November 2025 — Uncertainty Peaks Amid Policy Challenges

November shows the economy under growing strain. Unemployment rose 0.2% to 4.6%, the highest level of the year so far. This increase comes despite two prior Fed rate cuts intended to support the labor market, suggesting that the usual demand-management tools are not fully effective in this environment.

Headline inflation fell slightly to 2.7%, while core inflation rose by 0.4%. This divergence is concerning: core inflation increasing while headline inflation falls indicates weakening demand, while price pressures from supply-side factors — like tariffs — continue to push some prices higher. The combination points to an economy facing both softening demand and persistent cost pressures, a classic signal of stress.

One-year-ahead inflation expectations fell by 0.2% from September. This could reflect households recognizing that inflation is slowing, but given the rising unemployment and low confidence, it may also indicate that people are uncertain about the trajectory of the economy rather than fully optimistic.

Consumer sentiment dropped further to 51%, the lowest of the year. The decline highlights growing uncertainty and a cautious stance among households, likely affecting spending decisions and reinforcing the broader signs of economic weakness.

Overall, November paints a concerning picture. The labor market is weakening, core inflation is rising amid slowing demand, and consumer confidence is at its lowest point of the year. Tariff-driven cost pressures are evident, and rate cuts appear to be struggling to stimulate demand effectively. The outlook is uncertain, and policymakers face a challenging environment in balancing inflation and employment while trying to restore household confidence