Introduction to the US Economy
The US economy is set to release a host of delayed employment, inflation, and other data in the coming week, providing a long-anticipated view of the economy that could help guide markets into year-end. This release of data comes after a 43-day federal government shutdown that postponed or canceled key reports.
Current State of the Stock Market
The S&P 500 ended on Thursday at an all-time closing high, as a third-straight strong year for the benchmark US stock index is nearly in the books. A dovish Federal Reserve meeting on Wednesday cheered investors, although a disappointing report from cloud-computing giant Oracle weighed on the heavyweight tech sector on Thursday. The S&P 500 is up 17% so far in 2025, pushing its gain during the bull market that began in October 2022 to more than 90%.
Impact of Delayed Data
Investors have been lacking the typical evidence they use to gauge the health of the economy because of the delayed reports. The US jobs report for November is due Tuesday, while the monthly consumer price index, which is closely watched for inflation trends, is out on Thursday. According to Jim Baird, chief investment officer with Plante Moran Financial Advisors, "There has been a lack of clarity for investors. Strong corporate earnings certainly helped to support the markets. The Fed and anticipated rate cuts helped to provide a little bit of a boost. But now it’s time to turn our attention back to the underlying economy and what path we’re on."
Federal Reserve’s Role
A divided Fed cut interest rates by a quarter percentage point on Wednesday for a third-straight meeting as it seeks to shore up a weakening labor market. However, the central bank signaled borrowing costs are unlikely to drop further in the near term as it awaits more economic clarity. David Seif, chief economist for developed markets at Nomura, noted that "because of the government shutdown and the catch-up schedule, we have essentially three months of both labor and inflation data coming out between the December and January Fed meetings."
Expected Economic Data
U.S. payrolls are expected to have climbed by a tepid 35,000 in November, according to a Reuters poll. Fed Chair Jerome Powell on Wednesday said while payrolls have been averaging an increase of 40,000 per month since April, the Fed thinks those numbers are overstated and could instead be an average loss of 20,000 per month. Marvin Loh, senior global macro strategist at State Street, warned that "if we start getting negative prints around jobs, you can’t avoid the recession discussion."
Inflation and Retail Sales
The monthly CPI data comes as inflation has continued to run above the Fed’s target, which could complicate any further Fed easing if inflation fails to cool. Three policymakers dissented from the decision to lower rates, including two who argued rates should have been left unchanged. A report on retail sales is among the other releases next week that will help provide more insight into economic growth.
Conclusion
In conclusion, the upcoming release of delayed economic data will provide valuable insights into the health of the US economy. With the S&P 500 at an all-time high and the Fed signaling a cautious approach to interest rates, investors will be closely watching the jobs report, inflation data, and retail sales to gauge the economy’s trajectory. As Marvin Loh noted, "for the most part, it’s been a very, very good year for risk assets," but the approaching holidays and thinner markets could lead to exaggerated asset-price moves, making it essential for investors to stay informed and adapt to changing economic conditions.
