The Macro Outlook: Labor Market Risks vs. Resilient Activity

by | Jan 12, 2026

The key events for the w/c 12 January 2026: US CPI, PPI, retail sales, and Fed speeches

Last week’s data continued to reflect the core tension in the US economy: a “low-dynamism” labor market persisting alongside resilient top-line economic activity. While the fall in the unemployment rate in Dec reversed the notable increase in Nov, the data still suggests a labor market stuck in a low-hiring/low-firing gear and, for now, keeping labor market risks elevated for the Fed. Amid these vulnerabilities, measures of activity through Q4 have so far remained resilient, albeit with pockets of weakness persisting in housing and manufacturing.

The Labor Market: A State of Low Dynamism

Importantly, the low firing environment remained intact in Dec. The unemployment rate declined to 4.4%, fully reversing the concerning spike to 4.6% in Nov. At the same time, the employment-to-population ratio increased back up to 59.7% (rebounding from the YTD low of 59.6%). This stability was also echoed in a similar fall in the unemployment rate within the core working age group (25-54yrs), where the unemployment rate fell back to 3.65% while the employment-to-population ratio returned to a YTD high of 80.7%. Secondary data also supported the low-firing theme. Layoffs in the JOLTS report fell back down at the end of Nov, initial jobless claims remain low while tracking seasonal shifts, and private-sector job cut announcements also eased at the end of the year.

At the same time, the low hiring reality remained entrenched. US non-farm payroll growth slowed to 50k in Dec, compounded by net revisions of -75k for the prior two months. While some of these revisions could be tied to non-cyclical declines in government payrolls, the broader trend was undeniable: annual payroll growth has more than halved over the last year, falling from +1.3% in Dec 2024 to +0.4% in Dec 2025. The slowdown was broad-based across service-providing jobs, government, and goods-producing payrolls. The JOLTS survey also showed the hiring and job opening rates falling to an equal YTD low at the end of Nov.

Implications for the Fed: thoughts on the underlying causes of this labor market stagnation were captured in the recent Fed minutes:

“Participants generally viewed the low dynamism in the labor market as reflecting both lower labor demand amid economic uncertainty… and decreased labor supply associated with lower immigration, the aging population, or reduced participation.” Source: FOMC Minutes 9-10 Dec 2025

Late last year, the Fed explicitly prioritized stabilizing the labor market risks with a series of three (3) risk management rate cuts. With the unemployment rate falling in Dec, markets have pushed expectations for the next rate cut out to Jun 2026 (source: CME Fedwatch). However, the FOMC is likely to remain cautious about the risks to the labor market.

Growth and Activity Indicators Show Some Resilience

In stark contrast to the stagnant labor market, headline growth remains surprisingly resilient.

  • The productivity bridge: The Q3 productivity and unit labor costs report was notable for the substantial increase in productivity of +4.9%, which was well above the annual trend. While this is a volatile measure quarter to quarter, the report highlighted how output growth remained strong at +5.4%, despite stagnant job growth. The report also noted that unit profits increased by +6.6% while real compensation for workers decreased by -0.2%. However, this highlights the headwinds for ongoing spending and growth if productivity gains don’t eventually translate into real wage growth.
  • Mixed PMI signals: The Dec PMIs showed diverging paths. The S&P surveys showed some slowing of momentum going into year-end, yet both manufacturing and services activity continued to expand at a moderate pace. However, the ISM surveys painted a stark contrast between the manufacturing sector losing steam amid a more negative business backdrop, while services’ momentum continued to strengthen into year-end.
  • GDP tracking for Q4: The Atlanta Fed GDPNow tracker ended the week at a +5.1% growth run-rate so far for Q4. While impressive, the notable increase last week was mostly the result of distortions from net export data. Underlying this growth, consumer spending remained steady, while slower housing starts in Nov were a drag on growth.

The central question for the 2026 outlook is whether this “resilient activity” will eventually pull hiring back up, or if the lack of labor market dynamism will eventually begin to feed on itself, creating a broader drag on the US economy.

Australian Inflation Pulse and the RBA

The Aus monthly CPI series showed all three inflation measures remaining above the top of the target 2-3% band; however, headline inflation moved lower to +3.4% this month (from +3.8% in Oct). There was some relief with the monthly trajectories shifting lower, but the question for the RBA will be whether this is a durable change in trend, given the higher monthly rates since Jul 25. The RBA will continue to place more weight on the Q4 quarterly CPI report due out in several weeks. Markets maintained pricing for a hold in the cash rate in the near-term (source: ASX Rate Tracker at 9 Jan 26).

Outlook for the week ahead: US CPI, PPI, retail sales, and Fed speeches

It will be another full week of US data catch-up and the last week of Fed speeches leading up to the FOMC meeting on 27-28 Jan.

US data will add to the inflation picture for Dec, but note that data is likely to remain noisy given the timing challenges related to the restart of data collection. Retail sales for Nov will add the important consumer spending element to growth tracking so far in Q4.

Outside of the data, the US Supreme Court may release its ruling this week (14 Jan) on President Trump’s use of ‘emergency powers’ to impose tariffs. We are also awaiting the announcement of the new Fed Chair nominee.

