Federal Reserve Survey: Consumers' short-term inflation expectations rise, and views on employment are the worst in at least 12 and a half years

Local time on Thursday, according to the monthly survey released by the Federal Reserve Bank of New York, U.S. consumers' inflation expectations rose in December, while their outlook on job opportunities fell to the worst level in at least 12 and a half years. The Federal Reserve's report shows that consumers expect prices to rise by 3.4% over the next year, up from 3.2% in November. In the medium to long term, consumers' inflation expectations for the next three and five years remain unchanged at 3%. In terms of specific categories: The median expected increase in home prices among respondents has remained unchanged at 3.0% for the seventh consecutive month. Since August 2023, this indicator has fluctuated within a narrow range of 3.0%–3.3%. The expectation for rent increases over the next year has decreased by 0.6 percentage points to 7.7%. The expectation for gasoline price increases over the next year has decreased by 0.1 percentage points to 4.0%. The expectation for food price increases over the next year has decreased by 0.2 percentage points to 5.7%. The expectation for medical cost increases over the next year has decreased by 0.2 percentage points to 9.9%. The expectation for higher education cost increases over the next year has decreased by 0.1 percentage points to 8.3%. Meanwhile, the survey data regarding the labor market is as follows: Consumers believe that the probability of finding a new job if they lose their current one has dropped to 43.1%, the lowest level since the New York Fed launched the Consumer Expectations Survey in mid-2013. This decline is primarily driven by respondents with annual household incomes below $100,000, particularly noticeable among those aged 60 and above and those with a high school education or less. The median expectation for income growth over the next year has decreased by 0.1 percentage points to 2.5%, still below its 12-month rolling average of 2.7%. Since May 2021, this indicator has fluctuated within the range of 2.4%–3.0%. The average expectation for unemployment, which is the average probability that the U.S. unemployment rate will rise in a year, has decreased by 0.3 percentage points to 41.8%, but remains above the 12-month rolling average of 39.9%. The subjective perception of the probability of unemployment over the next 12 months has increased by 1.4 percentage points to 15.2%, higher than the 12-month rolling average of 14.3%. This increase is generally present across different age and education groups. The average probability of voluntarily leaving a job over the next 12 months has decreased by 0.2 percentage points to 17.5%. The New York Fed's survey also shows the following data regarding household finances: Consumers believe that the probability of being unable to make the minimum debt payments on time in the next three months is 15.3%, the highest level since April 2020. Meanwhile, the proportion of respondents expecting their financial situation to improve over the next year has risen to the highest point since February 2025. The median expectation for household income growth has increased by 0.1 percentage points to 3.0%, slightly above its 12-month rolling average of 2.9%. The median expectation for household spending growth over the next year has decreased by 0.1 percentage points to 4.9%. Compared to a year ago, the perception of credit availability has worsened: the proportion of households that believe "it is harder to obtain credit" has increased, while the proportion that believes "it is easier to obtain credit" has decreased. Expectations for future credit availability have also weakened slightly, with the net proportion of respondents expecting it to be harder to obtain credit over the next year increasing Compared to a year ago, the perception of current household financial conditions has improved: the proportion of households that believe their financial situation has worsened has decreased, while the proportion that believes it has improved has increased. Expectations for household financial conditions a year from now have also improved: the proportion expecting their financial situation to worsen has decreased, while the proportion expecting it to improve has increased, reaching the highest level since February 2025. Analysis points out that these data highlight the divisions within the Federal Reserve: some officials are more concerned about inflation issues, while others believe that rising unemployment is the greater risk. This division is likely to lead the Federal Reserve to maintain interest rates at its next policy meeting later this month. The release of these survey results comes just before the U.S. Bureau of Labor Statistics is set to publish its monthly non-farm payroll data on Friday, while the Consumer Price Index (CPI) data is scheduled for release on January 13