INFLATION AND EMPLOYMENT BEFORE DECEMBER FOMC

Wall Street Journal Blog #2

Free services and those in Tier Plus

In this first change section, Steve will go over the free stuff and what's inside Tier PLUS of the Wall Street Journal.

Plus is almost to serve subscribers transferring directly from Viet Hustler, however it includes a few additional services:

The US economy enters December 2025 in a particularly complex state: surface data still gives a feeling of stability, but underlying indicators have reversed in a worrying direction. Inflation continues to decline but unevenly, with goods and shelter cooling markedly, while services are still affected by noisy price groups that the Fed struggles to disentangle in the short term. On the opposite side, the labor market — the foundation of US consumption — is weakening faster than headline unemployment shows: hiring rate falls to the lowest level in over a decade, job postings continuously declining, employment diffusion below 50% for many consecutive months, and payroll approaching the “stall speed” zone that typically appears before major recession cycles.

This is the context forcing the Fed to make the hardest interest rate decision since the pandemic. The December meeting revolves not only around inflation, but also around the question of what risk the Fed is willing to accept: the risk of cutting rates too early while services haven't cooled enough, or the risk of keeping rates too high and letting the labor market slide into nonlinear weakening — where unemployment could spike sharply in just a few months. Pressure is further increased by the October shutdown causing a series of data gaps, forcing the Fed to decide in a more “information-blind” state than usual, and because the FOMC internals are the most divided in years between those prioritizing inflation and those concerned about the labor market's weakening momentum.

All these factors make the central question of December particularly difficult: will the Fed cut 25bps, or hold steady and accept letting the economy absorb another extended tightening cycle? Answering this requires looking through the “beautiful” surface signals and focusing on the underlying dynamics — where inflation is rationalizing, the labor market is losing momentum, and the US economy stands at a critical turning point for monetary policy.

In today's article, Viet Hustler will guide you through:

• Inflation: trends in goods, services and shelter – where is the real decline, where is it just statistical noise.

• Labor market: payroll stall-speed, hiring rate, diffusion, U-6, job postings and the breadth of layoffs.

• Fedspeak & Fed internals: hawk camp – dove camp – power structure and the greatest division in years.

• Three unpredictable variables for 2025: shutdown causing data gaps, tariffs at risk of reversal, and inflation expectations impacted by politics.

• December FOMC scenarios: hold probability, 25bps cut probability, and what the Fed will truly prioritize.