In another sign of a fraying labor market, job finding expectations fell to a record low in August based on a survey of consumers conducted by the Federal Reserve Bank of New York’s Center for Microeconomic Data.
The mean perceived probability of finding a new job if laid off plummeted by 5.8 percentage points to 44.9%. That is the lowest reading since the New York Fed began tracking that metric in June 2013.
Job loss concerns also increased slightly, with the mean perceived probability of losing one’s job over the next 12 months increasing to 14.5% from 14.4%. Additionally, the mean probability that the U.S. unemployment rate will be higher a year from now rose 1.7% to 39.1%, which is above the 12-month trailing average of 38.1%.
A downturn in job growth has led to heightened expectations that the Federal Reserve’s rate-setting committee will slash the benchmark federal funds rate later this month. On Friday, the Bureau of Labor Statistics (BLS) reported U.S. employers added just 22,000 nonfarm jobs in August, with the unemployment rate ticking 0.1% higher for the month.
The Fed generally cuts interest rates during periods of stalling jobs growth, as lower borrowing costs tend to boost hiring trends. But rising inflation can complicate that calculus, as a rate cut can fuel further consumer price increases.
The latest Commerce Department inflation data, released Aug. 29, showed the personal consumption expenditures (PCE) price index rising 2.6% on a seasonally adjusted annual basis in July, which is above the Fed’s 2% target for long-run inflation.
Respondents to the New York Fed survey see inflation rising to 3.2% by August 2026 before falling to 3% at the three-year time horizon and 2.9% at the five-year mark.
Two key inflation reports are due out this week, providing final pieces of data before the Federal Open Market Committee reconvenes on Sept. 16-17 to decide the path of interest rates. Wednesday’s producer price index report on wholesale price changes will be followed by Thursday’s consumer price index data, which measure changes in prices paid by urban consumers for various goods and services.
It would likely take a drastic spike in inflation to dissuade the Fed from cutting rates following a series of dour jobs reports. As of Monday morning, futures traders were pricing in 100% odds of a least a 0.25% cut to the fed funds rate, according to the CME FedWatch tool.
