US consumers' inflation expectations for the coming year remained stable, but pessimism about the labor market clearly intensified, reflecting the inherent contradictions in the current economic outlook.
The monthly Survey of Consumer Expectations released by the New York Fed on Monday showed that respondents' inflation expectations for the next year held at 3.9%, while three-year and five-year inflation expectations also remained steady at 3.3% and 3%, respectively.
At the same time, the average probability consumers assign to a rise in the unemployment rate climbed to its highest level since April 2020, reflecting public concerns about the job market.
Inflation expectations were broadly stable overall, but divergence in employment prospects will provide important reference for the Federal Reserve's policy path.
Several Fed officials have recently said that gradual rate hikes are needed to push inflation back to the 2% policy target. October Consumer Price Index (CPI) data will be released on Tuesday, which may further sway market judgments on the direction of monetary policy.
Unemployment concerns rise to a four-and-a-half-year high, with clear internal divergence
The New York Fed survey showed that the average probability respondents assign to the unemployment rate rising over the next year rose to 45.3%, the highest since April 2020, driven mainly by respondents without a college degree.
However, the survey also presented an opposing signal: among those already unemployed, the probability of finding a new job improved for a second consecutive month, reaching its highest level since November 2025.
For those currently employed, the probability of losing their job in the next year edged up slightly, but the willingness to voluntarily quit declined, consistent with the "low firing, low hiring" environment described by Fed officials.
Fed officials have repeatedly said the labor market is in a delicate balance. The October government employment report showed the unemployment rate fell to 4.1%, with nonfarm payroll gains beating expectations, indicating the market remains resilient.
Personal financial situation presents a mixed picture
At the personal finance level, the New York Fed data also showed a divergent picture.
The probability of being unable to make a minimum debt payment within the next three months rose to its highest level since December of last year, reflecting increased repayment pressure for some consumers; at the same time, perceptions of credit access changed little.
In terms of subjective assessments of financial situation, the share of households saying their financial situation had improved over the past year rose slightly, but the share of respondents expecting their financial situation to worsen over the next year also edged higher, with both sentiments coexisting.
Previously released data showed that US economic growth in the quarter through September reached its fastest pace in nearly a year, and several other surveys also showed a recovery in consumer confidence about personal financial prospects, contrasting with some of the pessimistic signals in this survey.
Inflation expectations anchored, rate hike path still debated
The overall stability of consumer inflation expectations provides the Fed with some room to maneuver in policymaking.
Last month, the Fed left the federal funds rate target range unchanged at 3.75% to 4%, but several officials have since said gradual rate hikes remain necessary to guide inflation back to the long-term 2% target.
At the last policy meeting, decision-makers said they would rely on "the accumulation of more information" to judge the optimal level of interest rates, indicating continued flexibility in the policy stance.
The October CPI data due on Tuesday will become a key basis for the market to assess the Fed's next move.
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