Labor Market Cooling
Last week brought long-awaited
clarity on the state of the US economy. After months of delayed government
data, the September jobs report was released, with Nonfarm Payrolls numbers
making headlines. The economy added 119,000 jobs in September, more than double
the consensus expectation of 50,000. However, prior months were revised sharply
lower, reinforcing the narrative of a softening labor market. The unemployment
rate hit 4.4%, the highest since 2021, driven by higher labor force
participation rather than mass layoffs. The outpacing of labor supply over job
creation signals a cooling economy where hiring demand is moderating, even as
workers return.
Inflation, Also Cooling
Inflation remains moderate at 3%,
still above the Fed's 2% target but unchanged from last month. With slower job
growth and rising unemployment reducing wage pressures, inflation is easing and
has potential to continue its downward trajectory in the coming months.
Meanwhile, consumer sentiment took a sharp hit, with the University of
Michigan's October index falling to a record low of 51, signaling heightened
risk aversion. In short, inflation is cooling, the labor market is softening,
and consumer spending is holding up, an expected reflection of monetary
tightening and cyclical slowdown.
Rate Cut Debate
A divide has grown further among
members of the FOMC heading into their December meeting, where a rate cut
remains on the table. For policymakers, the challenge lies in balancing signs
of cooling inflation and a softening labor market against the risk of
persistent price pressures and ongoing weaknesses in the housing market.
Futures pricing for a cut has been volatile, swinging sharply last week after
dovish comments from NY Fed President John Williams pushed odds from 39% to 70%
in the span of one day. Current odds remain at around 70%, but the debate drags
on, with this week's data likely to determine the next shift in sentiment.
Key Economic Data Releases
- Tuesday, November 25 - September PPI, Retail Sales
- Wednesday, November 26 - Personal Income & PCE
Deflator, Q3 GDP
WEEKLY INTEREST RATE SNAPSHOT (Images)
*National average rates are
provided by Bankrate.com and Bloomberg Professional as of 11/24/2025 and are
not advertised rates from Rate, Inc.
