A new survey from the Federal Reserve Bank of New York indicates that Americans are becoming increasingly pessimistic about their personal finances, with expectations that conditions could worsen in the months ahead.
According to the May Survey of Consumer Expectations, the proportion of respondents who said their financial situation had become “somewhat worse off” or “much worse off” compared to a year earlier rose to its highest level since January 2023. At the same time, the share of Americans who believed their finances would improve continued to decline for the fifth consecutive month, reaching its lowest point since October 2022.
The report, which does not include explanations for the data, comes amid rising living costs and broader economic pressure, including increased fuel and food prices linked to global tensions and supply disruptions.
Inflation expectations for the year ahead remained elevated at 3.5%, slightly down from April’s 3.6%, which was the highest reading in a year.
Recent increases in gasoline prices have contributed to renewed inflationary pressure. The Consumer Price Index rose from 2.4% at the start of the year to about 3.8% in April, offsetting wage growth for many households.
Economists note that inflation expectations are closely monitored by the US Federal Reserve because they can influence consumer behaviour. When people expect higher prices, they may increase spending or demand higher wages, potentially driving inflation further.
Looking ahead, the data suggests inflation could remain elevated, with projections indicating it may surpass 4% annually for the first time in three years.
Despite a relatively stable labour market, sentiment remains weak. The US economy added an estimated 172,000 jobs in May, but consumer confidence in employment prospects continues to fall.
The survey showed the perceived probability of losing a job in the next year rose to 15.1%, the highest level in six months, while confidence in finding a new job within three months dropped to 43.7%, well below pre-pandemic averages.
“Where you put the likelihood of finding a job in three months’ time if you lost your current job is a good indication of how you perceive the job market generally – and Americans don’t like the look of things,” said Elizabeth Renter, senior economist at NerdWallet.
She added that the labour market remains in a “low-hire, low-fire environment,” where job movement is limited, and workers feel increasingly stuck.
However, the report also noted a slight rise in the likelihood of voluntary job quitting, reaching its highest level in over three years, suggesting some workers may still be open to exploring new opportunities despite uncertainty.
