Consumer Inflation Expectations Hold Steady, Job Concerns Rise

U.S. consumers’ inflation expectations held largely steady in August, but their outlook for the labor market deteriorated, highlighting a growing divide between persistent price concerns and anxiety about employment conditions ahead of the Federal Reserve’s September policy meeting.

Median inflation expectations for the one-year horizon were unchanged at 3.6%, according to the Federal Reserve Bank of New York’s latest Survey of Consumer Expectations. Five-year expectations also held at 3%, while the three-year measure declined 0.1 percentage point to 3.2%.

Energy costs were a notable source of concern. Median expectations for gasoline-price growth jumped 1.7 percentage points to 4.6%, reflecting higher oil prices and supply risks related to conflict in the Middle East. Expected home-price growth, by contrast, declined 0.2 percentage point to 3%.

The survey showed a more cautious labor market outlook despite the economy adding 162,000 jobs in August and the unemployment rate holding at 4.1%.

The perceived probability that the unemployment rate will be higher a year from now rose 1.6 percentage points to 44.4%, its highest level since April 2020. Expectations for finding a new job after losing one also deteriorated.

The results were not uniformly negative. The average perceived probability of losing a job during the next 12 months fell 0.4 percentage point to 13.8%, its lowest reading since February. Expectations of voluntarily leaving a job also improved.

Consumers nevertheless reported weaker assessments of their current and future finances and more concern about obtaining credit.