U.S. Consumer Job Fears Rise as Inflation Hits 3.8 Percent in April

U.S. consumers grew markedly more pessimistic about the job market in April even as inflation accelerated beyond expectations. The share has climbed 10 percentage points since the start of 2025. Separately, 61 percent of consumers expect unemployment to increase over the next 12 months, a level of pessimism the University of Michigan Surveys of Consumers said has never occurred outside of a recession.

Consumer prices rose 3.8 percent annually in April, above the 3.7 percent consensus forecast. Food-at-home prices posted their largest monthly gain since August 2022, climbing 0.7 percent. Shelter costs increased 0.6 percent after recent moderation while apparel, a category sensitive to tariffs, rose 0.6 percent.

Airline fares jumped 2.8 percent, pushing the 12-month gain in that category to 20.7 percent.

Household furnishings and operations increased 0.7 percent.

Energy prices have drawn much attention after oil rose above $100 a barrel and national average gasoline reached $4.50 a gallon. New vehicle prices fell 0.2 percent while used cars and trucks were unchanged. Medical care costs declined 0.1 percent, hospital services 0.3 percent and health insurance 0.4 percent.

Real average hourly wages slipped 0.5 percent for the month and fell 0.3 percent over the past year. For the first time in three years inflation has erased all wage gains, according to one analysis.

“Inflation is the key drag on the U.S. economy now. There is a real financial squeeze underway. For the first time in three years, inflation is eating up all wage gains.”

Stock market futures turned negative after the inflation data while Treasury yields rose. Traders increased the probability of a Federal Reserve rate hike by the end of the year to roughly 30 percent.

The central bank has held its benchmark interest rate steady throughout the year. One governor voted for a rate cut while three regional bank presidents objected to language markets interpreted as signaling a future easing. Incoming leadership has expressed support for lower rates, a stance that now collides with renewed inflation pressures.

One investment strategist said it is unlikely the Fed will cut rates soon and that markets may begin pricing in hikes for next year. Consumer sentiment has fallen to all-time lows even as major stock averages remain near record highs. Corporate earnings have been robust and hiring has picked up from near-stagnant levels in 2025.

The Atlanta Fed's GDPNow model points to 3.7 percent annualized growth in the second quarter, though based on limited data.

“The good news is that the economy looks resilient to this price shock so far. Many consumers have benefited from tax refunds this year, hiring has picked up from near stagnant rates in 2025 and businesses are generating robust profit growth.”

Economists cautioned that these buffers have limits and that sustained higher prices could weigh on lower- and middle-income households.

Consumer spending has held up so far, driven largely by higher-income households. The combination of elevated inflation expectations, rising job worries and eroding real wages nevertheless signals growing financial pressure across broader segments of the population.

The latest readings arrive against the backdrop of geopolitical tensions that have pushed energy costs higher, adding another layer of uncertainty to household budgets and monetary policy decisions.