Key factors & events to watch this week:

US inflation data: CPI for Dec, PPI for Nov, and catch-up of import and export price indexes.

US inflation data continues to catch up after the end of the government shutdown – especially for PPI data this week. The CPI for Dec may contrast with the notably softer Nov reading, which may have been subject to distortions from the restart of data collection.

  • US headline CPI Dec is expected to increase by +0.3% over the month. The annual headline rate is expected to stay unchanged at +2.7%.
  • Core CPI is expected to increase by +0.3% in Dec, while the annual rate is expected to increase to +2.7% in Dec, from +2.6% in Nov.
  • The PPI data for Oct and Nov will be released this week, together with the import and export price indexes.

US Q4 growth inputs: retail sales and existing home sales.

  • US retail sales are expected to increase by +0.4% in Nov, up from 0% in Oct. The control group retail sales figure will be in focus as it feeds into the GDP calculation – and this measure was strong in the prior month, up +0.8%.
  • US existing home sales are expected to remain subdued in Dec, but still rising to 4.2m (annualized), up from 4.13m in Nov.

Fed speeches: This is the final week of speeches before the blackout period commences next week, ahead of the first FOMC meeting of the year on 27-28 Jan.

  • Two important speeches this week will be on Fri 16 Jan. Fed Vice Chair Jefferson and Vice Chair (Supervision) Bowman will both speak on the economic outlook. This is usually an important topic for any policy signalling ahead of the next FOMC meeting.
  • Fed Chair Powell released a firm video statement late on Sunday in response to the Trump administration serving grand jury subpoenas to the Fed last week. There are many implications of this escalation in action by the Trump administration targeted at the Fed – among them, this legal friction may delay or alter the succession timeline. There may be some headline risk around that this week.

This week, the US Treasury will auction and settle approx $586bn in ST Bills, Notes, and Bonds, raising approx. $11bn in new money. Approx $43bn in ST Bills & TIPS will mature on the Fed balance sheet and will be reinvested.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 12Jan2026Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net

The Macro Outlook: Setting the Tone for 2026

by | Jan 5, 2026

The key events for the w/c 5 January 2026: US non-farm payrolls, ISM PMIs, Aus CPI (monthly), S&P PMIs for Dec

The new year opens with a focus on reorientation as the US catches up on delayed data releases over a mostly quiet holiday period. We start the year, however, with further developments in the geopolitical backdrop as the US has now moved to depose the Venezuelan leader over the weekend. These developments warrant observation for their potential impact on broader market stability. Nevertheless, the primary task for markets this week is building out the final view of US economic activity for the close of 2025.

There are several important updates in the week ahead.

US Labor Market Dec: FOMC Implications

The updated suite of US labor market data for Dec will arguably be the most important input in the lead-up to the FOMC meeting at the end of the month. At the time of writing, markets are leaning toward a hold in Jan, with a slight skew to a cut in Mar (Source: CME FedWatch). The Fed’s sensitivity to a weakening labor market remains high. If the unemployment rate continues to increase beyond 4.7%, then we could see rate-cut expectations brought forward. The latest FOMC minutes reiterated the importance of managing the downside risks around the labor market.

Assessing the US Growth Trajectory: Q3 Resilience

The US data catch-up continues this week with housing data for Sept and Oct, alongside US trade figures. Looking back, US Q3 growth demonstrated resilience, with headline GDP accelerating to an annualized +4.3% (up from +3.8% in Q2). This growth was driven by higher personal spending growth, helping to offset a slowdown in fixed investment and continued weakness in the residential sector. While government spending provided a tailwind in Q3, the outlook for Q4 remains clouded by the government shutdown. We expect a dip in the final quarter of 2025, followed by a Q1 rebound.

The data catch-up also means that the Atlanta Fed GDP nowcast will be updated for Q4. So far, and based on limited data, the nowcast for the Q4 GDP growth run rate has started at +3%. The nowcast for Q4 GDP growth is expected to be finalized at the end of Jan.

Global Momentum: PMIs and Global Manufacturing Wanes

As we close out 2025, this week’s US ISM and final S&P Global PMIs will provide some insight into year-end momentum. Early data suggests that while global manufacturing momentum remains in positive territory, the pace of expansion waned during the final two months of Q4. The focus now shifts to whether services can maintain the heavy lifting.

Australian Inflation Pulse and the RBA

Outside of the US, the Aus monthly CPI for Nov will be important. While the RBA remains focused on the quarterly CPI result for Q4 (due 28 Jan), the new monthly series may offer an important directional guide. The RBA is navigating concerns that inflation risks may be tilting to the upside; however, the recent minutes emphasized that it was still too early to determine whether this recent uptick in inflation would be persistent. Expectations for the policy rate have shifted to a hold in the near-term, but are now skewed towards potential hikes in the outlook (Source: ASX Rate Tracker at 2 Jan 26).

Policy Watch: A New Era at the Fed

Finally, the transition in FOMC leadership is front-of-mind as we move forward in 2026. The announcement of a new Federal Reserve Chair is imminent, and markets should be prepared for the potential shift in priorities, communication style, and culture that a change at the top may bring.

