicle prices fell.

Hotter inflation could still be coming, experts acknowledged. Most economists (44 percent) expect inflation to stay above the Fed’s 2 percent target until the end of 2027.

Even the growing share of economists who started to predict that inflation might retreat by the end of 2026 — 29 percent in Q2 2025, up from 25 percent last quarter — acknowledged that price increases might still just be delayed.

Just one economist expects inflation to hit the Fed’s target by the end of this year, a projection that no economist expected in Q1 2025. 

Meanwhile, 24 percent of economists say they don’t know when the Fed can declare victory over inflation, up from 20 percent. That could be because tariffs risk slowing economic growth just as much as they risk raising prices. Case in point: Many economists noted in Bankrate’s poll that stagflation is still a concern, though the case might not be as severe as it was in the 1970s and ’80s. 

Companies who don’t want to risk alienating their customers may decide to absorb some of those costs, but they might have to reduce production or scale back on head count to account for those higher import prices. Consumers, meanwhile, might pull back on spending, robbing companies of their pricing power and weighing on their bottom lines even more. 

Powell in May quipped that someone will pay the cost of tariffs, but they don’t know who along the chain it may fall to — the importer, the exporter, the manufacturer, the retailer or the consumer.

Here’s what economists’ latest forecasts mean for you

Predicting the U.S. economy can be a fool’s game. The financial system avoided the widely forecast downturn as the Fed rushed to raise interest rates to contain inflation. You might find that the economy displays the same resilience again. 

But for most Americans, there’s no use in letting the latest recession odds dictate how you manage your money — because it shouldn’t change the steps you should be taking with your finances. 

“There is a cloud hanging over the economic outlook,” Hamrick says. “If you expect it is going to rain, you carry an umbrella. Similarly, if you think the economy may bring some challenges, you should take out the equivalent of insurance by prioritizing savings and paying down debt.”

Wondering what the latest results mean for you and your finances? Here’s what to know:

• A slower hiring environment means it’ll be tougher to find a job: The job market functions just like any other market, and whether workers or companies have the upper hand depends on both supply and demand. If companies have less demand for new workers and slow their hiring plans, you can expect weaker wage growth and a longer job hunt.
• Elevated recession odds underscore the importance of saving for emergencies: The chances of a recession are never zero. An emergency fund can be a crucial backstop if you do find yourself unemployed and on extended unemployment. Don’t focus too much on the amount you’re saving; if you’re starting from scratch, any little bit will help. Keep your cash in a place where it’s rewarded, like a high-yield savings account, and chip away at any high-interest debt that may be gnawing away at your budget. A balance-transfer card can help you make headway on repaying your credit card debt by lowering your annual percentage rate (APR) to 0 percent for a set number of months.
• Don’t fret any volatility in the stock market: The S&P 500 is near a record high again, after cratering as much as almost 19 percent after Trump announced his massive “Liberation Day” reciprocal tariffs. Investors’ attitudes, however, can change in an instant depending on the bogeyman of the data — and lately, there’s more than one. Elevated interest rates, the prospect of higher inflation and fears of a slowdown in the job market could crash the party. That shouldn’t matter to the investor who’s diversified and invested for the long haul, experts say.

• Methodology
  

  The Second-Quarter 2025 Bankrate Economic Indicator Survey of economists was conducted June 18-25. Survey requests were emailed to economists nationwide, and responses were submitted voluntarily online. Responding were: Odeta Kushi, deputy chief economist at First American Financial Corporation; Selma Hepp, chief economist, Cotality; Yelena Maleyev, senior economist, KPMG US; Oren Klachkin, financial market economist, Nationwide; Ryan Sweet, chief U.S. economist, Oxford Economics; Tuan Nguyen, economist, RSM; Dante DeAntonio, senior director, Moody’s Analytics; Joseph Mayans, chief economist, Experian North America; Lawrence Yun, chief economist, National Association of Realtors;  Gregory Daco, chief economist, EY; Lindsey Piegza, Ph.D., chief economist and managing director, Stifel, Nicolaus & Co.; Bernard Markstein, president and chief economist, Markstein Advisors; Mike Fratantoni, chief economist, Mortgage Bankers Association; Mike Englund, chief economist, Action Economics; Scott Anderson, chief U.S. economist and managing director, BMO Capital Markets; Lauren Saidel-Baker, economist, ITR Economics; and John E. Silvia, founder, Dynamic Economic Strategy.