Real GDP growth came in at a 4.3% pace in the third quarter, topping the 3.8% rebound in growth in the second quarter. The economy contracted in the first quarter. That marked the strongest gains since the back half of 2023, without a commensurate rise in employment.

Caution on CPI report Pass the salt Federal Reserve Chairman Jay Powell warned about taking the data on employment and inflation released this week with a grain of salt due to data collection problems following the government shutdown at his press conference following the Fed meeting on Dec 10.

Whacky inflation data. The assumptions on shelter costs in October meant that we essentially zeroed out inflation in one of the largest single sectors. That effect will linger in the CPI data, even if it comes in higher in segment.

Coming up on @cnbc.com to talk jobs, Fed, retail. We still have an economy that adds up on paper to look better than it feels to most Americans. Inflation data out Thursday.

Emp data went into the red for Oct & Nov on net. Losses were dominated by earlier federal worker buyouts; 151K federal workers fell off the payrolls on October 1. This is separate from the government shutdown, which added to temp layoffs in Nov. The overall unempl rate hit 4.6%. WW

@goolsbee.bsky.social @chicagofed.bsky.social Notes that higher productivity growth increases the non-inflationary fed funds rate as the economy can grow more rapidly, without triggering inflation.

@chicagofed.bsky.social @goolsbee.bsky.social & @steveliesman.bsky.social of @cnbc.com Austan notes persistence of service sector inflation, which is less related to tariffs. Why he voted no to front-loading rate cuts with inflation moving up without data. He wanted to wait until Q1.

Next week we will be getting employment data for November and partial payroll data for October. Chair Powell warned about the risk to the November household survey with the government not reopened until the survey week for the household data. That is what calculates unemployment.

My take on the 2026 outlook. Emerging from the clouds with stimulus - bring the sunscreen. With the sunshine is risk of lingering burn of inflation. George Harrison’s story behind the writing of “Here Comes the Sun” spoke to me. kpmg.com/us/en/articl...

Bond market doesn’t buy what Fed is selling. Prices in more rate cuts than Fed expects after press conference. Powell more dovish than many of his colleagues. Dissents hit 3; 2 for no cut; 1 for 0.5% cut. Concern over who will replace Powell intensifying. socialshare.us.kworld.kpmg.com

Coming up on @bloomberg.com TV to talk Fed decision on rates amidst much debate about whether or whether inflation or employment is the largest threat. Fed is starting to lose credibility on its inflation-fighting resolve. We are enduring the longest bout of elevated inflation since the early 1980s.

Gut-wrenching drop in both the U Michigan and Conference Board surveys in November. Mentions of tariff and trade still high, while assessment of labor market deteriorating further. Worries about recession rose.

Retail sales weak, while portions of PPI hot - airfares up at fastest pace in PPI since March 2022. Major margin compression for retailers, automakers & machinery, as tariffs make their way through supply chains.

I have a slightly different take. If @federalreserve Chair Powell were a lame duck chair, he would not have been able to whip those closest to him toward a considering a cut, which he seemed to prefer even as he underscored the divisions he bore witness to at the October meeting.

I have been looking into metaphors for a one legged stool, given how concentrated economic gains have become. AI infrastructure and the wealth it created accounted for an inordinate amount of growth over the last two years, despite a sharp slowdown in employment.

Should Fed weigh merits of an inter-meeting decision? It is no secret that the Fed is deeply divided over whether to cut in December, skip a meeting or not cut at all. The government shutdown has left us with data delays and holes in the data, which further complicate that calculus.

NY Fed Pres Williams got the markets on a tear with his dovish comments on a December cut. Philly Fed Pres Paulson, who had staked out her views in Oct for cuts in both Oct & Dec showed more caution. These lines stood out of her speech stood out.

It is official. No CPI report for October. They will needs to impute some figures for the month when they estimate GDP as they need to deflate the GDP data and some components of PCE index are in the CPI.

Consumer sentiment continued its downward march in November. Inflation expectations are elevated but have cooled since Spring, while job security eroding. Younger workers most worried about jobs, while those with large stock holdings have lost the mojo they had in Sept & earlier in the month.

Existing home sales got slight lift in Oct; these reflect closings and offers made more than a month prior. All cash still high even as first time buyers saw some gains. Midwest & South are most affordable for first time buyers. East & West not so much. share.google/EqwCSo7F7mMd...

Coming up on @bloomberg.com TV to talk jobs and Fed’s dilemma.

A more detailed look at the September report, the last full report we will have prior to November. The October payrolls will be released with revisions to September with the full November report (which was delayed and couldn’t be distorted) on December 16. kpmg.com/us/en/articl...

Payrolls jump more than expected 119,000 in September, but hiring over the summer was revised down even further. Gains in the service sector - healthcare and social assistance and leisure and hospitality accounted for nearly all of those gains. Construction also added jobs to build data centers.

Innovations often trigger manias in investment, which can become bubbles. Investors bet the potential offered by the innovation before they know who will be the actual financial winners. The result may enable adoption even as some initial investors lose their shirts.