Key factors & events to watch this week: US non-farm payrolls, ISM PMIs, Aus CPI (monthly)

US labor market data for Dec

A quick recap: the Nov labor data showed some further softening in conditions, though the data was mixed. Some of the larger-than-expected increase in the unemployment rate could be attributed to temporary layoffs; however, slower employment growth was also a factor.

  • Non-farm payroll growth is expected to remain modest at 57k in Dec, little changed from 64k in Nov.
  • The unemployment rate is expected to edge back down to 4.5% after increasing notably in Nov to 4.6%.
  • Participation is expected to be little changed at 62.5%, while average weekly hours worked is expected to be unchanged at 34.3.
  • Job openings at the end of Nov are expected to be 7.65m, down slightly from 7.67m in Oct.
  • The Challenger Job Cut Announcements survey for Dec is expected to show little change from the 71k announcements in Nov.
  • Initial jobless claims for the week ending 3 Jan are expected to increase to 216k (from 199k in the week prior). Continuing claims have been moving lower in the weeks since the end of the US government shutdown, falling to 1.866m in the latest week ending 20 Dec.

US Q4 growth inputs: ISM PMIs Dec, housing data catch-up, trade

  • The manufacturing and services PMIs are expected to be little changed in Dec at 48.3 and 52.3, respectively. Key indicators in focus will be the direction of demand/orders, employment, and prices.
  • Housing data catch-up (Sept & Oct): New housing permits are expected to come in around 1.34m on an annualized basis in Oct – remaining subdued. New housing starts are also expected to remain subdued at 1.31m in Oct.

Aus monthly CPI for Nov

This is now the second release of the new, complete monthly CPI series. It’s still early in the transition from the quarterly CPI series to the monthly series, so the RBA will continue to use the quarterly report.

  • The uptick in monthly headline inflation in Oct to +3.8% was notable, up from +3.6% in Sept. The core/trimmed mean also increased to +3.3% in Oct from +3.2% in Sept. We’ll be looking for the direction of movement in Nov to see how it impacts the quarterly outlook. The latest RBA forecast has Q4 trimmed mean CPI running at +3.3% over the year, which, so far, aligns with the monthly core inflation for Oct.

Euro area CPI – prelim for Dec

  • Headline CPI for the Euro area is expected to remain unchanged at +2.1% in Dec, and core CPI is also expected to remain unchanged at +2.4% in Dec.

Canada labour market Dec

  • The recent improvement in labour market conditions is expected to stall this month. Employment growth is expected to fall by -5k in Dec, after rising by +53.6k in Nov. The unemployment rate is expected to edge higher to 6.7% in Dec (from 6.5% in Nov).

S&P Global PMIs: The final composite and services PMIs for Dec will be released early this week.

This week, the US Treasury will auction and settle approx $467bn in ST Bills with a paydown of $25bn. Approx $13bn in ST Bills will mature on the Fed balance sheet and will be reinvested.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 5Jan2026Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net

The Macro Outlook: Central Bank Decisions – Part 2

by | Dec 15, 2025

The key events for the w/c 15 December 2025: Central Bank Decisions – ECB, BoE, and BoJ, US Fed Waller speech, US data: employment situation, retail sales, & CPI, Global CPI reports, S&P prelim PMIs (Dec)

The Recap from Last Week: Central Banks Find Their Own Path

The central bank decisions last week by the FOMC, the RBA, and the BoC continued to highlight policy divergence in response to local pressures. While a broad theme of caution and pause underlies all three decisions, each bank is responding more to specific national nuances as they approach, and now pause at, respective “neutral” policy levels. With its latest rate cut to further mitigate downside risks to employment, the FOMC signalled a pause after hitting a “plausible” neutral range. In contrast, the RBA stayed on hold, while sounding a warning on upside inflation risks. Finally, the BoC remained on hold, reaffirming that its policy rate was “at about the right level” as it manages the complex structural trade adjustment. These three decisions set the stage for the final key meetings of the year from the BoE, ECB, and BoJ this week.

FOMC: Rate Cut Arrives at a Plausible Neutral Range

SUMMARY: The FOMC cut the FFR by 25bps as expected to 3.5% – 3.75%, and now judges policy as within a range of “plausible estimates of neutral”. Chair Powell confirmed that “we’ve been sort of moving in the direction of neutral”, setting up the shift in guidance to signal a pause here “to see how the economy evolves”. The primary risk leading up to the next meeting is a deterioration in the labor market. While key US labor market data continues to catch up after the shutdown – and with Oct & Nov data due this week, Fed Chair Powell has warned over the challenge of data distortions.

DETAIL: The Fed decision was split 9-3 in favour of a cut (one member preferred a 50bps cut, and two preferred to hold (citing inflation and data uncertainty), highlighting the still divided nature of the policy debate.

Given the arrival at a more neutral setting, the cumulative cuts in the cycle so far, and a more constructive outlook for 2026, the key shift was the signal of a pause: “We are well positioned to wait and see how the economy evolves”. Guidance shifted to a more neutral bias, while keeping the door open to modest easing over the next two to three years. This marked a shift from the risk management bias (“considering additional adjustments”) to more of a data-dependent approach, “judging the extent and timing of additional adjustments” – reflecting less certainty over how many cuts and when.

