On Tuesday, October 7th, the Federal Reserve Bank of New York released a latest survey report indicating a growing pessimism among Americans towards the labor market, leading to a sharp decline in their confidence in substantial pay raises in the coming year.
According to the September Survey of Consumer Expectations (SCE) by the Federal Reserve Bank of New York, respondents expect a wage increase of only 2.4% in the next year, the lowest level since April 2021. The rate of those expecting an increase in the unemployment rate in the next year has also risen, from 39.1% in August to 41.1%.
In August, respondents had reached a new low since June 2013 in terms of the probability of quickly finding a new job after losing their current one, standing at 44.9%. This indicator saw a slight rebound in September, reaching 47.4%.
Although private data continues to show signs of a slowing labor market, the delay in government data release due to the shutdown has left it unclear whether the unemployment rate actually increased in September.
Furthermore, the survey by the Federal Reserve Bank of New York also indicates that consumers expect prices of goods to rise while wage growth will slow down. The median expectation for inflation in the next year has increased from 3.2% to 3.4%; the five-year outlook has gone up from 2.9% to 3.0%; and the three-year outlook remains unchanged at 3.0%.
The group showing the most significant increase in one-year inflation expectations are individuals with a high school education or below, as well as families with an annual income below $50,000.
However, with most Bureau of Labor Statistics (BLS) employees forced to take leave during the shutdown, official inflation data is expected to be released on October 15th.
The survey shows that the median expectation for housing price growth has remained unchanged at 3.0% for the fourth consecutive month.
In terms of expected changes in prices of goods, the median expectation for food prices has risen by 0.3 percentage points to 5.8%, the highest since March 2023; expected gasoline prices to increase by 0.5 percentage points to 4.2%; medical costs expected to rise by 0.5 percentage points to 9.3%; rent expected to increase by 1.0 percentage point to 7.0%; while the expected rate of change in college education costs has decreased by 0.8 percentage points to 7.0%.
The median expectation for household income growth remained unchanged at 2.9% in September, consistent with the average over the past 12 months.
SCE is a nationally representative survey tracking Americans’ expectations on economic indicators such as inflation, prices, job prospects, income growth, future spending, and access to credit. The survey conducts questionnaires via the internet with approximately 1,200 household heads.