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--Expected Earnings Growth Rose, But Income and Household Spending Fell
--Unemployment Rate Will be Higher 1-Yr From Now 33.5%; Low Since Dec 2014 
By Holly Stokes and Sara Haire
     WASHINGTON (MNI) - Consumers' expectations for 1-year and 3-year inflation
picked up modestly, to 2.8% and 2.9% respectively, reported the New York Fed's
Survey of Consumer Expectations on Tuesday morning. 
     This rise in expected inflation mirrors a continuingly tightening labor
market. The median year ahead earnings growth expectations continued its rise
since October, ticking up to 2.7%, as the perceived probability that
unemployment will be higher in a year dipped down to 33.5%. Both indicators
reached levels not seen since late 2014. 
     In line with the labor market tightening, the probability of both one
leaving their job voluntarily and involuntarily increased slightly to 21.7% and
13.8%, respectively. These levels are still below October's surge, but in line
and slightly above the trailing 12-months. 
     --MIXED HOUSEHOLD FINANCES
Despite expectations for earnings growing slightly, expectations for household
income and spending declined. However, the dip in household income to 2.9% was
not indicative of a change from the 2017 trend, but rather a reversion from
November's 3.6% spike. 
     Slight setbacks in expectations for household income did not drag down
expectation for financial situations to improve.
--POSITIVE OUTLOOK ON FISCAL
     Consumers were similarly optimistic towards government debt, with
expectations that it will be higher one year from now declining. This, combined
with modest declining expectations for tax changes, raises the question of to
what extent consumers expect tax reform to impact them. 
     Similarly, despite some political concerns that tax cuts would be fiscally
irresponsible, consumers do not seem to share this sentiment. As the debt
ceiling extension reaches the end of the continuing resolution on Friday,
consumers appear to be optimistic that politicians will reach a fiscally minded
agreement. Despite the decline, the prediction only lowered to 7.2% from the
highest point seen since November 2015 of 7.8%, still remaining well above the
trailing 12 months.
--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com
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