© Reuters. FILE PHOTO: People shop for clothes at a Target retail chain in Westbury, New York, U.S., May 20, 2021. REUTERS/Shannon Stapleton/File Photo
By Jonnelle Marte (Reuters) – U.S. consumers are expecting the economy to boom over the next year, with expectations for inflation, home prices, earnings and the labor market all picking up in May, according to a monthly survey by the Federal Reserve Bank of New York. Median expectations for what inflation will look like over the next year rose for the seventh consecutive month to 4% in May. That is up from 3.4% in April and reaches a new high for the series, which launched in 2013. Expectations for inflation over the next three years increased more modestly to 3.6% from 3.1%. Consumers also shared a much brighter outlook for the labor market at a time when more businesses are opening up, travel is increasing and hiring is improving. The average expectation that the U.S. unemployment rate will be higher one year from now dropped to a series low of 31.9% in May, down from 34.6% in April. The perceived odds of losing a job over the next year also reached a new low, falling to an average of 12.6% in May from 15% in April. The shift was most pronounced among workers below the age of 40, those earning less than $50,000 in household income and people with no more than a high school degree.
Workers also said they felt they had better odds of finding a job if they became unemployed, with the expected odds rising to 54% in May from 49.8% in April – the largest monthly increase for the series. Those expectations were the highest they’ve been since February 2020, but were still below pre-pandemic levels. Fed officials said they will soon begin discussing plans for pulling back the support they are offering to the U.S. economy through $120 billion in monthly bond purchases and low interest rates. Some economists expect the conversation could start during the policy meeting happening this week on Tuesday and Wednesday.
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