Markets ended the week little changed as investors digested a slew of delayed government data including October and November employment figures along with the November consumer inflation report. In many respects, the data was a Rorschach test, where different people saw different things in the same data.
Some saw October’s loss of 105K jobs as a sign of further weakness in labor market conditions. Others, however, saw a one-time distortion caused by the loss of 162K government jobs, reflecting those individuals who had accepted deferred resignations earlier in the year finally coming off federal payrolls.
November’s inflation data was similarly open to interpretation. Some saw the small 0.2% increase from September to November and 2.7% increase from a year ago, as a sign of easing inflation. Others, however, saw artificially weak inflation data distorted by the delayed collection of prices until the second half of November, when retailers were discounting items for the holiday shopping season.
The delayed timing of the releases and the effects of the government shutdown on the veracity of the data, meant investors generally accepted the results with a proverbial grain of salt, placing further importance on the December data. Without concerns about the data, the combination of seemingly weaker labor market conditions and relatively stable inflation would have fueled a narrative that the Fed could consider an additional rate cut in early 2026. Instead, market predictions for future rate cuts remained quite stable, as evidenced by the April rate cut forecast which was effectively unchanged at ~45% over the course of the week.
