- Federal Reserve Bank of New York finds more positive economic expectations among survey respondents in January
- Respondents foresee better job security and financial security in year ahead
- Optimism tempered by expectations of higher prices and taxes
Consumers had a more optimistic outlook on their financial situation in the coming year, according to a recent Federal Reserve Bank of New York. Respondents generally had more favorable expectations about their economic well-being, including job security and access to credit.
The Survey of Consumer Growth Expectations, which is issued to approximately 1,300 respondents each month, found that the median household income growth expectation for the year ahead was 2.4 percent – the highest figure since February 2020. Earnings expectations were flat for the sixth consecutive month at 2 percent.
The mean perceived probability of losing one’s job fell for the third straight month to its lowest point since September 2019. An average of 13.6 percent of respondents said they anticipate they might face unemployment in the next 12 months; the decrease was more pronounced among respondents with lower incomes and education levels.
The mean probability of a respondent leaving their job voluntarily in the next year fell to 16 percent, a new survey low. Among those who had lost a job, the perceived probability of finding a job in the year ahead rose from 46.2 percent in December to 49.5 percent, but remained well below the pre-pandemic average of 59.2 percent.
Year-ahead spending growth expectations increased to 4.2 percent, the highest level in five years. The increase was most prominent among respondents under the age of 40.
This anticipated growth dovetails with forecasts that COVID-19 vaccine distribution, along with the potential for another round of economic stimulus, will boost economic spending in the near future. However, respondents also expected higher costs in general, including median expectations for a 5.6 percent increase in food prices, 6.2 percent hike in gas prices, and 9.2 percent increase in the costs of medical care.
In addition, the median respondent is expecting taxes to be 4.4 percent higher a year from now – the highest expected increase since September 2013.
Respondents’ expectations on inflation remained flat at both the short- and medium-term horizons. Respondents were also more optimistic on their perceived ability to access credit, keep up with debt payments, reap the rewards of higher savings rates and stock prices, and have an improved financial situation a year from now.
