NEW YORK—The Federal Reserve Bank of New York's Center for Microeconomic Data released the July 2021 Survey of Consumer Expectations, which shows that households' expectations about year-ahead earnings growth and the likelihood of finding a job increased sharply in July. Short-term inflation expectations were unchanged while medium-term inflation expectation ticked up. While remaining elevated, home price growth expectations declined.
The main findings from the July 2021 Survey are:
Inflation
- Median one-year-ahead inflation expectations were unchanged at 4.8% in July while median inflation expectations at the three-year horizon increased slightly to 3.7% from 3.6%, its highest reading since August 2013. Our measures of disagreement across respondents (the difference between the 75th and 25th percentiles of inflation expectations) declined slightly at the one-year horizon but increased at the three-year horizon due to a strong increase in the 75th percentile. Both measures of short- and medium-term inflation disagreement remain elevated compared to their pre-COVID-19 levels.
- Median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—decreased slightly at the short- and medium-term horizons. Both measures remain well above the levels observed before the outbreak of COVID-19.
- Median year-ahead home price change expectations decreased to 6.0% from 6.2% in June. The decrease was driven mostly by respondents aged 40 or above, and was largest for those who live in the "West" and "Midwest" Census regions.
- Expectations about year-ahead price changes were flat for food prices (at 7.1%), increased by 0.1 percentage point for rent (to 9.8%) and medical care (to 9.5%), and increased by 0.5 percentage point for the cost of a college education (to 7.5%). The median one-year-ahead expected change in the price of gas declined by 1.1 percentage points to 8.1%.*
Labor Market
- Median one-year-ahead expected earnings growth rose 0.3 percentage point in July to 2.9%, its fourth consecutive increase and a new series high. The increase was driven mostly by respondents with no more than a high school degree and with annual household incomes under $50,000.
- Mean unemployment expectations—or the mean probability that the U.S. unemployment rate will be higher one year from now—increased by 1.0 percentage point to 31.7%.
- The mean perceived probability of losing one's job in the next 12 months increased slightly from a series low of 10.9% in June to 12.2%, the series' second lowest reading. The mean probability of leaving one's job voluntarily in the next 12 months also increased to 19.7% from 18.6%.
- The mean perceived probability of finding a job (if one's current job was lost) rose sharply to 57.0% from 54.2% in June, the fourth consecutive month-to-month increase and the highest level since February 2020. The increase was broad-based across income groups and most pronounced among respondents with no more than a high school degree.
Household Finance
- The median expected growth in household income decreased by 0.1 percentage point to 2.9% in July, but remains elevated at pre-pandemic levels seen during late 2018 and early 2019.
- Median household spending growth expectations retreated slightly from a series high of 5.2% reached in June to 5.1% in July.
- Expectations about future credit availability improved slightly, with more respondents in July expecting it will be easier to obtain credit in the year ahead.
- The average perceived probability of missing a minimum debt payment over the next three months increased by 0.8 percentage point, to 10.4%, which is slightly above the 12-month trailing average of 10.0%. The increase was broad based across age and education groups.
- The median expectation regarding a year-ahead change in taxes (at current income level) was unchanged at 4.6%.
- Median year-ahead expected growth in government debt increased to 15.7%, from 15.0% in June.
- The mean perceived probability that the average interest rate on saving accounts will be higher 12 months from now decreased to 27.0%, from 29.9% in June.
- Perceptions about households' current financial situations compared to a year ago deteriorated slightly in July, with more respondents reporting being financially worse off than they were a year ago. Respondents were also more pessimistic about their households' financial situations in the year ahead, with fewer respondents expecting their financial situation to improve a year from now.
- The mean perceived probability that U.S. stock prices will be higher 12 months from now decreased by 1.2 percentage points, to 39.0%.
About the Survey of Consumer Expectations (SCE)
The SCE contains information about how consumers expect overall inflation and prices for food, gas, housing, and education to behave. It also provides insight into Americans' views about job prospects and earnings growth and their expectations about future spending and access to credit. The SCE also provides measures of uncertainty regarding consumers' outlooks. Expectations are also available by age, geography, income, education, and numeracy.
The SCE is a nationally representative, internet-based survey of a rotating panel of approximately 1,300 household heads. Respondents participate in the panel for up to 12 months, with a roughly equal number rotating in and out of the panel each month. Unlike comparable surveys based on repeated cross-sections with a different set of respondents in each wave, our panel allows us to observe the changes in expectations and behavior of the same individuals over time.
* Due to a data recording error in the “one-year ahead commodity price change expectations” series, the data for this series has been revised going back to October 2020.
