12/8/25 REcap: Expect a Rate Cut During Fed Meeting on December 10th

Labor Market Keeps Cooling

While the government's labor data was delayed due to the shutdown, private data from ADP released last week shows that the labor market continues to cool. The newest private-sector payroll data showed the sharpest job drop in more than two and a half years, with ADP reporting a 32,000 decline in November as small businesses absorbed the bulk of the losses. Small firms shed roughly 120,000 jobs, a pullback economists tied to higher input costs — especially from tariffs — that have squeezed margins and slowed hiring. Despite the headline weakness, layoffs remain low, and several economists cautioned that ADP’s monthly numbers can diverge from the official BLS report. Even so, the broader message is consistent: hiring is losing momentum, uncertainty is rising, and businesses are increasingly hesitant to add staff.

Because the government shutdown delayed the BLS employment report, the Fed won’t have official November labor data at its meeting — meaning this ADP release carries more weight than usual. With small-business hiring turning negative, services employment cooling, and rate-sensitive sectors showing strain, this report adds to the need for cut rates again to help stimulate the labor market.

Inflation Data Says "Time to Cut"

The latest data showed a clear cooling in both inflation and consumer momentum, and it's exactly what the Fed needed heading into this week’s meeting. The PCE report showed headline and core PCE inflation easing to 2.8%, both lower than expected and down from the August inflation data, showing a march back down to the Fed's 2% goal. At the same time, consumer spending in September slowed sharply as households pulled back on discretionary purchases and became more price-sensitive. According to the reporting, higher prices are finally curbing demand, and several categories that had been stubborn earlier in the year are now flattening out.

Taken together, it paints a picture of an economy losing some steam but not collapsing. This is the first time in months where both sides of the mandate — inflation and the labor market — are moving in a direction that supports a cut.

What to expect this week?

We will be getting some important labor data - jobs opening data - on Tuesday, right before the Fed meeting, but Wednesday is the Fed announcement and Powell press conference. We'll likely see the Fed cut rates. Chances of a Fed rate cut are at right about 90%.

Keep an eye on rates as Powell takes to the podium. We'll likely see movement on how he projects the Fed will act in his final months as the Fed Chair.