Weekly Update 12/19/25: Economic Data Deluge
- Unemployment rate rises
- Accenture reports good results
- Consumer prices tamer than feared
- General Mills reports encouraging earnings
Labor indicators
Government statisticians are cranking out reports now that the government has been reopened for a few weeks. We received many pieces of information this week, including two of the most closely watched data reports—payrolls and consumer prices. The Bureau of Labor Statistics (BLS) reported that payrolls rose 64,000 in November after falling 105,000 in October. The November unemployment rate rose to 4.6%, up from September’s 4.4% and higher than the consensus estimate of 4.5%. The BLS canceled the October jobs report and combined that month’s payrolls with the November release because of the record-long government shutdown. The department was not able to produce an unemployment rate for October because it could not conduct a retroactive survey of households. The payrolls number is derived from a separate survey of businesses.
The unemployment rate was the highest since September 2021. In terms of sectors, government payrolls fell by 157,000 in October, and manufacturing payrolls have not risen since March. Meanwhile, private sector payroll figures have improved, producing an average gain of 75,000 over the past three months. By contrast, the average gain for the May through July period was just 15,000. Nevertheless, the labor department continues to emphasize a very mixed picture. While there are no outright signs of sharp declines, it appears the labor market is cooling. The U-6 unemployment figure, which tracks those marginally attached to the labor market and involuntary part-time workers, jumped to 8.7% in November. Healthcare hiring seems to be the only robust sector with 46,000 jobs added in November, which is above the monthly gain of 39,000 over the previous 12 months. Specifically, health care services added 24,000, hospitals +11,000 and nursing and residential care facilities +11,000.
In retrospect, the Fed’s 25 basis point (0.25%) cut last week to its federal funds rate seems prescient. With the average job gain over the last three months down to 22,000, economists are claiming that the country is below the break-even rate. That’s the monthly increase needed to absorb new entrants to the labor force. Taking into account the plunge in immigration, many economists put the breakeven number at 50,000. Thus, the current rate of job creation is not strong enough to prevent rising unemployment and the 4.6% figure is likely to grow. The number of people who are long-term unemployed—out of work for 27 weeks or more—rose to one of the highest levels since the end of 2021. Teenage unemployment surged to 16.3% in November compared to 13.1% a year ago. The participation rate—the share of the population that is working or looking for work—sat at 62.5%, which was little changed from September. Average hourly earnings cooled a bit, rising 3.5% in November after a 3.7% rise in October. Meanwhile, in a separate report, applications for initial unemployment benefits fell after a worrisome spike in the previous week’s data. Weekly claims tend to be especially “noisy” around the holidays, and this year is proving no exception so far. The level of initial and continuing claims points to limited layoffs and quiet hiring, emphasizing the “low-firing, low-hiring environment” mentioned by Fed Chairman Jerome Powell at a press briefing in the fall.
Inflation indicator
The delayed consumer price index (CPI) for November showed that prices rose at the slowest annual pace since early 2021 providing an early gift to investors during the holiday season. The core CPI, which excludes food and energy categories due to their more volatile nature, rose 2.6% last month from a year ago, according to the Bureau of Labor Statistics (BLS). The overall CPI climbed 2.7% on an annual basis. The longest-ever federal government shutdown prevented the BLS from capturing much of the October price data. Thus, there are no month-over-month comparisons possible and will continue to feed questions about the true trend in inflation. Declines in hotel stays, recreation and apparel contributed to a subdued 3% rise in services prices excluding energy, while household furnishings and personal care product costs rose. Shelter prices rose 3% from a year ago, the smallest advance in more than four years.
