Median expectations for growth in earnings and home prices are also near their lowest points since November 2016. Taken together, the figures suggest consumers believe that while their incomes and assets will keep growing, it may be at a slower rate than they expected about two years ago.
The New York Fed figures seem to confirm signs of unease in other recent surveys. The two most widely watched measures of consumers’ outlook, from the Conference Board and the University of Michigan, remain quite high in historical terms, but both had their future-expectations components fall in the most recent month.
The Conference Board blamed “a less optimistic view of future business conditions and personal income prospects.” Respondents were “generally more pessimistic” about the housing and labor markets, representatives of the nonprofit organization said in a release.
Like consumers, economists are moderating their outlook. “The accelerating, widespread improvement in the labor market in 2018 is unlikely to continue in 2019 as the recovery ages,” economists Martha Gimbel and Jed Kolko of Indeed’s Hiring Lab wrote earlier this month.
“The economy is poised to slow but not to the point of recession until 2020,” Diane Swonk, chief economist at the professional services network Grant Thornton, wrote last week. “We have moved our forecast for the next recession up by six months to the first half of 2020.”
We consider the November 2016 election the baseline for Trump’s presidency in this part of the New York Fed survey. After all, people’s expectations of what would happen over the next 12 months began to change the instant they realized they had to incorporate Trump’s surprise win into their plans.
Expectations of future earnings climbed slowly during much of the Trump presidency — but in the past two months they’ve fallen rapidly.
People now expect their earnings to climb just 2 percent over the coming year, down from 2.8 percent in September. That number looks even lower once you consider Americans expect prices to rise 3 percent over the same period.
Expectations have fallen most sharply for consumers in the middle income ($50,000 to $100,000), middle aged (40 to 60 years old) and least-educated (high school or less) categories. Regionally, expectations have slipped most rapidly in the West and the South.
Americans’ expectations for future home-price growth remained steady during the first year of Trump’s presidency. They picked up in early 2018 but have dropped nearly a percentage point since June.
Americans in the Midwest tended to walk back their expectations for growth in home values the most, compared with December 2016. Higher-income (more than $100,000), college-educated and working-age (60 and under) respondents also tended to lower their expectations for home-value growth.
These estimates aren’t precise. But people’s expectations and trends shape future growth. People save, spend and demand raises today based on their expectations for tomorrow. And as of November, people are lowering their estimates of where the economy will be a year from now.