US real GDP growth in 2035?
My base case is that 2035 U.S. real GDP growth lands in the 1.6% to 2.5% range, with 1.6% to 2.0% the single most likely bucket. The market looks a bit too pessimistic on outright zero-or-negative growth.
Analysis
The strongest anchors are the CBO-linked projection of about 1.8% growth through 2035 and the Fed’s longer-run median of 2.0%, which both point to a slow-growth but still positive economy. That makes the 1.6% to 2.0% bucket the modal outcome, with 2.1% to 2.5% also very plausible if productivity and labor supply hold up modestly better than baseline.
A zero-or-negative growth outcome is possible only if the economy suffers a meaningful structural disappointment by the time 2035 is measured, such as a prolonged productivity slump, a severe demographic drag, or an adverse recessionary episode near the observation window. The current 2026 data do not justify extrapolating a collapse in trend growth; they show normal cyclical variation, not a persistent break below trend.
Relative to the market, I think the pricing is too skewed toward the downside tail. The market’s 11% on 0.0% or below looks high versus the central bank and CBO baselines, while the middle buckets around 1.6% to 2.5% appear underrepresented for a long-run U.S. growth forecast. In other words, the most likely miss is not that growth reaches the extreme low end, but that it lands near the high-1% to low-2% range where the official projections cluster.
Arguments
For
- Official baseline projections support a growth rate around 2%, which favors the middle buckets over the extreme downside.
- There is enough structural room for moderate productivity gains to keep growth above the very low-end outcome.
Against
- Demographics and slowing labor-force growth make sustained 3%-plus growth unlikely without a major productivity surprise.
- The long forecast horizon leaves room for recession risk or policy mistakes to push the measured 2035 print below trend.
Key drivers
- CBO and Fed long-run estimates both cluster near 2%, making the middle growth bands the most defensible anchor.
- Demographic slowdown limits upside, but it also makes a deep contractionary outcome less likely than the market implies.
- A productivity or AI-driven pickup could lift the result into the 2.6% to 3.0% range, though that is still a tail case.
- The forecast is about a single year in 2035, so cyclical volatility and measurement noise matter more than recent quarterly GDP prints.
Risk factors
- If trend productivity stays weak and labor-force growth undershoots, the result could slip into the 0.0% or below bucket.
- A recession or major policy shock near the measurement date could overwhelm the long-run baseline and depress annual growth sharply.
- Long-horizon GDP forecasts are inherently uncertain, so a relatively small structural surprise can shift the outcome by a full percentage point or more.
Scenarios
Best case
Productivity improves enough to keep 2035 growth in the 2.1% to 3.0% range, with the economy beating the official long-run baselines.
Most likely
2035 growth comes in near the CBO and Fed anchors, with 1.6% to 2.0% as the most likely bucket and 2.1% to 2.5% close behind.
Worst case
Trend growth weakens materially or a recession hits near the measurement window, putting 2035 growth at 0.0% or below.
Outcomes
| Outcome | AI | MKT |
|---|---|---|
| 0.0% or Below | 7% | 11% |
| 3.1% to 3.5% | 9% | 9% |
| 1.6% to 2.0% | 38% | 8% |
| 2.1% to 2.5% | 30% | 8% |
| 2.6% to 3.0% | 16% | 8% |
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