^{Source: Bloomberg}

Consumer Anxiety Climbs as Inflation and Unemployment Concerns Reignite

In March, American households grew markedly more uneasy about the economy, as inflation fears spiked and unemployment concerns reached levels not seen since the height of the Covid-19 pandemic. According to the Federal Reserve Bank of New York’s latest Survey of Consumer Expectations, U.S. consumers are bracing for more economic pain ahead, driven by global trade tensions and uncertain labor market dynamics.

Inflation Expectations Surge to Five-Month High

Consumers now expect inflation to hit 3.6% over the next year, a noticeable increase from February’s 3.1% and the highest forecast since October 2023. This aligns with broader data showing prices creeping up in essential categories such as food, rent, and medical care. One-year expectations for food prices rose to 5.2%, the highest since May 2024, while rent is projected to jump by 7.2%. Health care costs are expected to climb a worrying 7.9%, the steepest rise since August 2024.

Unemployment Worries Reach Highest Since April 2020

Even more concerning: consumer confidence in the job market has taken a hit. The survey found that Americans believe there's a 44% chance that unemployment will be higher a year from now, up from 39.4% in February. That’s the most pessimistic reading since the early shockwaves of the Covid-19 crisis in April 2020.

This increase in labor market anxiety coincides with recent layoffs announced across major sectors, including tech, retail, and manufacturing, as companies brace for higher operating costs driven by tariffs and inflation.

Stock Market Sentiment Slips, Gold Shines Brighter

Confidence in the equity markets also declined. Only 33.8% of survey participants expect the stock market to be higher one year from now — the lowest reading since June 2022. This drop follows weeks of volatility and investor uncertainty around interest rate movements and trade disruptions.

Conversely, expectations for gold prices have surged, with respondents anticipating a 5.2% rise, the most optimistic outlook since April 2022. Gold, traditionally seen as a safe-haven asset, is benefitting from increased economic anxiety and geopolitical risk.

Tariffs Stir More Concern Than Traders Are Pricing In

The survey was conducted prior to President Donald Trump’s April 2 announcement of new tariffs, dubbed "Liberation Day," targeting a broad swath of imports as part of his toughened trade stance. Although some of the tariffs were temporarily suspended a week later, the policy shift has already stoked consumer fear, despite markets reflecting a relatively muted inflation outlook.

Market-based inflation indicators like breakeven rates on Treasury Inflation-Protected Securities (TIPS) remain stable, suggesting that institutional investors expect long-term inflation to stay in check. However, household-level sentiment tells a different story — one that reflects the real-world impact of rising prices on everyday budgets.

Longer-Term Outlook Mixed

Looking beyond the next year, expectations for inflation were slightly more subdued. The three-year outlook held steady at 3%, while the five-year forecast edged down to 2.9% — suggesting consumers still believe the Fed can keep longer-term inflation under control.

Fuel price expectations also eased somewhat, with gasoline prices expected to rise by 3.2%, a drop from February’s 3.7%.

Reinforced by Broader Sentiment Data

This gloomier view aligns with other consumer metrics. The University of Michigan’s Consumer Sentiment Index, released in mid-April, showed a similar surge in inflation concerns — one-year inflation expectations rose to their highest level since November 1981, as consumers brace for continued price pressures.

Pressure Mounts as Trade, Prices, and Jobs Collide

While Wall Street might appear calm, Main Street is clearly rattled. Rising prices, job security fears, and global trade uncertainty are forming a potent cocktail of concern. With the Federal Reserve keeping a cautious eye on economic data and policy volatility intensifying, the coming months will likely test the resilience of American households — and the credibility of policymakers trying to guide the economy through turbulent waters.

‍