Main Street Senses an Economic Turn, NY Fed Says

Households’ perceptions of inflation and the labor market improved slightly in January, the Federal Reserve Bank of New York said Monday (Feb. 9).

When considering inflation, households’ short-term expectations improved while their medium- and long-term expectations remained unchanged, the New York Fed’s Center for Microeconomic Data said in a Monday press release outlining findings from its January Survey of Consumer Expectations .

Median inflation expectations at the one-year horizon declined by 0.3 percentage points to 3.1% while those at the three-year and five-year horizons stayed at 3%, according to the release.

As for the labor market, households said in January that they felt there was a lower likelihood of losing their job and a higher likelihood of earnings growth and of finding a job in the event they do lose their current one, the release said.

The mean perceived probability of losing one’s job in the next 12 months decreased by 0.4 percentage points to 14.8%. This change drew the number closer to the trailing 12-month average of 14.6%, per the release.

Median one-year ahead earnings growth expectations rose by 0.2 percentage points to 2.7%. This increase was driven by respondents with a household income under $50,000, according to the release.

Households’ mean perceived probability of finding a new job within three months of losing a current one increased by 2.5 percentage points to 45.6%. This rise moved the figure closer to the trailing 12-month average of 48.6%, per the release.

The University of Michigan ’s Index of Consumer Sentiment , which was released Jan. 23, also found that consumer outlook improved in January. The Index rose from 52.9 in December to 56.4 in January, reflecting gains in current conditions and expectations.

Much of January’s improvement stemmed from a modest easing in inflation fears rather than a broad sense of economic comfort, with year-ahead inflation expectations declining to 4%. However, long-term inflation expectations edged higher.

ADP said Feb. 4 that the private sector added 22,000 jobs in January, down from the 37,000 jobs added during the previous month. Year-over-year pay growth was little changed for job-stayers and slower for job-changers.