US Consumers Grow More Concerned About Jobs and Personal Finances

U.S. consumers’ expectations for inflation remained largely stable in August, while concerns about employment and personal finances increased, according to the New York Federal Reserve’s latest Survey of Consumer Expectations.

Households continued to expect inflation to reach 3.6% over the next year and 3% over the next five years. The three-year inflation expectation eased slightly to 3.2%, down from 3.3% in July. Consumers also anticipated higher gasoline prices over the coming year.

Despite relatively little movement in inflation expectations, views about the labor market became less positive. The expected unemployment rate one year from now rose to its highest level since April 2020, when the U.S. economy was heavily affected by the COVID-19 pandemic. The increase was seen across different age, income and education groups.

At the same time, respondents reported a lower expectation of losing their jobs compared with July. However, their expectations of finding new employment after an involuntary job loss also weakened.

Consumers also became less positive about their current and future financial conditions and expressed greater concerns about access to credit both now and over the next year.

Key Inflation Data Ahead

The survey comes about a week before the Federal Reserve’s September 15-16 policy meeting, as officials continue to assess inflation that remains above the central bank’s 2% target. The federal funds rate is currently in the 3.50%-3.75% range.

The August Consumer Price Index, due Friday, is expected to be an important factor in the Fed’s upcoming policy decision. Some officials have indicated that the inflation data could influence their position on interest rates.

Fed Governor Christopher Waller said that continued progress toward the Fed’s 2% inflation goal would make him willing to support keeping the policy rate at its current level. Cleveland Fed President Beth Hammack, meanwhile, has continued to support action to reduce inflationary pressure and indicated that she remains in favor of raising rates.