With the cut, the FOMC continued to manage its dual mandate trade-off by prioritizing the “further cooling” in the labor market over inflation that had come in a “touch lower”. Chair Powell noted that he expects unemployment might “kick up one or two more tenths,” but that the cuts to date would help to stabilize unemployment, and that he isn’t expecting a sharper downturn. This suggests that an unemployment rate exceeding the projected year-end rate of 4.5% by more than two tenths could be a trigger for another cut leading up to the Jan meeting.

While risks to the outlook are still tilted to the downside for unemployment, the projections for 2026 were somewhat more constructive: solid growth, inflation easing, and unemployment easing. Powell stated, “So it looks like the baseline would be solid growth next year.”

The outlook for the FFR in the dot plot projects modest easing over the next two to three years, with the long-term (LT) neutral rate unchanged at 3%. Near-term dispersion is notable: the median projection for the FFR in 2026 suggests at least one rate cut, but there are twelve members projecting a lower FFR (by between one and six rate cuts), four see a hold through 2026, and three see potential for a hike. Powell firmly ruled out a hike being on the table at this point.

RBA: Hold With Inflation Risks Tilted to the Upside

SUMMARY: The RBA stayed on hold at this meeting as expected, and it was a unanimous decision. The Board elevated its concern over inflation, noting that recent data suggests “inflation risks have tilted to the upside” – a key shift at this meeting. The primary risk remains the Q4 trimmed mean inflation rate and domestic capacity pressures that could position the Feb meeting as live for a hike.

DETAIL: Stronger-than-expected inflation, combined with stronger-than-expected activity in Q3, has fuelled concerns over the inflation outlook. The Board noted “uncertainty over the extent to which monetary policy remains restrictive”, with the RBA Governor adding that the effects of recent cuts are still to be fully transmitted through the economy, potentially adding further to demand.

The Board did not consider a rate cut at this meeting, “given what’s happening with underlying momentum in the economy that it does look like additional cuts are not needed”. While the case for a rate rise was not explicitly considered, the Board did discuss how conditions would need to evolve if rates “had to rise again at some point next year” – we’ll await the Minutes for details on this discussion.

Guidance shifted to a more near-term, cautious bias, given that it would take a little longer to assess the persistence of inflationary pressures. The Q4 CPI was explicitly noted as a key report leading up to the next meeting, to help answer whether the larger-than-expected Q3 trimmed mean was “due to unrelated, one-off factors, or was it demonstrating some underlying capacity pressures in the economy”? The latest SoMP has the trimmed mean inflation rate lifting to +3.2% in Q4 (from +3% in Q3 – which was higher than the SoMP forecast of +2.7%). A reading above the projected Q4 QoQ trimmed mean inflation of +0.8% could trigger concerns for the RBA, suggesting Feb could be a live meeting for a hike. Current market pricing (12 Dec) has a rate hike priced by around Jul 2026. While the RBA is waiting on the Q4 CPI report, its assessment of inflationary pressure will incorporate broader measures of capacity pressures, labour market tightness, and financial conditions. The latest Nov labor market report was published after the meeting with mixed results, even though the unemployment rate was unchanged at 4.3%.

BOC: Holding at “About the Right Level”

SUMMARY: The BoC kept policy settings unchanged at this meeting as expected. The decision was unanimous. The key signalling was that the Bank continues to see the current policy rate “at about the right level” to keep inflation close to 2% while helping the economy through this period of structural adjustment. Holding the policy rate unchanged at the lower end of the neutral range was seen as appropriate, having already delivered significant policy easing. However, the key risk remains supporting the economy, balancing growth and inflation, through the structural trade adjustment.

DETAIL: The Bank suggests economic slack, caused by the structural reconfiguration of trade, is acting to “offset” the cost pressures associated with that reconfiguration. The BoC emphasized that “this is more than a cyclical downturn—it’s a structural transition. Monetary policy cannot restore lost supply. But it can help the economy adjust as long as inflation is well controlled”. The current stickiness of core inflation, despite the economic slack, creates some caution for the Bank while it balances support for the Canadian economy amid nascent signs of stabilization. Despite several upside surprises in recent GDP and unemployment data, there remains a great deal of uncertainty over the path of the economy.

Outlook for the week ahead: Central Bank Decisions – ECB, BoE, and BoJ, US Fed Waller speech, US data: employment situation, retail sales, & CPI, Global CPI reports, S&P prelim PMIs (Dec)

To close out the year, it’s going to be a big week of central bank decisions, important US data beginning to catch up (non-farm payrolls, CPI, retail sales), global inflation reports (UK, Canada, Euro-area, and Japan), and the prelim S&P PMIs for Dec.

Key factors & events to watch this week:

Key central bank decisions part 2 and speeches

Bank of England (BoE)

  • Expected Action: Markets are expecting the BoE to cut rates by 25bps.
  • Decision Focus: After the extremely divided decision at the last meeting, the focus will be on the assessment of the balance of risks (less pronounced inflation risks versus slack building in the economy), as well as any shift in the assessment of policy restrictiveness. The BoE was waiting on additional evidence on the inflation outlook, as well as the budget release, before assessing further rate cuts.
  • A further CPI (Nov) and labour market report (3-mth Oct) will be released before the meeting.

