Unemployment fears hit worst levels since Covid as tariffs fuel inflation outlook, Fed survey shows

Consumer worries grew over inflation, unemployment and the stock market as the global trade war heated up in March, according to a Federal Reserve Bank of New York survey released Monday.

The central bank's monthly Survey of Consumer Expectations showed that respondents saw inflation a year from now at 3.6%, an increase of half a percentage point from February and the highest reading since October 2023.

Along with concerns over a higher cost of living came a surge in worries over the labor market: The probability that the unemployment rate would be higher a year from now surged to 44%, a move up of 4.6 percentage points and the highest level going back to the early Covid pandemic days of April 2020.

The survey also showed angst about the uncertainty translating into problems for stock market prices.

The expectation that the market will be higher a year from low slid to 33.8%, a decline of 3.2 percentage points to the lowest reading going back to June 2022. While the expectations for equities pulled back, respondents said they figure gold to rise by 5.2%, the highest since April 2022.

The survey reflects other readings, such as the University of Michigan consumer sentiment survey, which showed one-year expectations in mid-April at their highest since November 1981.

In the case of the New York Fed measure, the survey took place ahead of President Donald Trump's April 2 "liberation day" tariff announcement, as well as the 90-day suspension of the order a week later. However, it is largely consistent with other measures reflecting consumer concern over the impact tariffs will have, even as market-based measures show inflation worries are low among traders.

Expectations for inflation at the five-year horizon actually edged lower to 2.9%, down 0.1 percentage point, and were unchanged for the three-year outlook at 3%. The outlook for food prices a year from now nudged up to 5.2%, its highest since May 2024, and was at 7.2% for rent, an increase of half a point. The outlook for medical care costs also jumped to an expected 7.9% increase, the most since August 2024.

Respondents expect gasoline to rise by 3.2%, a 0.5 percentage point drop from the February outlook.

Get Your Ticket to Pro LIVE

Join us at the New York Stock Exchange!
Uncertain markets? Gain an edge with CNBC Pro LIVE, an exclusive, inaugural event at the historic New York Stock Exchange.

In today's dynamic financial landscape, access to expert insights is paramount. As a CNBC Pro subscriber, we invite you to join us for our first exclusive, in-person CNBC Pro LIVE event at the iconic NYSE on Thursday, June 12.

Join interactive Pro clinics led by our Pros Carter Worth, Dan Niles and Dan Ives, with a special edition of Pro Talks with Tom Lee. You'll also get the opportunity to network with CNBC experts, talent and other Pro subscribers during an exciting cocktail hour on the legendary trading floor. Tickets are limited!

• How Warren Buffett handled past market crises
• 'Big Short' investor Steve Eisman on tariff turmoil: Don't be a hero
• Highest tariffs since the '30s to trigger recession, S&P 500 decline to 4,200-4,500, says BCA Research
• One group of stocks is emerging as a bright spot in the tariff sell-off