Declining Job Market Confidence Reflected in New York Fed Survey

The Federal Reserve Bank of New York’s Center for Microeconomic Data released its August 2025 Survey of Consumer Expectations, revealing a notable decline in consumer confidence regarding job prospects and a slight increase in inflation expectations. Conducted from August 1 to August 31, the survey indicates that the mean perceived probability of finding a new job after losing one plummeted to 44.9%, marking a 5.8 percentage point drop from July and the lowest level since the survey's inception in June 2013. Concurrently, expectations for the unemployment rate to rise increased to 39.1%, up 1.7 percentage points from the previous month.

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Median inflation expectations for the one-year horizon rose to 3.2%, while expectations for three- and five-year horizons remained stable at 3.0% and 2.9%, respectively. The survey also highlighted a deterioration in perceptions of current financial situations, with a larger share of households reporting a worse financial outlook compared to the previous year. Despite this, expectations for household income growth remained unchanged at 2.9%, and spending growth expectations slightly increased to 5.0%.

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The survey's findings reflect broader concerns about the U.S. labor market, which has shown signs of cooling. The Bureau of Labor Statistics reported a mere 22,000 new jobs added in August, significantly below the anticipated 75,000, and the unemployment rate rose to 4.3%. These figures contribute to a growing sentiment among consumers that job opportunities are dwindling, particularly among those with lower educational attainment.

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Critics argue that the current economic climate, characterized by rising inflation and stagnant job growth, is creating a precarious situation for workers. Elizabeth Renter, a senior economist at NerdWallet, noted, "Consumers are feeling down about job-finding opportunities, and those feelings are wholly appropriate." The sentiment reflects a shift from the "Great Resignation" period of 2021-2022, where job mobility was high, to a more cautious labor market environment.

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Federal Reserve officials are increasingly concerned about the labor market's trajectory. Fed Governor Christopher Waller emphasized the need for proactive measures, stating, "You want to get ahead of having the labor market go down because usually when the labor market turns bad, it turns bad fast." This sentiment underscores the urgency for potential interest rate cuts to stimulate hiring.

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The Federal Open Market Committee is expected to convene on September 16-17 to discuss monetary policy in light of the labor market's performance. Analysts predict a strong likelihood of a rate cut, with futures traders pricing in a 100% chance of at least a 0.25% reduction in the federal funds rate. This decision will be influenced by upcoming inflation reports, which are critical for assessing the broader economic landscape.

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• “Consumers are feeling down about job-finding opportunities, and those feelings are wholly appropriate,” — Elizabeth Renter, Senior Economist, NerdWallet

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• “You want to get ahead of having the labor market go down because usually when the labor market turns bad, it turns bad fast.” — Christopher Waller, Fed Governor

Reuters

The August 2025 Survey of Consumer Expectations paints a concerning picture of the U.S. economy, highlighting rising inflation expectations alongside a significant decline in consumer confidence regarding job security and market mobility.

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