European Central Bank (ECB)

  • Expected Action: The ECB is expected to keep the Deposit Facility Rate (DFR) unchanged at 2% at this meeting.
  • Guidance focus: remains meeting by meeting. ECB President Lagarde recently reaffirmed that “we are in a good place” in regard to activity and policy settings in the Euro area. However, there could be some shift in signalling related to the balance of risks and the inflation and growth outlook, with the release of the latest forecasts.

The Bank of Japan (BoJ)

  • Expected Action: Based on speeches over the last several weeks, there is some expectation that the BoJ could hike rates by 25bps as early as this meeting.
  • The latest National CPI report for Nov will be released around the time of the meeting.

The US Federal Reserve

  • There will be several speeches this week; however, the key speech will be Fed Governor Waller on the Economic Outlook. This will be an important speech outlining Waller’s view on the US economy and the appropriate policy approach.

US labor market data catch-up

This week will feature the key employment situation report for Oct & Nov as well as weekly claims data. Note that the US labor market data for Oct & Nov will be released earlier in the week than usual, on Tue 16 Dec. Most of this data will still likely reflect the effects of the US govt shutdown.

  • Non-farm payrolls for Nov are expected to increase by 35k, after +119k in Sept.
  • The unemployment rate is expected to stay unchanged at 4.4%.
  • Initial jobless claims for the week ending 13 Dec are expected to be little changed at 230k (from 236k in the week prior). The trend of continuing claims fell notably in the week ending 29 Nov – likely reflecting the short holiday week as well as normalization after the end of the shutdown.

US Inflation and spending data

  • US retail sales for Oct are expected to increase by +0.2%, little changed from +0.2% in Sep. The control group (feeds into the GDP calculation) is expected to increase by +0.2% after falling in Sep. Data is likely to remain subdued as a result of the shutdown.
  • US CPI for Nov is expected to increase to +3.2% over the year, up from +3% in Oct. Core CPI is also expected to increase to +3.2% in Nov, from +3% in Oct.

Global CPI reports – Nov

  • Canada: headline CPI for Nov is expected to lift back up to +2.4% from +2.2% in Oct. Headline CPI ex gasoline was unchanged at +2.6% in Oct and is expected to remain little changed in Nov. The BoC measures of underlying inflation have shifted lower again and are expected to be unchanged at +2.9% and +3% for the median and trimmed mean, respectively.
  • UK CPI core CPI for Nov is expected to be unchanged at +3.4%.
  • Euro area CPI (final) for Nov is expected to be confirmed at +2.2% for headline inflation and at +2.4% for core inflation.
  • Japan National CPI is expected to be unchanged, with the main BoJ measure of core CPI ex fresh food expected to be +3% in Nov, the same as Oct.

NZ Q3 GDP is expected to increase by +0.9% QoQ, reversing the sharp fall of -0.9% QoQ in Q2.

The prelim S&P PMIs for Dec will be released early this week.

This week, the US Treasury will auction and settle approx $591bn in ST Bills, Notes, and Bonds, raising approx. $36bn in new money. The US Treasury will also auction the 20-year Bond and 5-year TIPS this week, to settle on 31 Dec.

Approx $9.1bn in ST Bills will mature on the Fed balance sheet and will be reinvested. Reserve Management Purchase (RPM) operations recommenced last week.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 15Dec2025Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net

The Macro Outlook: Central Bank Previews – Fed Rate Cut Expected

by | Dec 8, 2025

The key events for w/c 8 December 2025: Central Bank Decisions: FOMC, RBA, BoC, Aus Labour Market for Nov, US data: ECI Q3, JOLTS Oct.

The Recap from Last Week – US Data Supports Risk Management Bias

The market widely expects the FOMC to deliver a further rate cut this week, despite the previous decision revealing “strongly differing views” for the Dec meeting. Despite the presence of two-sided risks and “no risk-free path” for the Fed, the risks from cooling labor market conditions have underpinned the recent decisions to ease policy. The data flow leading up to the meeting this week is still likely to support the Fed’s risk management bias, highlighting a backdrop characterized by resilient, albeit sluggish growth, stalled progress on inflation, and evidence that the labor market continues to cool and remains “susceptible to negative shocks”.

Cooling Labor Market Conditions Persist

Cooling conditions in the US labor market have been the key area of concern for the FOMC. Despite a lack of government data since the last meeting, private sector reports likely provide enough direction to maintain that risk management bias.

  • The ADP report showed another 32k jobs shed in Nov, particularly in manufacturing and professional services. This contrasted with the recent Challenger Job Cut Announcement survey, which did see a fall in Nov after the elevated number of job cuts announced in Oct.
  • The Fed will lean heavily on the most recent Beige Book survey, which showed a slight decline in employment and weaker labor demand, with firms relying on hiring freezes, attrition, and adjusted hours rather than mass layoffs.
  • The most recent initial and continuing claims data continue to normalize after the shutdown. Crucially, continuing claims have drifted lower post-shutdown, but remain at an elevated level, highlighting the susceptibility of the labor market to a negative shock.
  • The latest Nov S&P PMIs showed some resilience (employment growth steepest in three months in manufacturing and services). But this was countered by the still downbeat view of employment from the ISM surveys – especially in manufacturing.
  • The latest JOLTS data for Oct is due this week, with the full Employment Situation report for Nov to be released next week as part of the data catch-up.

