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Are Labor Market Improvements On The Horizon?!?
The Macro Institute's Weekly Economic Primer
The Macro Institute
December 08, 2025
In partnership with
There’s not a lot of market moving data out this week. The most exciting event will likely be Wednesday's FOMC meeting.
One dataset we are keen to see this week is the November NFIB report on Tuesday. Friendly reminder that the NFIB releases some of the employment-related indicators ahead of the full report. Interestingly, the Hiring Plans series from the November report moved significantly higher.
This series has historically been a good leading indicator of the unemployment rate and currently argues for tighter labor markets in the new year. This is also consistent with last week's Initial Jobless Claims figure, which moved significantly lower.
It feels like employment data is all over the place lately, but leading indicators of labor markets have looked more constructive recently.
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The Macro Week In Review
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The Macro Week Ahead
❄️ Holiday Season Sending Mixed Signals
Ahead of the Fed’s upcoming meeting on Wednesday, the backlog of data releases is delivering conflicting signals on the trajectories of employment and inflation. On the labor front, ADP’s November report sharply missed expectations at –32K jobs, while the ISM Services Employment component softened to 48.9.
Conversely, Initial Jobless Claims for the week ending 11/29 fell to their lowest level since 2022. While claims data are notoriously volatile, the broader labor picture still aligns with the “slow to hire, slow to fire” narrative. Demand-side survey commentary continues to point to elevated trade and macro uncertainty. At the same time, small businesses cite persistent shortages of available and qualified workers reflecting structural issues tied to immigration policy, demographic trends, and long-term disabilities.
Inflation data sent similarly mixed messages. The ISM Services Prices Paid component remained near cyclical highs in December, reflecting the ongoing pass-through of tariffs into supply chains.
However, on Friday, equities rallied after Core PCE for September registered 2.8% versus 2.9% in August, and the University of Michigan’s one-year-ahead inflation gauge eased to 4.1% in December from 4.5% in November.
Despite the jumbled macro backdrop, equity markets seem confident the Fed will deliver a 25-bps cut this week. If so, it would bring the total amount of easing to 175 bps since 2024. Traditionally, monetary stimulus tends to support leading economic indicators such as the stock market over the next 18 months.
📆 The Week Ahead
Tuesday is the busiest day for data this week. It begins with the November NFIB Small Business Index at 6:00 am. In October, NFIB’s Chief Economist wrote, "Optimism among small businesses declined slightly in October as owners report lower sales and reduced profits. Additionally, many firms are still navigating a labor shortage and want to hire, but are having difficulty doing so, with labor quality being the top issue for Main Street.”
Despite this, the headline index’s last reading of 98.2 remains consistent with improving activity. Survey commentary highlighted the rising cost of providing employee health insurance, which threatens both profitability and employee retention. Health insurance, childcare, housing, and tuition costs continue to outpace headline inflation. These are areas where the Fed’s preferred inflation measures do not fully capture the cost burdens for U.S. households.
Also on Tuesday, the long-delayed JOLTS report for October will be released. September’s print was canceled due to the government shutdown. Leading employment indicators point to continued softening in job openings, though the historical path of interest rates suggests the U.S. may be nearing a cyclical trough in labor market conditions. The data should help clarify the degree of cooling in labor markets and whether the Fed’s anticipated rate cut is warranted.
Wednesday brings the most anticipated event of the week with the FOMC meeting and ensuing interest rate announcement at 2:00 pm. This meeting will include an updated Summary of Economic Projections (SEP) outlining the Fed’s forecasts for the policy rate, employment, and inflation. The September SEP projected 1.8% Real GDP Growth, 4.4% Unemployment, and 2.6% Core PCE for 2026. With third-quarter Real GDP tracking near 3.5%, any upward revisions will be scrutinized, particularly in the context of another 25-bps cut.
As we’ve noted, there is abnormal dissent within the ranks of the FOMC committee on the future path of policy. The odds of a December cut have moved between 40% and 95% over just a few weeks. Chairman Powell’s term will be ending in May, and it appears his replacement will lean dovish. This will likely set the stage for additional easing in 2026.
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