Hello, my friends!
On Wednesday, the Federal Reserve voted to cut interest rates by a quarter percentage point for the third time this year…but also sent clear signals that the path forward on monetary policy is likely to be most uncertain through at least the near term.
For starters, the decision itself was hardly unanimous, with three “no” votes cast against the nine in favor of lowering the target range to 3.5%-3.75%. It’s the first time in more than six years that a policy meeting has seen three dissenting votes cast.
To be clear, not all the dissenters objected because they were in favor of keeping rates in place at 3.75%-4.00%. One member of the Federal Open Market Committee, Governor Stephen Miran, was in favor of a larger rate reduction by 50 basis points. However, the other dissenters – regional Presidents Jeffrey Schmid of Kansas City and Austan Goolsbee of Chicago – believed it best to pass on a rate cut altogether this time around.
More broadly, it seems clear that policymakers are reluctant to maintain an aggressive rate-cut outlook from here amid persistent uncertainty about inflation, even as concerns about labor-market strength also endure. In their updated its Summary of Economic Projections, committee members implied just one rate cut next year and another in 2027…an outlook that’s hardly suggestive of a return to robustly accommodative monetary policy.
At his post-meeting press conference, Fed Chair Powell underscored the noncommittal posture of policymakers as a whole, saying:
“We’re in the high end of the range of neutral. It’s so happened that we’ve cut three times. We haven’t made any decision about January, but as I said, we think we’re well positioned to wait and see how the economy performs.”
America’s Small Business Owners Remain Upbeat in the Face of Continued Uncertainty
In other news this week, America’s resilient small business owners say they remain relatively upbeat about the near-term future despite the array of risks that continue to swirl just above the economy.
On Tuesday, the National Federation of Independent Business (NFIB) reported that its widely followed Small Business Optimism Index ticked up 0.8 points in November to land at 99.0, ahead of the 98.2 projected by economists polled by the Wall Street Journal. The result also means the metric has managed to stay above its long-term average of 98 for seven consecutive months.
According to the data, higher sales expectations were the principal driver of greater optimism last month. However, the NFIB also noted that a collateral measure, the Uncertainty Index, actually rose three points last month to a reading of 91.
“Although optimism increased, small business owners are still frustrated by the lack of qualified workers,” said NFIB Chief Economist Bill Dunkelberg.
Indeed, 21% of small business owners cited labor quality as their single most important problem, making it the number one challenge faced last month. Unsurprisingly, the second most daunting problem cited by small business owners was inflation.
Job Openings Have Been Climbing…but Hiring Is a Different Story
Also this week, the government issued a key report on labor-market health that had been delayed since August as a direct consequence of the federal government shutdown.
Playing a bit of catch-up, the Labor Department on Tuesday released its Job Openings and Labor Turnover Survey, or JOLTS report, for both September and October.
On the surface, the numbers suggested at least a measure of continued resilience in the jobs market. The data for September reflected a solid increase in openings to 7.66 million from 7.23 million in August, while the October data showed openings ticking up slightly higher from there, to 7.67 million.
Analysts were less than exuberant over the uptick, however, saying the increase simply is a function of the holiday shopping season. As evidence, they noted October’s biggest gains were posted by trade industries.
What’s more, despite the rise, job openings, overall, remain nearly 40% below the highs reached 3½ years ago.
Also, the hiring rate is still concerningly subdued. At a level of 3.2% in October, it remains where it was in August and well below the pre-pandemic average rate of 3.9%.
“Where employers really put their money where their mouth is, is when it comes to hiring,” said Noah Yosif, chief economist at the American Staffing Association. “And unfortunately, we haven’t really seen much of an uptick in hiring.”
Tariffs Credited With Keeping Deficit Growth Somewhat Restrained in November
Finally this week, the Treasury Department reported on Wednesday that the federal government ran a budget deficit of $173 billion in November, substantially less than the $285 billion posted in October and also lower than the $205 billion projected by Reuters-polled economists.
Notably, the November total also is significantly less – 53% less, to be exact – than the $367 billion deficit recorded in November 2024. Import tariffs are credited with bolstering revenues last month, leading to the sizable year-over-year deficit drop. November receipts came in at $336 billion, which is a record for that calendar month.
Still, the first two months of fiscal year 2026 have seen the government rack up a $458 billion total deficit thus far, sharply lower than the $624 billion reported through the same period in fiscal 2025 but still indicative of a country that has grown all too comfortable spending well beyond its means.
On that note, the annual 2026 deficit currently is projected by the Congressional Budget Office to reach $1.7 trillion…slightly less than FY 2025’s $1.78 trillion total but an amount that would rank as the fifth-highest deficit in U.S. history.
That’s all for now; have a wonderful weekend!
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