Joanne Hsu

The direction of inflation and the direction of interest rates are as much about what we think will happen as about what's actually happening.

Joanne Hsu directs the monthly surveys of consumers at the University of Michigan.

If enough people rush to buy things, they'll boost demand and push up prices.

Conversely, workers may also demand higher wages if they think life is going to cost more in the future.

Right now, the University of Michigan's survey finds long-run inflation expectations are not terrible, 3.4%.

But it could get worse if people lose faith that the Federal Reserve will act in the interest of keeping inflation in check and think that it's influenced by politics instead.

Yelena Shulyatyeva is with the conference board.

It's not just consumer expectations we have to worry about.

Financial analyst Stephen Cates of Bankrate says bond markets could get skittish, too, if they think the Fed's short-term actions are counterproductive and will fuel inflation in the long term.

Long-term bond yields are what determine what consumers end up paying in credit card rates, car loans, and mortgages.

I'm Novosafo for Marketplace.

Most of the debate now, most of the discussion is,

One of the big overarching patterns of 2025 was a broad deterioration in views and expectations for labor markets, a pretty substantial increase in people expecting unemployment to get worse in the future.

Even if the consumer themselves is stable in their job, they talk about how hard the labor market is for a young person in their family trying to look for a job right now.

They were the ones most likely to believe that unemployment was going to rise.

Xu has an idea why.

The news about layoffs have been for educated workers, white-collar workers.

A lot of job losses have been concentrated within the tech industry.