US real GDP growth in 2035?
My independent view is that 2035 US real GDP growth is most likely to land in the low-to-mid 2% range, with 2.1% to 2.5% the single most likely bucket. The market looks somewhat too pessimistic on a strong-but-not-recessionary long-run growth outcome.
Analysis
With no recent news available, the best guide is the long-run structure of US growth: trend real GDP growth is usually driven by labor-force growth, productivity, and the absence of a major recession or supply shock. By 2035, a plausible baseline is continued moderate expansion rather than either stagnation or a breakout boom. That makes the 1.6% to 2.5% area the center of gravity, with 2.1% to 2.5% slightly more likely than 1.6% to 2.0% because nominal policy volatility and periodic investment/productivity gains can keep realized growth a bit above the long-run average in a mature expansion year.
The main case against very high growth is demographic drag and the tendency for mature advanced economies to revert toward lower trend rates over time. Sustained 2.6% to 3.0% real growth is possible, but it usually requires unusually strong productivity, elevated labor-force growth, or a strong cyclical rebound. Likewise, the negative-growth bucket should remain relatively limited unless 2035 happens to coincide with a recession, financial shock, or policy mistake, which is certainly possible but not the base rate.
Against the market, I think the 14% price on the top 2.1% to 2.5% bucket is a bit too low relative to its centrality in a reasonable long-run forecast. The market appears to be over-weighting low-growth and downside outcomes, perhaps because investors extrapolate the low-growth regime that has often characterized mature-cycle economies. My distribution is therefore meaningfully more constructive on moderate growth and somewhat less bearish on the tail-risk outcomes than the market implies.
Arguments
For
- Arguments for Yes: US real GDP growth is likely to remain positive and moderately healthy in a non-crisis year, making the 2.1% to 2.5% range a credible center outcome.
- Arguments for Yes: Periodic productivity improvements and business investment can lift growth above the economy's sluggish baseline without requiring an exceptional boom.
Against
- Arguments against Yes: Demographic aging and slower labor-force growth make sustained 2%+ real growth harder to achieve over time.
- Arguments against Yes: The probability of a recessionary or subpar year in any single future year is still meaningful, which keeps downside buckets relevant.
Key drivers
- Long-run US trend growth is more likely to settle in a moderate positive range than in either a boom or a contraction.
- Productivity gains and investment can keep 2035 growth above the lower trend buckets even if demographics remain a drag.
Risk factors
- A recession, financial shock, or policy error in 2035 could push growth into the low or negative buckets.
- If structural productivity disappoints for longer than expected, growth may remain stuck in the 1% to 2% range rather than reaching the top bucket.
Scenarios
Best case
The US economy enters 2035 with solid productivity growth, stable financial conditions, and no major shock, allowing real GDP growth to land in the 2.1% to 2.5% range or slightly above.
Most likely
Growth settles in a moderate positive range, with the highest probability concentrated in 2.1% to 2.5% and 1.6% to 2.0%, while the extreme high and negative outcomes remain less likely.
Worst case
A recession, credit event, or major policy/geo-economic disruption drives 2035 growth to 0.0% or below, making the negative-growth bucket the winner.
Outcomes
| Outcome | AI | MKT |
|---|---|---|
| 2.1% to 2.5% | 24% | 14% |
| 1.6% to 2.0% | 23% | 13% |
| 0.0% or Below | 12% | 12% |
| 2.6% to 3.0% | 15% | 11% |
| 0.6% to 1.0% | 10% | 8% |
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