New York Fed Survey: U.S. Consumer Employment Confidence Improves in July, Short-Term Inflation Expectations Drop to 3.6%

The Federal Reserve Bank of New York released its July Consumer Expectations Survey on Friday (July 7), showing that U.S. consumers' confidence in finding new employment has increased, while short-term inflation expectations have slightly declined. However, respondents also anticipate a rise in future unemployment rates and express growing concern over personal job loss and debt default, highlighting a conflicted outlook on the economy.

The survey found that the average probability of finding a new job after unemployment rose to 46.2%, the highest level this year, with the most significant gains seen among those with less than a high school education and households earning under $50,000 annually. The expected likelihood of voluntarily leaving a job also increased.

At the same time, the perceived probability of the national unemployment rate rising over the next 12 months also increased across all age and income groups. Respondents’ own perceived risk of losing their job within the next year also rose slightly, though it remains below the 12-month average.

Earlier government data showed that nonfarm payrolls unexpectedly declined by 23,000 in July, while labor force participation continued to fall, and the unemployment rate dropped to 4.1%. Weak labor market conditions, combined with recent declines in oil prices, may give the Federal Reserve (Fed) more time to assess its future interest rate path. The Fed held rates steady last week for the fifth consecutive time, although three officials advocated for a one-notch rate hike.

On inflation, consumers' one-year-ahead inflation expectations fell from 3.7% in June to 3.6%. Three-year and five-year expectations remained unchanged at 3.3% and 3.0%, respectively. Expected increases in gasoline prices one year out rose again, while home price growth expectations held steady at 3.2%. Despite energy price volatility due to Middle East conflicts, medium- and long-term inflation views did not deteriorate significantly but remain above the Fed’s 2% target.

Households reported improved financial conditions, with more respondents stating their current situation is better than a year ago and expecting it to remain largely unchanged through 2027. Consumers find credit harder to obtain currently, but expect access to credit to ease in the future.

Notably, the average probability of being unable to make minimum debt payments over the next three months increased, particularly among households earning under $50,000 annually. Conversely, consumers are more optimistic about the stock market, with the probability of expecting higher stock prices one year out reaching the highest level since the survey began in April 2021.