(Reuters) – U.S. households are hopeful they will be able to spend more freely in the coming year, according to a survey released Monday by the Federal Reserve Bank of New York – a sign that some consumers feel their finances could soon be turning the corner after taking a hit during the pandemic.
Expectations for how much spending will grow over the next year rose to a median 4.2%, the highest rate in more than five years. However, the outlook for how much earnings will grow over the next year remained flat at 2.0%, the sixth straight month without change.
Consumers also reported a mixed outlook for the labor market, with the perceived odds of losing one’s job over the next year declining to an average 13.6% in January, reaching the lowest level since September 2019. However, the expected chance that the U.S. unemployment rate would be higher in a year rose to 40.2% in January from 38.9% in December.
The report shows the challenges U.S. households are facing nearly a year into the global pandemic that led to a surge in joblessness and killed more than 460,000 Americans.
While the distribution of vaccines is expected to lead to an economic rebound in the second half of the year, data released by the Labor Department on Friday shows the job market recovery is stalling – providing evidence for Democrats who say that households and businesses need more support.
The survey of consumer expectations is a monthly poll based on a rotating panel of 1,300 households.
Median expectations for how inflation would change over the next one year and the next three years both stayed the same at 3.0%, but consumers said they expected the cost of rent, food and medical care to increase at a fast rate over the next year.
(Reporting by Jonnelle Marte; Editing by Chizu Nomiyama)