Comments based on information available as of 5:45am CT on 12/19/2025
Growth: Labor’s Lump of Coal 
The November unemployment rate crept up to 4.6%. That’s still a gift compared to historical averages, but it has been moving in the wrong direction since March 2022 when it was as low as 3.4%. The Fed’s long-run projection for the unemployment rate is 4.2%, so we’re seeing an unemployment rate overshoot. Back in 2021-2022 we had a massive inflation overshoot due to policy errors. The Fed is cautiously cutting rates, so at least we’re unlikely to see a massive unemployment rate overshoot this time. The labor market may be cooling, but it’s not frozen.
Inflation: Inflation’s Sleigh Ride
October’s consumer price index (CPI) data is missing, but we did get November’s. Services price inflation eased from 3.5% in September to 3.0% in November, while goods inflation slipped from 1.5% to 1.4%. Because of the government shutdown, these numbers could be biased downward. The magnitudes might not be right, but the direction does seem to be corroborated by other data, like market-based rents and auto prices. With services inflation simmering down and goods inflation fading, the worst of the inflation scare seems to be mostly behind us.
Policy: Two Turtle Doves
We can question the data’s reliability all we want, but we have to deal with the data we have, not the data we wish we had. With the unemployment rate ticking up and inflation pressures easing, the doves at the Fed have two gifts under their tree. Before the next Fed meeting we’ll unwrap another jobs report and inflation reading. Then we will see whether the hawks or the doves need to change their feathers.
Looking Ahead: Nightmare Before Christmas or Yuletide Cheer?
The NASDAQ, the market’s star atop the tree, stumbled this past week. It wasn’t just the weight of high valuations, but the vulnerability that comes from lofty expectations. When an A+ student gets an A-, it stings more than when a B+ student gets a B-. The fundamentals of the broader market look solid, maybe even improving. If tech’s pre-Christmas dip feels like a lump of coal, there are still plenty of other presents to unwrap.