Inflation Momentum Contained by Margin Compression

While lagging data suggests progress on inflation has stalled above the 2% target, more recent survey data suggests momentum may be contained by firm-level caution over pricing and competitive pressures.

  • PCE Inflation – catch-up release: The Sep report is a significantly lagging datapoint, but it did confirm the concern that inflation progress has stalled: headline PCE inflation hit a YTD high of +2.8%,  moving well above the +2.3% recorded a year ago. Core PCE edged down from its Aug YTD high to +2.8% in Sep, and is on par with the rate recorded a year ago, strengthening concerns that inflation progress has stalled.
  • The Beige Book: However, surveys suggest some weakness in pricing power. The latest Beige Book showed input prices still increased moderately and were not limited to tariffs. However, there were “multiple reports” that firms had absorbed these increases for now. The outlook for plans to raise prices in the near term was mixed.
  • The latest S&P PMIs showed manufacturing firms continued to absorb rising input prices. While services sector inflation increased to “the greatest degree since May”, increases in selling prices remained below recent peaks. The ISM surveys showed price increases remained broadly elevated, but little changed in the manufacturing sector and became less widespread in the services sector.

Activity: Downshifted but Resilient

Amidst persistent cost pressures and the government shutdown, activity has remained resilient, though downshifted to a more sluggish pace.

  • The Beige Book reported that economic activity was ‘little changed’ across most districts, noting weakness in consumer spending, resilient manufacturing activity, and “flat-to-down” revenue in the services sector.
  • The latest S&P PMIs for Nov showed growth momentum had remained broadly moderate and unchanged from Oct, as solid services sector activity helped to offset some weakness in manufacturing demand.   

Central Bank Previews – Focus on Policy Outlook

  • The FOMC: While a further rate cut is expected by the FOMC this week, the decision will be important for its signalling on the outlook. There was a notable division at the last meeting on the current policy stance, between those who thought policy was still restrictive and needed to move toward neutral and those who thought policy was “not clearly restrictive”, supporting a slower cadence of cuts. The latest projections should reflect how policymakers have shifted their views on the path of rates, as well as expectations for the economy.
  • The RBA meets this week – and is expected to keep policy settings unchanged. This will also be an important meeting, not so much for the decision, but for the parsing of recent data (firmer inflation, stronger labour market, and solid growth) and the implications for the outlook. At the last meeting, the RBA Governor noted that the recent data flow has led to increased uncertainty over the assessment that monetary policy remains a “little restrictive”. Based on the data flow since then, markets have removed rate cuts from the outlook and even started to price in the chances of a hike. The signalling in this decision will be important for the outlook.
  • Finally, the BoC will also meet this week and is expected to keep policy settings unchanged. At the last meeting, the BoC signalled that it saw its policy rate of 2.25% as “at about the right level to keep inflation close to 2%”. The latest Canadian labor market report for Nov confirmed a firming trend in employment growth, while the unemployment rate stepped notably lower from 6.9% to 6.5%.

Outlook for the week ahead: Central Bank Decisions: FOMC, RBA, BoC, Aus Labour Market for Nov, US data: ECI Q3, JOLTS Oct.

The focus shifts firmly to central bank decisions this week, including the FOMC, RBA, and BoC. While the decisions are widely expected to be clear-cut, the signalling on policy stance and the implications for the outlook will be in focus for markets.

Key factors & events to watch this week:

Key central bank decisions

US Federal Reserve meeting (FOMC)

  • Expected Action: Markets are expecting the FOMC to cut rates again this week to: 3.5% – 3.75%
  • Decision Focus: Details of the decision will be in focus – the status of the decision (still a risk management cut?), the balance of risks to the outlook (labor market versus inflation bias?), and changes to the degree of dissent/division among committee members on the policy stance compared to the previous meeting.
  • Forward Guidance: The latest Summary of Economic Projections (SEP) will be released. In focus will be any change to the cadence of policy easing as well as updates to the outlook for growth, inflation, and the labor market. Expect uncertainty to be elevated given the lack of data, effects of post-shutdown normalization on the economy, and fiscal impacts in early 2026.
  • Post-meeting speeches will also be in focus.

The Reserve Bank of Australia (RBA)

  • Expected Action: The RBA is expected to keep rates unchanged at 3.6% at its meeting this week.
  • Signalling Focus: Details of the decision will be a key focus – especially around how recent firmer data may change the Board’s view on the current policy stance (previously, “increased uncertainty” over whether policy was a “little restrictive”).
  • Domestic Data: The Nov labour market survey is expected to show continued growth in employment of +20k, down from +42k in Oct. The unemployment rate is expected to edge back up to 4.4% from 4.3% in Oct.

The Bank of Canada (BoC)

  • Expected Action: The BoC is expected to keep policy settings unchanged at this meeting at 2.25%.

