Rock stars are easy to name. Musical influencers, not so much. Tapping into the Rock & Roll Hall of Fame (HoF), the Musical Influence Award has been handed out since its first class of inductees in 1986. In 2024, John Mayall received said recognition as the “Godfather of British Blues.” The HoF website described Mayall as a “purveyor of amped-up Chicago-style blues in the early 1960s.” His groundbreaking band, the Bluesbreakers, became a who’s who of young musicians who would define British rock in the late 1960s. He influenced The Rolling Stones, Cream, The Animals, The Yardbirds and Led Zeppelin. The revolving door of the Bluesbreakers launched successful careers for Eric Clapton, Mick Taylor (Rolling Stones), Peter Green and Mick Fleetwood (Fleetwood Mac) and Jack Bruce (Cream). Known for his 12-string Rickenbacker and its jangly tone, it distinguished Mayall from other traditional blues guitarists. If you have a blues harmonica prodigy under your roof, have a listen to Mayall’s “Room to Move” from The Turning Point album. It won’t disappoint.
From room to move to room to improve…on the U.S. inflation expectations front. The New York Fed’s Survey of Consumer Expectations (SCE) revealed median one-year inflation expectations came in at a steady 3.20% in November compared to 3.24% in October (teal line). In other words, there wasn’t much movement to speak of as “households’ inflation expectations remained unchanged at the short-, medium-, and longer-term horizons.” The three-year and five-year ahead medians stayed stuck at 3.00% and ticked down a hair from 3.00% to 2.98%, respectively.
Dissecting the distribution of one-year inflation expectations showed a persistent upward bias. The largest share of consumers, 44.4%, expected inflation above 4% over the next year followed by 25.0% in the 2-4% range, 11.4% in the 0-2% cohort and 19.2% that foresaw declines in the less than 0% bucket. Since the 2013 inception, respective long-run averages for these four slices were 41.5%, 24.2%, 17.3% and 17.1%. Interestingly, that makes the 0-2% group the one that has diverged the most from its longer-term trend.
To be sure, it’s as if this quadrant existed in two separate planes before (between 20% and 25%) and after the pandemic (between 10% and 15%, lime line). The takeaway is that there’s room for improvement. Moreover, since the last available consumer price index (CPI) yielded a 3.0% year-over-year rate (red line), it would take a disinflationary move to 2% (and below) to shift the distribution back toward the performance in the five years leading up to COVID.
One definitive disinflationary artifact was unearthed from the SCE’s household financial situation. Danielle set the table for this metric with her QI Pro chat post denoting that “the percentage of respondents saying their current financial situation was worse than a year ago rose to 39%, the highest in two years.” This was complemented by 17.6% of those surveyed indicating the current situation was better. The future financial situation compounded things as 31.4% saw a worsening vis-à-vis 26.4% calling for an improvement in the year ahead. November’s net -5.0% reading (orange line) marked a six-month low and the seventh inversion in the last nine months, hammering home the disinflationary theme.
The upside-down outlook does not bode well for indebted households. Debt delinquency expectations, defined as the mean probability of not being able to make a minimum debt payment, rose to a seven-month high of 13.7% in November (inverted purple line). When the future financial situation worsened in 2022 and 2023, it laid the groundwork for the last time debt delinquency expectations were this high in 2024.
Farther back, the worries about paying on time during the 2016 episode were short-lived, not to mention, job loss fears were contained; the SCE’s higher unemployment expectations gauge was less than 40% (not illustrated). During the weak run for expected finances from March to November, higher unemployment expectations (HUE) were north of 40% in six of those nine months. Even the end of the government shutdown in November did little to rally HUE as it edged down to 42.1% from 42.5% in October. The outlier nature of 2025 should be emphasized. For most of the history of the HUE, it traveled between the 30% and 40% range 83% of the time (124 out of 150 months).
The SCE’s job finding expectations series adds to this narrative. But in the spirit of innovation, QI converted this series, which measures the mean probability of finding a job in the next three months if that job were lost today, by flipping our inner Dr. Jekyll to Mr. Hyde. The Job ‘Not’ Finding metric is its own approximation of HUE, but from the perspective of employment expectations. In six of the last eight months ended November, Job ‘Not’ Finding ran above the 50% mark (dark blue line).
Combined with HUE, it shows how acute labor concerns are for households. Does this combination mean that capital is being favored over labor? The spread between Sentix’s investor expectations (at +2.3 in December) and the University of Michigan’s consumer expectations for the U.S. economy (at -42.0) is telling. The divergent optimism compared to the dire pessimism (at +44.3, fuchsia line) suggests profits are the focal point to the detriment of warm bodies; the visual association between the two series reinforces our Spidey senses on capital winning over labor.
Future hits to consumer purchasing power also came through in higher essentials’ inflation expectations. In November, food price expectations advanced to a two-year high of 5.9% (green line), rent expectations rose to a decidedly elevated, five-month high of 8.3% (light blue line) and medical care cost expectations increased to 10.1% (lavender line) the highest level since January 2014.
For the last example, the timing of this couldn’t be more appropriate. U.S. corporations’ open enrollment periods for next year’s benefit plans most commonly happen in October and November. Add this as a third exhibit of evidence for a jump in 2026 health care costs that we tabled in the most recent installment of the Intelligence Briefing. Households viewing higher nondiscretionary pricing against a smaller cushion of personal savings (yellow bars) suggest they could be singing the blues in 2026 as it will be tougher sledding this time around to cover all costs.