Consumers Uneasy About US Labor Market, Household Finances in Year Ahead: New York Fed

Nearly 38 percent of respondents told the regional central bank that they expect the unemployment rate will be higher one year from now, up from 36.6 percent in July.
Fewer consumers expected to lose their jobs in the next 12 months, down by 1 percentage point from the July report to 13.3 percent. This was below the 12-month trailing average of 13.7 percent.
SCE data also showed that the perceived probability of finding employment if one’s job is lost dipped by 0.2 percentage points to 52.3 percent. This, too, was below the 12-month average of 53.9 percent.
The probability of leaving a job voluntarily slipped by nearly 2 percent to 19.1 percent.
The one-year outlook for expected earnings growth rose by 0.2 percentage points to 2.9 percent, above the 12-month trailing average of 2.8 percent.
The share of individuals who reported searching for a job surged to 28.4 percent, up from 19.4 percent in July 2023. This represented the highest reading since the regional central bank started the series a decade ago.
Respondents further noted that the average reservation wage—the lowest wage that individuals would accept for a new position—was higher than pre-COVID-19 pandemic levels, coming in at $81,147.
This suggests that inflation pressures might be higher than government data show, according to economist Peter St Onge.
Since January 2021, cumulative inflation has surged by more than 20 percent.
Individuals anticipate gasoline, medical care, and rent to be more expensive in the year ahead. Conversely, they expect growth in the costs of food and college tuition to ease next year.
The survey found that more respondents think their households’ current financial situation will deteriorate in the coming year.
“Perceptions about households’ current financial situations deteriorated slightly with fewer respondents reporting being better off than a year ago and more respondents reporting being worse off,” the report stated. “Year-ahead expectations also deteriorated somewhat, with a larger share of respondents expecting to be worse off.”
One-quarter of respondents think they will be “much” or “somewhat” worse off. More than one-third (36 percent) say their household’s financial situation is worse off than last year.
At the same time, New York Fed economists note that “overall, respondents remain considerably more optimistic about their financial situation compared to a year ago.”
Median expected growth in household income ticked higher by 0.1 percentage points to 3.1 percent. Likewise, median household spending growth expectations increased by 0.1 percentage point to 5 percent.
“The series has moved within a narrow range of 4.9% to 5.2% since November 2023, remaining well above its February 2020 level of 3.1%,” the report stated.
Credit availability expectations slightly improved in August.
For the third consecutive month, the average perceived odds of missing a minimum debt payment over the next three months increased by 0.3 percentage points to 13.6 percent, the highest level since April 2020.
However, personal finance publication WalletHub says real (inflation-adjusted) second quarter total credit card debt was roughly $1.28 trillion. The outlet notes that this is about 13 percent below the inflation-adjusted peak in December 2008.
With the Federal Reserve expected to cut interest rates later this month, borrowers can pencil in savings in 2025, according to WalletHub editor John Kiernan.
Investors overwhelmingly expect the Fed to lower the benchmark interest rate by 25 basis points (0.25 percentage points), the first cut since the onset of the COVID-19 pandemic.
The Fed will hold its two-day policy meeting on Sept. 17 and 18.