The Federal Reserve Board published a research note examining how U.S. consumers’ expectations for their own wage and income growth evolved before, during, and after the Covid-19 period, and how these expectations relate to inflation expectations and realized wage growth. Using two major consumer surveys, the authors find that wage and income growth expectations showed little discernible movement even during the high-inflation, high-wage-growth period, in contrast to inflation expectations, which rose sharply and then moderated broadly in line with actual inflation. The analysis draws on the New York Fed’s Survey of Consumer Expectations, which measures expected earnings changes conditional on staying in the same main job, and the University of Michigan Surveys of Consumers, which measures expected household income changes over the next year. Comparing these expectations with realized 12‑month wage growth constructed from the Current Population Survey using the Wage Growth Tracker methodology, the note finds little aggregate correlation between expected and realized wage growth, alongside a much more compressed distribution of expected wage growth than of realized wage changes. At the individual level, linking longitudinal Survey of Consumer Expectations responses from March 2014 to April 2024, regressions suggest limited predictive power of expected wage or income growth for subsequent reported income growth once observations with very large realized income gains (greater than 50 percent) are excluded, implying that expectations mainly align with outcomes around unusually large pay changes. The note concludes that the disconnect between wage expectations, inflation expectations, and wage realizations raises questions about how inflation expectations transmit to inflation through wages and about the conditions under which wage-price dynamics could emerge.
Federal Reserve Board 2026-04-13
Federal Reserve Board research finds consumer wage growth expectations barely moved during the post-pandemic inflation surge
The Federal Reserve Board published a research note finding that U.S. consumers’ wage and income growth expectations remained relatively stable before, during, and after Covid-19, unlike inflation expectations, which moved broadly with actual inflation. Using data from the New York Fed’s Survey of Consumer Expectations, the University of Michigan Surveys of Consumers, and realized wage growth from the Current Population Survey, the authors find weak links between expected and realized wage growth, with expectations mainly aligning with unusually large pay changes. The note concludes that this disconnect raises questions about how inflation expectations transmit to inflation through wages and when wage‑price dynamics could emerge.