NEW YORK: U.S. consumers ended 2025 with higher expectations for inflation over the coming year and a more pessimistic assessment of job prospects, according to a monthly survey released by the Federal Reserve Bank of New York, highlighting persistent concerns about prices and employment as households enter 2026.
The New York Fed’s Survey of Consumer Expectations showed that median one-year-ahead inflation expectations rose in December to 3.4 percent from 3.2 percent in November, extending a gradual increase observed over recent months. Expectations for inflation over the three-year and five-year horizons were unchanged, suggesting that concerns remain focused on near-term price pressures rather than longer-term inflation trends.
At the same time, perceptions of labor market conditions weakened noticeably. Respondents reported a sharp decline in the perceived probability of finding a new job within three months if they were to lose their current employment, with the measure falling to its lowest level since the survey began in 2013. The perceived likelihood of losing a job over the next year increased slightly, pointing to reduced confidence in job security across a broad range of households.
The decline in job-finding confidence was evident across demographic groups but was more pronounced among older respondents and those with lower incomes. While the survey does not measure actual job outcomes, it tracks household sentiment, which economists view as an important indicator of future consumer behavior, particularly spending and saving decisions.
Job market perceptions deteriorate despite stable unemployment
Official labor market data continue to show relatively stable conditions, though recent reports indicate slower momentum. Job growth in December was modest compared with earlier periods, and the unemployment rate edged down to 4.4 percent. Hiring over the past year has been uneven across sectors, contributing to perceptions among some workers that employment opportunities are becoming more limited despite steady headline figures.
The survey also showed slightly lower expectations for personal income growth over the next year, while expectations for price increases in key categories such as food, rent, and energy remained elevated. Expectations for home price growth were largely unchanged, and anticipated increases in medical care and education costs stayed high, reinforcing concerns about household budgets.
Some of the inflation pressures shaping current expectations can be traced to policy decisions made in earlier years. Measures enacted during the administration of Donald Trump, including tariffs on a wide range of imported goods, contributed to higher costs for certain consumer products and industrial inputs during that period. Those tariffs remained in place through subsequent administrations and have been cited in economic data as a factor that raised prices in affected categories, influencing longer-lasting perceptions about inflation risks.
Caution grows entering the 2026 economic cycle
Federal Reserve officials monitor consumer inflation expectations closely because they can affect wage-setting and spending behavior. While measures of actual inflation have moderated from earlier highs, policymakers have emphasized the importance of preventing expectations from becoming entrenched above the central bank’s 2 percent target. The combination of rising short-term inflation expectations and weakening job confidence presents a challenging environment for assessing the underlying strength of the economy.
The December survey results add to evidence that U.S. households are becoming more cautious as they head into 2026. Even as some economic indicators point to resilience, sentiment data suggest heightened sensitivity to prices and employment risks. The New York Fed’s findings underscore the gap between headline economic measures and household perceptions, a dynamic that continues to shape the broader outlook for consumer confidence and economic activity. – By Content Syndication Services.