On the heels of Friday’s disappointing April employment report from the Bureau of Labor Statistics and a paltry estimate of 0.5 percent GDP growth for the first quarter, the Federal Reserve Bank of New York reported in the April Survey of Consumer Expectations (SCE) on Monday that consumers’ expectations of the labor market had deteriorated slightly.
The good news is that expectations for both income growth and spending growth increased, despite the declining expectations for the labor market and the weak Q1 GDP growth, according to the latest SCE.
The BLS employment situation for April reported only 160,000 jobs added plus a downward revision to both February’s and March’s job gains by a combined 19,000, bringing the average monthly total for the last three months down to 200,000. However, average hourly earnings for employees increased by 8 cents in April (after a 6-cent hike in March) up to $25.53, bringing the over-the-year average increase up to 2.5 percent.
The wage growth reported by the BLS correlates with the findings of the latest SCE by the New York Fed, which showed that expected household income growth increased from 2.6 percent in March to 2.8 percent in April—the same levels recorded for the first three quarters of 2015. According to the SCE, middle and higher income respondents drove the increase.
Middle and higher income respondents also drove the slight increase in spending growth from 3.4 percent in March up to 3.5 percent in April.
The mean unemployment expectations (probability that the unemployment rate will be higher one year from now) jumped by nearly two full percentage points from March to April, from 37.4 percent up to 39.3 percent. Unemployment expectations have been trending upward since January 2015, according to SCE; however, the actual unemployment rate has fallen from 5.7 percent in January 2015 down to 5.0 percent in April 2016. The U-6 unemployment rate, the most comprehensive measure of unemployment, is at a post-crisis low (9.7 percent) and has remained below 10 percent since October 2015.
The mean probability of losing one’s job in the next 12 months leaped by 1.4 percentage points from March to April, from 14.4 percent up to 15.8 percent, a level not seen since late 2014, according to the SCE. The probability of voluntarily leaving a job in the next 12 months spiked from 20.0 percent up to 23.1 percent from March to April. Both increases were broad-based across demographic groups, according to SCE.
Younger and lower income respondents drove the decline in the mean perceived probability of finding another job if one’s job were to be lost, which dropped from 54.3 percent in March down to 52.9 percent in April—also the lowest level since late 2014.