Weekly Market Commentary December 22, 2025
WEEK IN REVIEW
Last week’s economic data offered a concentrated look at a U.S. economy in transition, with headline numbers masking deeper shifts beneath the surface.
Labor market signals were mixed. November’s hiring beat expectations, but the unemployment rate climbed to a four-year high of 4.6%, and October revisions revealed a loss of 105,000 jobs. The real story is in the details: companies are holding onto staff but cutting hours, driving the U-6 underemployment rate to 8.7% and swelling the ranks of involuntary part-time workers by 909,000. This “hours versus headcount” strategy means workers keep jobs but lose income and markets will likely be on the lookout for weaker consumer spending.
Data from the revised October nonfarm payroll indicates that the higher unemployment rate is mainly due to a loss of 162,000 federal government jobs, largely caused by deferred resignation offers. These displaced workers entered a private sector with frozen hiring, pushing the headline unemployment rate higher. Meanwhile, initial jobless claims remain low, reflecting corporate reluctance to let go of talent, but continuing claims are trending up, signaling that those who lose jobs are struggling to find new ones.
Inflation data delivered a dovish surprise, with headline Consumer Price Index (CPI) dropping to 2.7%. However, analysts caution that this “low quality beat” may be distorted by holiday discounting and delayed data collection. At the same time, Average Hourly Earnings rose just 0.1% in November, indicating that labor is showing early signs of losing pricing power. Together, these reports point to easing wage-driven inflation, but the downside is clear: stagnant wages and shrinking paychecks threaten consumer demand.
Other Reports on the Radar
• University of Michigan Consumer Sentiment (December): Sentiment index fell to 52.9, near historic lows, with labor anxiety now outweighing inflation concerns
• Core Retail Sales (November, Census Bureau): Flat overall, with core sales up just 0.2%. Spending shifted toward essentials, while discretionary purchases lagged.
• Business Inventories (November, Census Bureau): Rose 0.2%, with retail inventories up 0.4%. Rising inventories could signal slowing demand ahead.
• Existing Home Sales (November, NAR): Increased 0.5% to 4.13 million units, but volume remains historically low. Median home price hit a record $409,200, erasing affordability gains from lower rates.
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