Inflation expectations stall while job fears keep climbing
The New York Fed Survey of Consumer Expectations for August, released on September 8 2026, came out strikingly split. On one side, median inflation expectations barely moved: the one-year horizon stayed at 3.6%, the five-year at 3.0%, and the three-year edged down from 3.3% to 3.2%. On the other side, households see the labor market getting worse. The mean probability that unemployment will be higher a year from now jumped 1.6 points to 44.4%, the highest since April 2020.What the survey showed
Looking only at the inflation headline, it seems nothing happened. But the details tell a livelier story. People still expect visible price growth for gas, food and rent, while housing cooled slightly. According to the NY Fed, the survey ran from August 3 to August 31 among about 1300 household heads.- One-year expectations - 3.6% unchanged, three-year - 3.2% after 3.3%, five-year - 3.0% unchanged;
- Gas - expected price growth jumped 1.7 points to 4.6%, food - up 0.3 point to 5.3%, medical care - up 0.2 point to 9.1%;
- Rent - up 0.7 point to 6.6%, college - up 0.3 point to 6.1%, while home prices - down 0.2 point to 3.0%;
- Earnings - median expected growth up 0.1 point to 2.9%, household spending - up 0.3 point to 5.2%.
Fig. 1. US median consumer inflation expectations, NY Fed SCE, percent yoy. August 2026: 1 year at 3.6 pct, 3 years at 3.2 pct, 5 years at 3.0 pct. Source: NY Fed Survey of Consumer Expectations.
Why gas is pulling expectations up again
This is where it gets more interesting. The headline one-year number stands still, but its mix shifted clearly. The sharpest move is gas: after 2.9% in July, expectations jumped to 4.6%. In my view, this is a classic visible-price effect: the pump is in front of people every day and shapes feelings more than an abstract index.Food and rent moved up as well, and medical care sits at a very high 9.1%. So people do not expect deflation anywhere in daily spending, the median headline is just balancing across components for now. Housing, by the way, cooled slightly to 3.0%, with the decline linked mostly to the Northeast.
ℹ INFO
The key August nuance: a steady headline hides rising expectations across almost every commodity line. It is not an inflation scare, but it is not calming either.
The labor market worries more than prices
The real move is in job perceptions. The chance of higher unemployment a year ahead rose to 44.4%, above July 42.8% and well above the 12-month average. The chance of finding a job after losing one fell to 45.4%, just below the 45.5% average. Interestingly, personal layoff risk looks calmer: the chance of losing a job fell to 13.8%, while willingness to quit rose to 19.5%.- Unemployment higher - mean probability 44.4%, highest since April 2020;
- Finding a job after loss - 45.4%, just below the yearly average;
- Losing a job - 13.8%, lowest since February 2026;
- Quitting voluntarily - 19.5%, above the 18.4% average.
Fig. 2. Labor market expectations, NY Fed SCE, mean probabilities in percent. August 2026: higher unemployment 44.4 pct, finding a job 45.4 pct. Source: NY Fed Survey of Consumer Expectations.
It seems to me this mix speaks of fear not for your own seat but for the market as a whole. People still hold their jobs, yet believe finding a new one outside would be hard.
Wallets and credit: more caution
The finance part of the survey came out rather cautious. Expected income growth stuck at 3.0%, while spending sits at 5.2%, so the gap persists. Perceived credit access worsened, and expectations for future access did too. The chance of missing a minimum debt payment rose 1.2 points to 13.2%, just above the 12.7% average.- Income - 3.0% growth unchanged, stuck in a narrow 2.8 to 3.0 pct range since June 2025;
- Spending - 5.2% growth, above the 5.0 pct 12-month average;
- Missing a debt payment - 13.2% chance versus 12.7% average;
- Stocks higher in a year - 40.9% chance, down 0.5 point on the month.
What it means for the Fed and markets
For the Fed this mix argues against rushing either way. Short-run inflation expectations stuck above target support caution on rates. But worsening unemployment expectations flag risk to employment, the second half of the mandate. If consumers keep expecting both elevated prices and a soft labor market, that is a stagflationary flavor in sentiment even if hard data look milder.In my view, the main risk is not the 3.6% itself but its stickiness. Since June 2026 one-year expectations hover around 3.5 to 3.7% and refuse to drift back toward 3%. And the labor market, judging by the survey, cools faster than the official 4.1% unemployment rate suggests.
⚠ IMPORTANT
With inflation stuck in minds and job fears rising, the Fed sits between two fires: easing would support jobs but could entrench high expectations.