New York Fed Survey: Inflation Expectations Edge Higher as Job Concerns Grow

The Federal Reserve Bank of New York’s Center for Microeconomic Data says that U.S. households raised their short- and long-term inflation predictions in September while becoming more cautious about jobs and incomes. The Survey of Consumer Expectations, which took place from September 1 to 30, found that the median one-year inflation expectation jumped from 3.2% to 3.4%. The three-year view stayed at 3.0%, but the five-year view went up to 3.0% from 2.9%. The biggest increase in one year was among people with a high school diploma or less and people with household earnings of less than $50,000. There was less disagreement among respondents when looking at the one- and five-year time frames. At one year, inflation uncertainty went down; at three years, it stayed the same; and at five years, it went up.

People have different opinions on the categories. Expected changes in the next year went up for food (+0.3 percentage points to 5.8%), gas (+0.3 to 4.2%), medical care (+0.5 to 9.3%), and rent (+1.0 to 7.0%). Expected college costs, on the other hand, went down by 0.8 to 7.0%. The reading for food was the highest since March 2023. For the fourth month in a row, people expected home prices to rise by 3.0%.

Expectations for the job market got worse. The median predicted rise in earnings fell to 2.4%, the lowest level since April 2021. The average chance that unemployment will be higher in a year went up 2.0 points to 41.1%. The predicted quit rate rose to 20.7%, and the perceived likelihood of losing a job rose to 14.9%, which is higher than the 12-month average. If someone lost their job, the chance of finding a new one within three months rose from August’s record low to 47.4%, but it was still lower than the 12-month average.

Household financial readings were not very good. Expected spending growth went down to 4.7%, while expected income growth stayed at 2.9%. Most of the people who answered said that they would still have access to credit and that it would be a little easier to get credit in the future. There was a 12.6% chance of missing a minimum debt payment. People’s expectations for a tax hike next year went up to 3.6%, while their expectations for government debt to grow went up to 7.5%. The odds of savings-account rates being higher in a year went up to 24.9%. The New York Fed says that equity sentiment improved, with the perceived chance of higher stock prices in 12 months rising to 39.8%.