NY Fed Survey: Expected Unemployment Highest Since April 2020, Inflation Expectations Hold at 3.9%

Americans are more worried about the job market than they have been in six and a half years. They also expect prices to keep climbing at close to 4% a year.

That is the picture from the New York Fed's October Survey of Consumer Expectations, released Monday, Nov. 9.

Jobs: the fear is up, the data is not

The share of respondents expecting the unemployment rate to be higher a year from now hit its highest level since April 2020, the early weeks of the Covid shutdowns. The perceived probability rose 1.4 percentage points to 45.3%.

Respondents also saw a greater chance of involuntarily losing a job in October. That expectation remains at relatively low levels. They also put their odds of finding new work after a job loss higher than in September.

The actual numbers cut the other way. On Friday, Nov. 6, the government reported that employers added 165,000 jobs in October and the unemployment rate eased to 4.1%. Hiring figures for recent months were revised up sharply.

Fed officials have regularly described the labor market as "low-hire, low-fire." Households also said their current finances improved a bit from September. Their outlook for finances a year out was steady, and views on credit access were unchanged.

So consumers are bracing for a weaker job market that the latest payroll data does not show.

Inflation: unchanged, and well above target

Median expectations did not move at any horizon:

• One year ahead: 3.9% (3.91%, versus 3.90% in September and a 3.8% consensus forecast)
• Three years ahead: 3.3%
• Five years ahead: 3.0%, where it has sat for 14 months running

The Fed calls that kind of stability "anchored." The anchor is a full percentage point above the Fed's 2% target.

Disagreement among respondents narrowed at the one- and five-year horizons, and uncertainty eased at the one- and three-year horizons. People are getting more confident that inflation stays where it is.

The category detail was mixed. Expected gasoline price inflation fell 0.6 points to 4.2%, as households saw a more moderate increase ahead. Food was unchanged at 5.5%. Medical care edged up 0.1 point to 9.3%, and college tuition rose 0.1 point to 7.6%.

Rent was the big mover. Expected rent increases over the next year jumped 0.9 points to 7.7%, up from 6.6% in August.

Goldman sees a much softer CPI

The October consumer price index is due Tuesday, Nov. 10, the last CPI report before the Fed's Dec. 9 decision. Goldman Sachs is forecasting a cooler print than consumers expect.

The bank projects core CPI up 0.16% for the month against a 0.2% consensus, and headline CPI up 0.21% against 0.3%. Goldman expects medical services prices to fall 0.1%, driven by a 2.5% drop in health insurance as the Bureau of Labor Statistics incorporates updated premium data. It also expects used car prices to fall 1.5% and airfares to be flat.

Goldman's economists say they expect core CPI increases of about 0.1% a month in November and December. They cite slowing shelter costs, shrinking contributions from tariff-related price increases, and continued downward pressure from health insurance. Annualized, 0.1% a month works out to roughly 1.2%, about a third of the 3.9% households expect.

The two views are hard to square. Goldman is forecasting one month of data, and households are guessing at a full year. Consumers expect medical costs to rise 9.3% and rents 7.7%, while Goldman's model has medical services falling in October.

The political backdrop

The survey was conducted in October, in the run-up to the midterm elections. Democrats made broad gains and won control of both houses of Congress. Reuters described the national mood going into the vote as sour, with Americans struggling with high inflation that it attributed to President Donald Trump's trade tariffs and the Middle East war. That is Reuters's characterization. Goldman's own note does point to tariff-related price increases as a contributor that is now shrinking.

The administration has not been quoted on the survey results.

What the Fed does with it

Reuters reports that Fed officials are broadly expected to raise interest rates at the early December meeting to bring inflation back to target. A prediction market on whether the Fed hikes at least once in 2026 had that probability falling from 24% to 20.5% over 24 hours. The two readings do not line up. The market price implies a December hike is far from the consensus Reuters describes.

If Tuesday's CPI comes in near Goldman's forecast, the Fed will face an unusual set of facts for its Dec. 9 meeting. Hiring is stronger than expected, price growth may be cooling, and households still expect inflation near 4%. Whether policymakers weigh a hot jobs report, a soft CPI, or a public that has priced in 3.9% inflation will be clear only when they announce their decision.