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NY Fed:Consumers Have Stable Outlook, Labor Mkt Shows Strength

--Three-Year Ahead Infl Expectations Decline; One-Year Ahead is Unchanged
--Expected Household Spending Rises; Income and Earnings Growth Falls
--3-Yr Inflation Uncertainty Hit New Series Low of 2.34%
By Sara Haire
     WASHINGTON (MNI) - Consumers are reporting to have a relatively stable
outlook on the economy, with the labor market showing continued strength.
Consumers' inflation expectations for three-year ahead time frame saw a marginal
drop to 2.6% from 2.7%, while the one-year ahead was unchanged at 2.5%, the New
York Federal Reserve Bank reported Monday. 
     In addition to the inflation expectations for the one-year time horizon
being unchanged, the "median inflation uncertainty--or the uncertainty expressed
by respondents regarding future inflation outcomes--was unchanged at the
one-year horizon," but saw a decline for the three-year horizon to a new series
low of 2.34% in August, down from 2.6% in July. 
     Survey-based measures that indicate strength in the economy, particularly
in the labor market are things the Federal Open Market Committee pays close
attention to when choosing when to raise rates. According to consumers
expectations regarding employment and wage growth, the labor market is showing
signs of continued strength. This continued strength supports the notion that
another rate hike this year is not unreasonable. 
     Household spending growth expectations saw an increase to 3.0% in August,
up from 2.8% in July. Despite the increase, this level remains below the
12-month average of 3.2%. "The increase was driven by lower-education and
lower-income respondents."  
     Even though expected household spending saw a rise, the median expected
household income growth saw a decline to 2.7%, down from the series high of 3.0%
in July, with respondents under the age of 40 driving the decline. 
     In addition to the decrease in expected growth for household income, the
median expected growth in earnings for the year ahead saw a small decrease to
2.5%, down from 2.6%. This still remains above the 12-month average of 2.3%. 
     These decreases in expected household income and earnings growth could be
attributed to the consumers expecting a change in taxes. The expectations for a
change in taxes (at current income level) for the year ahead saw a modest rise
to 2.6%, up from 2.4%, making this the third increase since May 2017.
     Despite some household finance expectations showing declines,
"one-year-ahead expectations of the household's financial situation improved
slightly, with 42.3% of respondents expecting to be better off financially,
compared to 41.4% in July and 37.4% a year ago," the survey reports. 
     The mean perceived probability of finding a job if one's current job was
lost saw an increase to 58.3% from 57.1%, marking it close to the series high
seen in March of 59.3%. "The increase was largest for lower-education (with a
high school degree or less) and lower-income (below $50,000 household income)
respondents." The driving increase suggests low-skilled laborers are more
confident in finding jobs, despite high-skilled labor typically being in higher
demand recently.
     The unemployment rate has been hovering around the very low 4.3% to 4.4%
level since April, but "mean unemployment expectations--or the mean probability
that the U.S. unemployment rate will be higher one year from now--decreased
slightly to 35.4%, the lowest level since February 2015," the survey reports.
This would suggest that consumers are expecting the unemployment rate to drop
further. 
     Expectations for median home price change saw an increase to 3.3% in
August, up slightly from 3.2%, mirroring the average over the past year.
Uncertainty about home price change registered a decline to the lowest level
since February 2015.  
     The median expectations for gasoline price changes for the year ahead
increased to 4.1% from 3.0%, while the expected change in food prices and the
cost of a college education saw increases to 4.6% from 4.3% and to 6.7% from
6.0%, respectively. 
--MNI Washington Bureau; +1 212-800-8517; email: sara.haire@marketnews.com
[TOPICS: MMUFE$,M$U$$$]

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