More Americans are concerned about the jobs market and believe that their incomes may come under pressure over the year ahead at a time when the economy is grappling with elevated inflation and high interest rates.
About 38 percent of American expect the unemployment rate to jump in the year ahead, 6 percent higher in the past five months, according to the Survey of Consumers from the University of Michigan. The survey also found that Americans are more worried about their incomes.
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“Consumers expect their income growth over the next year to slow as well,” according to a statement shared with Newsweek. “Taken together, at this time consumers expect a modest softening in labor markets, and the months ahead will reveal if these labor market expectations will continue to weaken.”
The U.S. economy has shown resilience amid price increases and borrowing costs at more than two-decade highs, continuing to grow with the labor market showing strength providing jobs for workers.
The Context
The U.S. economy grew at a 1.6 rate in the first quarter of 2024, even as high interest rates have made borrowing expensive and stifled business investment. Meanwhile, the unemployment rate at 3.9 percent in April much lower than the nearly 15 percent seen at the height of the pandemic-induced economic crisis.
But Americans feel less than stellar about the economic direction of the country.
A poll conducted by Redfield & Wilton Strategies for Newsweek last month found that 50 percent of Americans think the U.S. economy is heading in the wrong direction, with only 25 percent believing that it is going in the right direction.
Those perceptions could be fueled by inflation at 3.4 percent, which is higher than the Federal Reserve target of 2 percent. Higher inflation—which at one point soared to four-decade highs of 9 percent—sparked the Fed’s response of hiking rates, pushing up borrowing costs for things like home and auto loans.
The economy, while still growing, slowed to begin the year compared to the prior quarter, when it accelerated by 3.4 percent, according to the Commerce Department.
Views
One reason the economy may have been growing is due to robust consumer spending. Fears over loss of jobs could threaten growth going forward.
“Strength in household incomes has been the primary source of support for robust consumer spending over the past couple of years, so a softening in labor market expectations is concerning and— if it continues—may lead to a pullback in consumers’ willingness to spend,” Joanne Hsu, Surveys of Consumers chief economist, said in the statement.
“Furthermore, consumers expect interest rates to remain high in the future, which will make it even more difficult for consumers to make large purchases.”
What’s Next
Americans are concerned over high interest rates. In January, 37 percent expected rates to fall over the next year. That number has now plunged to 26 percent.
“This indicates that consumers expect high interest rates to persist, and indeed,
worries over interest rates were visible throughout the survey,” the survey said. “In recent months, a rising share of consumers have blamed high interest rates or tight credit for poor buying conditions for homes and cars.
“Interest rates were less of a concern for durable goods; in contrast, the sharp deterioration seen in buying conditions for durables was largely attributable to high prices.”
Uncommon Knowledge
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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.