Washington (CNN) — Americans are not only increasingly fearful of higher inflation — with President Donald Trump set to announce a sweeping spate of tariffs in just a few days — but many more are now dreading rising unemployment.
Consumer sentiment tanked 12% this month, the University of Michigan said in its latest survey released Friday. That was a slightly steeper decline than the one reported in a preliminary reading earlier this month. Respondents blamed Trump’s erratic trade war for their jitters, the survey said.
“Consumers continue to worry about the potential for pain amid ongoing economic policy developments,” Joanne Hsu, the survey’s director, said in a release. “Notably, two-thirds of consumers expect unemployment to rise in the year ahead, the highest reading since 2009.”
On Wednesday, Trump is set to announce duties that match the ones foreign countries impose on the United States, so-called reciprocal tariffs, which he has referred to as “the big one.” Trump this week already escalated his trade war by announcing 25% tariffs on all car imports, taking effect on April 3. So far, Trump has slapped tariffs on metals and doubled duties on China to 20%.
The Michigan survey’s “expectations” index, which captures respondents’ outlook for the economy, plummeted 18% “and has now lost more than 30% since November 2024,” according to a release. And this time, it wasn’t just Democrats and Independents feeling dour; Republicans also grew gloomier, “expressing worsening expectations since February for their personal finances, business conditions, unemployment, and inflation.”
Americans’ expectations for inflation in the year ahead climbed to 5% this month, up from 4.3% last month, reaching its highest level since November 2022. Meanwhile inflation expectations in the next 5 to 10 years also surged, rising to 4.1%, which was the highest level since February 1993, when it was also 4.1%.
“It’s natural for people to expect higher prices because we haven’t seen a trade war like this since McKinley,” Art Hogan, chief market strategist at B. Riley Financial, told CNN’s Matt Egan.
“Sentiment is soft data. We’re used to soft data being abysmal. It doesn’t usually line up with what they do,” Hogan added. “The ongoing battle between soft and hard data has yet to be resolved.”
A conundrum for the Fed?
So far, Federal Reserve officials have maintained that long-run inflation expectations mostly remain in check. That could quickly change if expectations continue to trend in the wrong direction. And if consumers’ prediction of rising unemployment bears out, that stands to make the Fed’s job even more complicated.
The Fed pays close attention to people’s perception prices because they can be self-fulfilling; if people expect inflation to climb and remain elevated in the coming years, then they’ll likely adjust their spending accordingly. Officials have said they’ll recalibrate their plans if it’s clear that expectations have indeed taken a turn for the worse.
“If inflation expectations are threatening to become unanchored or becoming unanchored in the long term, then the balanced approach may not work,” St. Louis Fed President Alberto Musalem said Wednesday at an event in Paducah, Kentucky. That would mean the Fed will “probably lean in to the inflation side” of its so-called dual mandate, which is to promote full employment and stabilize prices.
In that case, any further rate cuts would be off the table for the foreseeable future.
But now, there’s also the possibility of the US economy weakening as shoppers curb their spending. When the economy weakens more than expected, pushing up unemployment, the Fed usually responds by lowering borrowing costs. Fresh data out Friday showed that consumer spending rebounded in February, advancing 0.4% for the month, after declining 0.3% in January, though people cut back notably on dining out and hotel stays.
Consumer spending accounts for about 70% of economic output, so if that key economic engine begins to sputter, it wouldn’t bode well for the broader US economy.
“The latest consumer health check revealed consumers are increasingly apprehensive about spending amid sticky inflation trends and pre-emptive inflation anxiety from tariffs, flagging consumer sentiment and rising job insecurity,” Lydia Boussour, senior economist at Ernst & Young, said in commentary issued Friday.
Bangla Zoom is most popular bangladeshi website. We are working with bengali news, english news headlines, bangla blog tips, bangla health tips, entertainmnet and more bangla helpful tips.
from Boston News, Weather, Sports | WHDH 7News
Source: https://whdh.com/news/americans-havent-been-this-worried-about-rising-unemployment-since-2009-survey-shows/
Comments
Post a Comment