According to a survey released by the Federal Reserve Bank of New York on Monday, Americans’ outlook on the labor market turned more pessimistic in May, with job prospects for job seekers dropping to their lowest level this year.
The survey also showed that consumers’ inflation expectations remained largely unchanged compared to a month earlier.
This report was released following an unexpectedly strong jobs report in May, when employment growth exceeded expectations. For Federal Reserve officials, the report temporarily eased concerns about the U.S. labor market remaining fragile, while simultaneously heightening worries over inflation. The policymakers’ preferred inflation gauge reached 3.8% in April, driven by soaring energy prices.
Federal Reserve officials are expected to keep interest rates unchanged at their meeting in Washington on June 16–17, the first meeting chaired by new Chair Kevin Warsh.
The Federal Reserve Bank of New York’s report sent mixed signals about the labor market. In May, the probability that people expected to become unemployed within the next 12 months rose by 0.5 percentage points to 15.1%. At the same time, their perceived ability to find a job declined by 2.3 percentage points to 43.7%, the lowest level since December last year.
Nevertheless, the expected quit rate—the probability of voluntary resignation within the next year, typically a measure of labor market confidence—rose in May to its highest level since February 2023. The report noted that this increase spanned across all age groups, education levels, and income brackets.
Consumers expect inflation to be 3.5% over the next year, down from 3.6% in April. In May, expectations for inflation over the next three and five years remained stable at 3.1% and 3%, respectively.
The Federal Reserve Bank of New York’s survey findings also confirm conclusions from other reports that consumer confidence has fallen to a historic low, primarily due to the largest gasoline price increases in years and a series of aggressive tariff policies. The share of households reporting their financial situation as worse than last year reached its highest level since January 2023. More consumers also expect their financial condition to deteriorate further over the coming year.
In May, consumers’ likelihood of being unable to repay their minimum debt within the next three months also increased, primarily among those with at most a high school education and annual incomes below $100,000.
