Withdrawal Plans and Concerns About Job Security Amid Fed Policies and AI

Are employees feeling more secure or anxious about their job futures?

On Monday, the Federal Reserve Bank of New York shared findings from its monthly Consumer Expectations Survey, stirring reactions from both optimists and those with reservations.

The likelihood of workers quitting their jobs voluntarily rose by 2.6 percentage points, reaching 20.8 percent, the highest it’s been since February 2023. This indicates a degree of economic confidence; employees who feel positive about job prospects are more inclined to leave for better opportunities. The New York Fed noted this increase was consistent across various age, education, and income demographics.

Yet, in tandem with this, the likelihood of facing job losses also ticked upwards, increasing by 0.5 percentage points to 15.1%. Moreover, the belief that workers could secure a new position within three months of being laid off dropped by 2.3 percentage points to 43.7%, marking a new low since December. These trends suggest a more pessimistic outlook.

The New York Fed underscored this decline, saying, “Labor market expectations have deteriorated slightly due to higher layoff expectations and lower employment expectations.” Many financial outlets echoed this sentiment, with Bloomberg News noting a slight uptick in pessimism among Americans regarding job prospects. It’s hard to shake the feeling that there might be some bias influencing these views, especially since not many at the New York Fed support Trump’s economic approach.

Exploring the Gap Between Layoff Fears and Retirement Intentions

While a rise in quitting intentions may seem at odds with increasing fears of layoffs and job scarcity, these findings aren’t necessarily contradictory.

The questions about quitting require respondents to reflect on their personal situation and future choices—“Do I anticipate leaving my job in the next year?”—which relies heavily on individual experiences rather than broader economic narratives.

Conversely, concerns about layoffs demand insight into both current and potential employers’ thoughts, influenced significantly by the economic climate. Thus, it seems like many workers feel optimistic about their ability to voluntarily leave their roles, but they’re simultaneously worried about losing their jobs and struggling to find new ones. Some may be contemplating a job search preemptively, anticipating that a transition could lead to more stability.

What’s Fueling Increasing Layoff Concerns?

Currently, layoffs are relatively low overall, except within the tech and finance sectors. Jobless claims have remained at historic lows, with the unemployment rate around 4.3%, which is quite favorable historically. Yet, layoffs are notably high in tech, creating a different narrative for those workers compared to the flourishing job market elsewhere.

It’s possible that artificial intelligence is intensifying anxiety about job loss. Many workers have heard stories of positions being lost to AI, a narrative that resonates powerfully today and likely impacts worker sentiments.

Furthermore, there’s a growing concern regarding inflation and the anticipated reactions from the Fed. Markets currently predict that the Fed will maintain higher rates for the foreseeable future. Expectations are that monetary policy will shift away from a supportive stance in the upcoming meeting. Rising long-term bond yields suggest that short-term rates may not fall as much as previously anticipated.

A tightening policy from the Fed raises the stakes for potential layoffs and could slow employment growth. So, if workers sense a tighter monetary policy, it’s reasonable to fear an uptick in job losses.

Support for this notion comes from survey responses about credit availability. While there hasn’t been a notable change in perceptions of credit access, future expectations have shifted downward—fewer respondents believe it will be easier to secure credit over the coming year; this reflects the implications of the Fed’s tightening approach.

The New York Fed characterized this change in perception as a “deterioration.” However, it merely represents an adjustment in recognition of the Fed’s communications—broader access to credit isn’t always indicative of improvement, especially during proactive efforts to stabilize the economy during downturns. Agreeing with the Fed on this point doesn’t imply a pessimistic perspective; rather, it might suggest a recognition that the labor market is being monitored carefully without excessive reliance on credit expansion.

Overall, it seems that people expect the unemployment rate to stay more stable. The likelihood of a higher U.S. unemployment rate in one year decreased by 0.4 points to 43.2%. Households appear to be less inclined toward believing credit will be tight while also being less convinced that unemployment will soar.

Interestingly, expectations regarding inflation also lend credence to this Fed-focused perspective. One-year inflation expectations have dipped by 0.1 percentage points to 3.5%, slightly lower than the latest Consumer Price Index and Personal Consumption Expenditure readings, both at 3.8%. Households seem to believe that inflation will calm over the next year, a sentiment echoed in three- and five-year expectations, averaging 3.1% and 3.0% respectively.

The three-year forecast exceeds the Fed’s 2% target, but it’s not as alarming as it seems—historically, 3.1% isn’t particularly high. In fact, the average three-year expectation since 2013 has been around 3%, with pre-pandemic averages closer to 2.9%.

Ultimately, the data suggests that consumers don’t necessarily view the labor market or the broader economy as worsening. Instead, many are wary of job risks stemming from AI and interpret the Fed’s actions as a signal that employment isn’t a primary concern, as inflation remains a priority. Coupled with an uptick in retirement intentions, this paints a picture of an economy that, overall, is trending in a positive direction.