US labor market data

  • Ahead of the release next week of the up-to-date Employment Situation report for Nov, the latest JOLTS data for Oct will be released this week. Job openings for Oct are expected to be 7.2m in Oct, little changed from 7.22m in Sep. This report will provide our first read on any shift to the low-hiring/low-firing dynamic of the US labor market.
  • Initial jobless claims for the wk ending 6 Dec are expected to increase slightly to 221k from 191k wk ending 29 Nov, which reflected the short week for Thanksgiving. The trend of continuing claims will be in focus for the wk ending 29 Nov, given the recent downshift post-shutdown.
  • Data catch-up: US Employment Cost Index Q3: QoQ expecting +0.9%, unchanged from +0.9% in Q2.
  • The catch-up international trade data for Sept will be released this week (BEA), with the release of the initial estimate of US Q3 GDP growth pushed out to 23 Dec.

Updated US data release schedules

  • Link to the BLS page for the revised news release is here.
  • The Bureau of Economic Analysis (BEA) schedule page can be found here.
  • The US Census Bureau page can be found here.

This week, the US Treasury will auction and settle approx $502bn in ST Bills, with a net paydown of $38bn. The US Treasury will also auction the 30-year Bond, 3-year, and 10-year Notes this week – all will settle next week on 15 Dec.

Approx $11bn in ST Bills will mature on the Fed balance sheet and will be reinvested.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 8Dec2025Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net

The Macro Outlook: A Divided FOMC and the US Labor Market

by | Nov 3, 2025

The key events shaping the w/c 3 November 2025: US labor market data for Oct, RBA & BoE meetings, PMIs for Oct.

Recap from last week: Review of FOMC, BoC, ECB, and BoJ Decisions

While last week’s central bank decisions played out mostly as expected, the FOMC decision was the highlight. It introduced a notable shift in guidance for Dec and revealed an FOMC divided on the outlook. The Australian Q3 CPI was much higher than expected, with implications for the RBA meeting this week. Finally, the meeting and agreement between US President Trump and Chinese President Xi provided a more constructive geopolitical backdrop for now.

FOMC: Shifts Guidance for Dec

The FOMC cut by 25bps last week, with the decision remaining in the realm of a ‘risk management’ cut, given the rising downside risks to the labor market noted at the Sept meeting. The Fed also announced the end of QT next month. The Fed Chair continued to emphasize the challenging situation of “no risk-free path” as the Committee navigates the tension between its employment and inflation goals.

The key feature of this decision, however, was the division among Committee members. Firstly, the decision to cut was not unanimous, drawing two notable dissents – one member (Schmid) preferred no change at this meeting, while another (Miran) argued for a deeper 50bps cut. Secondly, according to Powell, “there were strongly differing views about how to proceed in Dec”, which led to a distinct shift in forward guidance. While markets had priced in a follow-up rate cut in Dec, Chair Powell explicitly countered that expectation:  

“A further reduction in the policy rate at the December meeting is not a forgone conclusion—far from it.” – US Fed Chair Powell, Press Conference, 29 Oct 2025

This shift in guidance appeared to be more than just an attempt to maximize optionality for the Dec meeting. Rather, it reflected the range of views that leaned against the expectation for a continued rate cut in Dec. During the press conference, Powell outlined some of these arguments, including tentative signs that labor market conditions may be stabilizing, as well as members noting “stronger economic activity”. Given inflation is still above target, Powell noted that while the “reasonable base case” assumes tariffs will cause a one-off shift in the price level, many on the board are not simply assuming that will be the case. He also cited lingering data uncertainty stemming from the government shutdown as a reason to pause: “What do you do in a fog? You slow down.” Finally, an argument for slowing down the cadence of easing emerged, noting that the policy rate was 150bps closer to neutral than a year ago:

“And so there’s a growing chorus now of feeling like maybe this is where we should at least wait a cycle, something like that. That’s what it is.”- US Fed Chair Powell, Press Conference, 29 Oct 2025

The post-meeting commentary underscored the committee’s division. Several members outlined their differing views; Schmid (dissent), Logan, and Hammack preferred a hold; Waller still supports a cut in Dec; and Miran (dissent) likely still supports a 50bps cut in Dec. There are more speakers scheduled this week. Overall, the outcome of the Dec meeting will largely be determined by how the data and momentum, especially for the labor market, evolve over the next few weeks. Assessing this momentum remains challenging given the continued lack of official government data. This week, we will continue to rely on private sector reports, instead of the official government data, to assess the US labor market momentum in Oct.

The BoC Signals a Pause

The BoC cut rates at this meeting as expected, based on ongoing weakness in the economy, while inflation pressures remained ‘contained’. The BoC signalled a possible pause, though, with the Governing Council noting that “the current policy rate [is] at about the right level to keep inflation close to 2% while helping the economy through this period of structural adjustment”. The BoC noted that the current economic weakness wasn’t just cyclical, but that trade and tariff changes were leading to a structural adjustment in the Canadian economy.

The domestic picture still poses a challenge for monetary policy. Like the ECB, the BoC noted that some uncertainty over trade and tariffs had receded – but that growth remained under pressure due to tariffs. In Sept, the unemployment rate remained high at 7.1% while headline inflation was +2.4%, slightly higher than the BoC anticipated. While the preferred measures of core inflation have been sticky around 3%, the “upward momentum had dissipated”.

