U.S. households are feeling increasingly pessimistic about their personal finances and the job market. According to the Federal Reserve Bank of New York’s May survey, 43.7% felt worse off financially than they did a year ago. That is the highest share since January 2023.
Looking ahead, the outlook is getting worse. Only about 23% of respondents expect their financial situation to improve over the next year, while 36% expect it to get worse. That net outlook is the weakest since October 2022.
Stalling labor mobility
The financial strain is feeding a gloomier view of near-term job prospects. While overall employment growth has stabilized, workers see fewer options if they lose a job. The survey highlighted several labor market concerns:
- The perceived likelihood of losing a job over the next year climbed to 15.1%.
- Confidence in finding a new job within three months of unemployment dropped to 43.7%, well below the 60% average seen before the pandemic.
- Despite the gloom, the probability of workers voluntarily quitting their jobs reached a three-year high.
Consumer price fatigue remains the main anchor for household sentiment. Median expectations for inflation over the next year held steady at 3.5%, while consumers expect rent to increase by 7.4% and food prices to rise by 5.8% over the next 12 months.
The latest consumer sentiment data arrives just before the government releases its May consumer price index. Economists estimate the report will show headline inflation crossing above 4% for the first time in three years.
