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

 

Unemployment Fears Hit Worst Levels Since COVID as Tariffs Fuel Inflation Outlook, Fed Survey Shows
By Steven Orlowski, CFP, CNPR

April 14, 2025

Americans are growing increasingly anxious about their job security and the economic outlook, with fears of unemployment surging to their highest levels since the onset of the COVID-19 pandemic, according to a new Federal Reserve survey released Monday.

The New York Fed’s Survey of Consumer Expectations, conducted in March, reveals a sharp uptick in concerns over job loss and stagnant wages, with inflation expectations also rising amid renewed trade tensions and proposed tariffs on foreign goods.

A Worsening Labor Outlook

The probability that U.S. workers will lose their jobs over the next 12 months jumped to 16.7%—the highest reading since April 2020, when lockdowns brought large swaths of the economy to a standstill. Confidence in finding new employment after a potential layoff also declined sharply, falling from 57.4% in February to 51.2% in March.

“These numbers suggest rising anxiety among workers about the stability of their employment, even in sectors that have remained relatively insulated from previous downturns,” the report stated.

Tariffs Spark Inflation Concerns

At the same time, inflation expectations ticked up for the second straight month. Median one-year-ahead inflation expectations rose to 3.4%, up from 3.2% in February. The increase comes amid escalating rhetoric from Washington about new tariffs on Chinese electronics, European steel, and Mexican agricultural goods—policies that economists warn could pass higher prices on to U.S. consumers.

“The concern here is that tariffs are a double-edged sword,” said Laura Kim, chief economist at WestRock Financial. “They’re aimed at protecting American industries, but in practice they tend to raise costs for everyone—businesses and consumers alike.”

Wage Expectations and Household Finances

Adding to the unease is stagnation in expected wage growth, which held steady at 2.8% for the third consecutive month—well below the 4.3% pace seen in mid-2022. Expectations for household income growth also declined slightly, while perceptions of credit access deteriorated, with more respondents reporting tighter borrowing conditions.

Households also expressed greater difficulty in meeting monthly expenses. The share of respondents who said they would struggle to come up with $2,000 in an emergency within 30 days rose to 34.9%, from 31.6% a month earlier.

Policymakers Face a Tightrope

The survey underscores the challenge facing the Federal Reserve as it seeks to balance inflation control with labor market stability. While inflation has fallen from its post-pandemic peak, the rise in price expectations and economic pessimism complicates the Fed’s path forward.

Fed Chair Jerome Powell has signaled patience in cutting interest rates, emphasizing the need for “greater confidence” that inflation is sustainably moving toward the central bank’s 2% target. But with unemployment fears rising and growth softening, pressure is mounting for more accommodative policy.

“The Fed is walking a tightrope,” said Ethan Rivera, senior analyst at Beacon Policy Group. “Act too soon, and inflation could reignite. Wait too long, and we risk an unnecessary contraction.”

Outlook Remains Clouded

As trade tensions escalate and global supply chains face renewed strain, consumers appear braced for economic uncertainty. The Fed’s survey paints a sobering picture of a public increasingly concerned about job loss, inflation, and financial security—an uneasy echo of the early pandemic period.

Whether those fears translate into real economic slowdown will depend on a complex interplay of global events, policy responses, and consumer sentiment in the months ahead.