Near-Term Price Views Surge, Jobs Prospects Sour in Fed Survey

(Bloomberg) — American consumers see higher inflation in the year ahead and are growing more anxious about their future jobs prospects, according to a monthly survey from the Federal Reserve Bank of New York. 

Median expectations for year-ahead inflation rose 0.5 percentage point to 3.6% in March, the biggest one month increase in two years. Consumers’ perceptions of inflation in the medium- and longer-term, however, remained stable. 

Estimates for price growth three years out remained unchanged at 3%, while those for five-years ahead ticked down to 2.9%. Several Fed officials have recently emphasized the importance of keeping longer-term inflation expectations steady. 

Most measures of longer-term inflation have remained roughly stable thus far, with the notable exception of the University of Michigan’s consumer survey. Data out Friday showed Americans’ expectations for price growth in the next five to 10 years surged to 4.4% in April, the highest since 1991.

Policymakers are closely monitoring a variety of similar gauges to assess whether President Donald Trump’s sweeping tariffs will result in more persistent price growth. While many economists forecast the duties to boost inflation — at least in the near-term — tariff threats so far haven’t changed consumers’ views over the long term in the New York Fed survey.

Tariffs also present a risk to growth, with some economists to forecasting a recession in the year ahead. Americans are growing anxious about their jobs prospects as a result. 

The mean probability of the unemployment rate being higher in a year surged in March to the highest since April 2020, when businesses shuttered nationwide as a result of the pandemic. Concerns grew across age, education and income groups, the New York Fed’s survey showed. The perceived odds of losing one’s job in the next 12 months also climbed.

Nearly a third of households expect to be in a worse financial situation a year from now, the most since October 2023. Expectations for future income growth declined, and more Americans perceive it harder to access credit. Even so, the average perceived probability of missing a minimum debt payment over the next three months decreased by one percentage point to 13.6%. 

Households expect their food prices to rise 5.2% in the year ahead, the highest since May 2024. Their expectations for rent increased half a percentage point to 7.2%, the survey showed. Estimates of growth in gas prices, on the other hand, fell to 3.2%. 

Trump’s tariff announcements have caused massive volatility in financial markets. Most analysts, and investors, are now counting on slower growth and higher inflation, even after recent news of a 90-day pause on so-called reciprocal levies. Tariffs on China, meanwhile, have skyrocketed.

The survey found that the mean perceived probability that US stock prices will be higher 12 months from now dropped to the lowest level since June 2022.

The New York Fed’s Survey of Consumer Expectations is an internet-based survey that uses a rotating panel of approximately 1,300 household heads. Since many of the same respondents are used each month, changes in expectations and behavior of the same individuals over time can be seen.

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