American households are showing a notable shift in economic outlook, reflecting growing anxieties over labor market stability and persistent inflation. The latest Survey of Consumer Expectations from the Federal Reserve Bank of New York reveals a significant drop in optimism about job prospects, alongside a noticeable rise in short-term inflation forecasts, signaling potential challenges for consumer confidence and broader economic activity.
The perceived likelihood of finding a new job if current employment ended plummeted to a new low of 44.9% in August, marking a 5.8 percentage point drop. This represents the lowest level since the New York Fed began collecting this data series in June 2013. The decline was broad-based across all age, education, and income demographics, though it was particularly pronounced among individuals with a high school education or less.
This pessimism also extended to job security, with Americans’ expectations of job loss over the next 12 months rising by 0.1 percentage point to 14.5%. Conversely, the likelihood of voluntarily leaving a job within the coming year slightly decreased by 0.1 percentage point, settling at 18.9%. These trends collectively suggest a more cautious stance within the labor market, as workers may prioritize job retention amidst economic uncertainties.
Beyond labor market concerns, the survey also revealed rising inflation expectations. Median projections for inflation over the next year increased by 0.1 percentage point, reaching 3.2%. This figure comfortably exceeds the Federal Reserve’s 2% target, suggesting households anticipate a sustained period of elevated price levels. In contrast, inflation expectations for the three- and five-year horizons remained stable at 3% and 2.9% respectively, indicating belief in longer-term price stabilization.
These consumer sentiments align with a broader economic context, including reports of US job growth missing expectations and a 6.7% year-over-year decline in small business hiring, according to Bank of America, amidst tariff surges. Further insight into inflationary trends is anticipated with the upcoming release of the Bureau of Labor Statistics’ Consumer Price Index (CPI) report for August. July data showed headline CPI at 2.7% year-over-year, with core CPI at 3.1%.
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