Dearth of data. The BLS will release the employment situation, which is two surveys - the establishment and the household - for November on December 16 AFTER the Federal Reserve meets on December 10. The October establishment will be backfilled.

Job postings close to pre-pandemic level but data masks underlying weakness. Wage posting up 2.5%, weak & below current inflation. Tends to lead by about 6 mos. Pockets of shortages in areas dominated by immigrants. Not zero sum. Foreign- & native- born complement instead substitute for each other.

A reminder: inflation burns but it is the level of prices relative to income that most consumers are struggling with. Too many don’t have the income to make ends meet. That is the result of compounding price increases without broad enough gains in wages …

Has the Fed changed its tune? No There was a large minority of the participants at the September meeting who either did not want to cut or were ok with only that cut. They didn’t dissent at that meeting, but one President, who usually doesn’t cast a dissenting vote in a vacuum did do so in Oct.

Coming up on CNBC at noon central/one est.

Watch BBC News Channel to hear @KPMG_US chief economist @dianeswonk.bsky.social assess where the economy stands after the long government shutdown. She'll be talking to Lewis Vaughan Jones in London and Caitriona Perry in DC.

A dilemma for the Fed. “It is easier to forecast stagflation than live it I real time…” Dealing with the Federal Reserve’s now dueling mandate reveals divisions. kathleenhays.substack.com/p/swonk-sees...

Coming up on Bloomberg at 10 est.

My take on the jobless boom we are riding is here. A rising tide fails to lift all boats… kpmg.com/us/en/articl...

Mortgage winter got about 🥶 Avg age first-time buyers jumped to 40 from 38 in NAR survey, oldest on record back to 1980s. Hard even as some markets hottest post pandemic markets experiencing price drops. Insurance & taxes hurt affordability more than mortgage rates. share.google/XwCFhqj82war...

Working on a new piece laying out why we are experiencing a jobless boom. Research by JP Morgan suggests that AI and related investment in infrastructure accounted for 3/4 of the 1.6% average growth of the first half of the year.

My take on a contensious rate cut by the Fed. Powell waffles on December cut. Dissonance within ranks of the Fed getting louder. Not yet deafening but moving in that direction. Mild bout of stagflation proven easier to forecast than live. Odd press conference. kpmg.com/us/en/articl...

Meant to post this sooner. Inflation hit 3% Y/Y. Not as hot as could have been but still warm. Troubling that 40% of the data are now imputed due to staffing shortages prior to shutdown. kpmg.com/us/en/articl...

This research from the Boston Fed suggests that inflation expectations may becoming unmoored. That means higher inflation is becoming normalized, which could be own self-fulfilling prophecy on a more sustained bout of inflation. Here are key takeaways:

Fed’s Beige Book survey of economic conditions is out. Lots of dissonance for the Fed. The low hire/low fire environment persists, along with pockets of labor shortages.

Powell: We do not have a view on immigration - we take it as it arrives. The changes are larger than expected with only beginning to see the effects. Big economic factor - fewer people to work and pockets of labor shortages are emerging. New people create supply and demand.

Powell embraces “healthy debate” about the tensions we are facing in. When I was an investor, I hated when everyone agreed. Debate at moment within the Fed are some of the richest and should be healthy given we have two things happening at once - inflation & weak employment.

Chair Powell receives the Adam Smith award. Data limited but outlook for employment and inflation not changed. In person Powell emphasizes MAYBE we have seen growth pick up. Learn more dovish than his text, with rising downside risks to employment. BUT evolving outcomes - more caution next year

Prez Anna Paulson, who rotated on to the FOMC voting committee next year, supports two additional rate cuts this year but caution next year. Worries ab employment & risk to low income households. Economy carried by affluent. BUT cautious cuts in 2026.

Halloween scare. Discussion of debt and deficits: AI can’t save us - debt and deficits on unsustainable path & crisis risks rising. Quote of day: “We might find someone who argues we are on a sustainable path, but they would not be qualified to speak on this panel.

Salim Ramji, CEO of Vanguard lays out the need for access to wealth accumulation for individual investors as a key equalizer. Investors do not know what they can spend & how to limit need to borrow or liquidate their 401Ks, which set them back. Leans into fixed incomes markets.

The hallowing out of the middle class and the economy. We are at a precipice. My take here. kpmg.com/us/en/articl...

More on inequality to come. Some recent studies worth thinking about. The age group with the most wealth over time is those over 75. A compounding of financial market returns and the equity in their homes are the primary reason. nber.org/papers/w34131#…

Some level of inequality is expected and aspirational in a market-based economy. Everything from skills, luck and grit can create inequality. Extreme inequality is not and can dampen growth and leave large swaths of the population desperate rather than aspiring.

Revisions to ADP payrolls reveal more weakness in private sector hiring, although the payroll company said the granularity on the Census data required more estimates. The ADP confirms other data on the labor market that is weak.

Why do economists care about inequality in incomes and wealth? 1) Inequality tends to dampen overall economic performance. One of most immediacy effects is on consumer spending. Low-and middle-income households spend a larger percentage of each dollar that they earn when more spending is in…