US real GDP growth in 2035?
My independent view is that 2035 US real GDP growth is most likely to land near the Fed’s long-run 2% trend, with the single best range being 2.1% to 2.5% or 1.6% to 2.0%. The market looks a bit too pessimistic on sub-2% growth and too dismissive of a mild upside drift from trend.
Analysis
The strongest anchor available is the Fed’s latest long-run estimate of 2.0% real GDP growth, and that matters more for 2035 than any short-run cyclical forecast. A 2035 reading should reflect trend growth, not a one-year recession or boom, so the center of mass should sit around the 2% area unless productivity or labor supply shifts materially. The Fed’s own projections through 2029 remain clustered around roughly 2% or slightly below, which supports a distribution centered near the middle ranges rather than the extremes.
Against that, it is reasonable to allow some upside tail risk. If AI-driven productivity gains, capital deepening, or better labor-force participation compound over the next decade, growth could drift into the low-to-mid 2% range more often than the Fed’s long-run median suggests. That said, a sustained move into the upper 2%s would require a meaningful structural acceleration, and the provided official forecasts do not currently point there. The downside case is also real: demographics, slower labor growth, or a less favorable productivity cycle could keep 2035 growth closer to 1% than 2%.
Relative to the current market, I think the pricing is too skewed toward very low growth outcomes, especially 0.0% or below, which looks more like a recession-tail than a central case for a 2035 annual reading. The market also seems to underweight the Fed-style midpoint around 2.0%, which should make the 1.6% to 2.5% bands collectively more attractive than the top-line pricing implies. On balance, I would put the highest independent probability on the 2.1% to 2.5% range, with the 1.6% to 2.0% range close behind, and I would expect the market to mean-revert somewhat toward those middle outcomes over time.
Arguments
For
- Arguments for Yes: The Fed’s long-run projection and recent medium-term path both cluster near 2%, which makes a mid-range 2035 outcome the natural base case.
- Arguments for Yes: AI and capital deepening could plausibly lift trend growth enough to make the 2.1% to 2.5% band the single most likely bucket.
Against
- Arguments against Yes: The economy has struggled to sustain growth materially above 2% for long periods, so the upper bands may be overestimated.
- Arguments against Yes: If 2035 lands during a slowdown year, annual real GDP growth could easily slip into the 0.6% to 2.0% region or lower.
Key drivers
- The Fed’s long-run 2.0% growth estimate is the best official anchor for a 2035 reading.
- Structural productivity gains could nudge 2035 growth modestly above trend without requiring an extreme macro regime shift.
Risk factors
- Demographic slowdown or weak labor-force growth could hold 2035 growth below 2%.
- A recessionary or disinflationary environment in the measurement year could push the outcome into the very low growth buckets.
Scenarios
Best case
Productivity accelerates and labor supply holds up, producing growth in the low-to-mid 2% range or even modestly above 2.5%.
Most likely
2035 growth lands near the long-run trend, with the highest probability on 2.1% to 2.5% and the next most likely outcome just below that in 1.6% to 2.0%.
Worst case
A recession or severe slowdown hits the measurement year, pushing real GDP growth into the zero-or-negative bucket.
Outcomes
| Outcome | AI | MKT |
|---|---|---|
| 0.0% or Below | 8% | 14% |
| 2.1% to 2.5% | 27% | 14% |
| 0.6% to 1.0% | 13% | 11% |
| 1.6% to 2.0% | 24% | 10% |
| 2.6% to 3.0% | 28% | 9% |
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