The ECB: Still in a ‘Good Place’

The ECB kept policy settings unchanged as expected. The Governing Council noted that inflation is close to the 2% target, and the inflation outlook was broadly unchanged. Although the growth backdrop remained challenging, growth risks had abated. Past rate cuts were cited as an important source of resilience, with the ECB President stating that “Policy is still in a good place”. The ECB maintained its meeting-by-meeting approach to its assessment.

The broader Euro area continues to show resilience. The latest prelim GDP for Q3 was better than expected at +0.2%, boosted by some stronger country-level results despite political disruption in France, and the challenging manufacturing and trade backdrop facing Germany and the broader Eurozone manufacturing sector. Meanwhile, the latest prelim Oct CPI for the Euro area was little changed from Sep.

The BoJ Maintains its Policy Rate

The BoJ kept rates unchanged as expected, maintaining its normalisation bias. However, the decision was marked by two dissenting votes preferring a rate hike. The dissenters cited “a shift away from the deflationary norm and the price stability target had been more or less achieved”, and “with risks to prices becoming more skewed to the upside, the Bank should set the policy interest rate a little closer to the neutral rate” as reasons for preferring to hike at this meeting.

On the outlook, Governor Ueda reiterated the need for patience, stating: “We held today as we want to see more data on domestic wage-setting behaviors, while uncertainty remains high in overseas economies. If we’re convinced, we’ll adjust rates regardless of the political situation.”

Via Bloomberg: Governor Ueda also made clear that the central bank does not need to see the full results of the wage talks before deciding. He repeatedly emphasized that the BoJ wants only to confirm the initial momentum of wage talks before adjusting policy—a signal that a rate hike may be closer than market reactions might suggest.

Outlook for the week ahead: US Labor Market data for Oct, RBA & BoE meetings, PMIs for Oct

The focus shifts this week to the US labor market for Oct, several central bank decisions, and the full suite of Oct PMIs to assess growth momentum at the start of Q4.

Progress on the resolution of the US government shutdown will also remain in focus this week.

The geopolitical backdrop is expected to remain constructive for now, given positive meetings with US President Trump throughout Asia last week, as well as an agreement signed with Chinese President Xi. While the details of the agreement are limited, markets remain reassured with positive dialogue between the sides.

Key factors & events to watch this week:

US Labor Market for Oct

With the shutdown still in place, we continue to rely on private sector labor market reports (and central bank surveys) to assess momentum in the US labor market.

  • ADP is now releasing its 4-week average payroll growth statistic each week. Last week, for the four weeks ended 11 Oct, payroll growth was +14k.
  • The full month ADP report for Oct is expected to show payroll growth of +25k, up from -32k in Sept.
  • The Challenger Job Cut Announcement survey for Oct will also be released this week. Last month, job cut announcements fell to 54k.
  • The various ISM and S&P PMIs will also provide some guidance on changes in employment conditions from the prior month across manufacturing and services firms.

US PMI Data – Oct

ISM & S&P PMI surveys for Oct will provide some further insight into changes in growth momentum.

  • The ISM surveys are expected to show stagnant conditions in manufacturing and only modest growth in Services in Oct. The ISM Manufacturing PMI is expected to stay around 49, while the services PMI is expected to increase to 51. Across both reports, key indicators will be the momentum in orders, employment, and prices.
  • The S&P prelim US PMIs for Oct showed somewhat stronger activity in Oct compared to Sept. The S&P manufacturing PMI is expected to confirm a modest expansion at 52.2, and a more widespread expansion in the services sector at 55.2.

US Fed speeches & Data

  • There is a range of Fed speeches scheduled for this week. Of note is Governor Waller (central banking and the future of payments), Governor Cook (economic outlook and monetary policy), Vice Chair (Supervision) Bowman, and Fed Vice Chair Jefferson.
  • The latest Senior Loan Officer Opinion Survey is expected to be released.
  • The US Consumer Credit Change for Sept will be released at the end of the week. Growth in consumer credit in Aug was a mere +$0.36bn.

The RBA Meeting

Last week’s Q3 CPI came in higher than the already firmer expectations. Every category made a positive contribution to inflation in Q3. The trimmed mean and median measures of underlying inflation also increased notably compared to Q2, while not to the same degree as headline inflation, but still suggesting that it wasn’t just outliers driving the higher inflation in Q3. This will have implications for the RBA decision this week.

  • RBA Decision: expected to stay on hold. The RBA also stayed on hold at the last meeting pending the Q3 inflation print, noting that the Sept quarter inflation could be higher than expected.
  • Updated forecasts will also be released.

The BoE Meeting

  • BoE Decision: expected to stay on hold, despite some recent continued cooling in the labor market. Markets are expecting a hold pending the UK government budget release later in Nov.

Canada Labour Market – Oct

  • Conditions are expected to remain weaker, with employment expected to fall by -4k (versus +60k in Sept), and the unemployment rate is expected to increase to 7.2%.

The full suite of global S&P PMIs for Oct will be released this week.

This week, the US Treasury will auction and settle approx. $532bn in ST Bills, raising approx. $42bn in new money. QT this week: Approx $13bn in ST Bills will mature on the Fed balance sheet and will be reinvested.

The US Treasury will also update its quarterly financing requirements for Q4 2025 and provide estimates for Q1 2026.

More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:

Weekly Macro Outlook – 3Nov2025Download

Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net