“It’s possible that this does reflect a genuine drop off in inflationary pressures, but such a sudden stop, particularly in the more-persistent services components like rent of shelter is very unusual, at least outside of a recession,” Paul Ashworth, chief North America economist at Capital Economics, said in a note. “The upshot is that it [sic] looks like we all have to wait until the December data is published next month to verify whether this is a statistical blip or a genuine disinflation,” he said. There were plenty who were skeptical of the data. “The slowdown was broad-based across nearly all categories, adding to our suspicions that the shutdown’s disruptions caused issues in the data,” Wells Fargo & Co. economists said in a note. “Data collection didn’t begin until the second half of November, which may have skewed the sample more than we anticipated.” It is a little daunting to look at page after page of just blank columns (check it out at www.bls.gov) since data collection not only was not done for October, but the collection period for November was shortened. While equity markets had a somewhat outsized positive reaction to the news, the bond futures markets had no change in the odds of a Fed rate cut at the next three meetings. The nearest month with a greater than 50% bet on a rate cut is not until June, after current chair Powell steps down as the leader of the Federal Open Market Committee. The best conclusion to draw from this unique CPI report was that the data should not be ignored, but, for now, it should not be taken at face value.
Other data points
The deluge of data did not stop at just labor and price releases. The Commerce Department reported U.S. retail prices in October. Excluding auto dealers and gasoline service stations, sales rose 0.5%, which was above the 0.4% gain expected in a survey of economists by Bloomberg and much higher than the 0.1% rise reported in September. Eight out of 13 categories showed increases, including solid growth at department stores and online merchants as they prepare for the holiday shopping season. So-called “control group” sales, which are key components of the government’s GDP calculation, rose 0.8% in October, the most in four months. The data suggest that in spite of labor headwinds, consumer spending picked up steam in the early weeks of holiday splurges. Many retailers consider October now the unofficial start of the season, so these numbers bode well for the official kickoff which begins on Black Friday, the day after Thanksgiving. If you think holiday ads are starting earlier and earlier….they are, at least this year. According to ad racker iSpot, holiday TV ads started in October, and companies have spent $1.5 billion over the past nine weeks, a 13% increase from a year ago. Amazon.com aired its first holiday TV ad on October 13, much earlier than last year when it started November 1.
The National Association of Homebuilders and Wells Fargo confidence survey showed that market conditions inched up a bit in December. The index rose 1 point to 39, the highest since April. However, the gauge remains below 50, which is the dividing line between good and poor conditions. “Builders continue to face supply-side headwinds, as regulatory costs and material prices remain stubbornly high,” said Robert Dietz, chief economist at the NAHB. “Rising inventory also has increased competition for newly built homes.” An index which tracks prospective buyer traffic was flat. Home closings among publicly traded builders are expected to rise a bit next year after an anticipated 4% drop in 2025, Bloomberg Intelligence analyst Drew Reading said in a Dec. 1 note. This month, 67% of builders reported using sales incentives while 40% reported cutting prices. Mortgage rates hovering around 6.3%-6.4% has helped a bit, but many households still sit with mortgage rates below 5% secured during the post-pandemic period when the Fed pushed its benchmark rate to 0%. By region, builder sentiment rose the most in the Midwest and also picked up in the West. Sentiment in the South, the biggest homebuilding region, slipped.
In terms of previously-owned homes, the National Association of Realtors (NAR) reported sales rose 1.2% at an annual rate in October. The median sales price was up 2.1% from a year ago to $415,200, but that figure is down from this year’s peak of $432,700 reached in June. Somewhat ironically, sales were strongest among the more expensive homes, for example those costing $750,000 or more. Existing home sales make up approximately 90% of all residential transactions. Homes remained on the market 34 days, the longest stretch of any October since 2019. According to Lawrence Yun, Chief Economist at NAR, in order for sales to return to pre-Covid levels, “it requires drastically larger supply. We’re not seeing that. And a much more meaningful decline in mortgage rates.” Current rates for 30-year mortgages are hovering around 6.3%, down from closer to 7% in late spring. Yun’s “meaningful decline” means rates below 6%. Since the Fed reduced its benchmark federal funds rate, which federal banks charge each other for overnight loans, the U.S. government yield on 30-year debt has risen from 4.787% last week to 4.823% today so hopes of another leg down in mortgage rates are unlikely anytime soon.
Company Events
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