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<\/a><\/p>\nThe government shutdown may have distorted the data. But it\u2019s not the whole story. More companies are slowing hiring and trimming headcount as they focus on efficiency \u2013 producing more with fewer workers. That helps explain why GDP growth can remain strong even as job creation cools.<\/p>\n
Federal Reserve Chair Jerome Powell has acknowledged this possibility, noting that it\u2019s still too early to measure the full impact of new technologies on employment. At the same time, he warned of \u201csignificant downside risks\u201d if these trends accelerate faster than expected.<\/p>\n
For workers, especially younger Americans entering the job market, this has made conditions feel tougher. But with a couple more key interest rate cuts to help, this will look less like a collapsing labor market and more like one in transition \u2013 and I\u2019ll explain why in a moment.<\/p>\n
But first, the next question becomes obvious: Are consumers actually pulling back?<\/p>\n
Cutting Back or Splurging?<\/p>\n
This brings us to our next report, U.S. retail sales, released Wednesday morning.<\/p>\n
For October, retail sales were unchanged from the previous month. Economists expected a 0.1% increase.<\/p>\n
A 1.6% decline in sales at motor vehicle and auto parts dealerships weighed on the headline number, reflecting in part the expiration of federal incentives for electric vehicles.<\/p>\n
But when vehicles and auto parts are excluded, retail sales rose 0.4% month over month \u2013 double economists\u2019 expectations.<\/p>\n
Digging further under the hood, spending remained firm in several key categories. Furniture store sales climbed 2.3%, food and beverage stores rose 0.3% and clothing and accessories sales increased 0.9%.<\/p>\n
On the flip side, there was a 0.4% decline in food services & drinking places, suggesting consumers are becoming more selective with discretionary spending.<\/p>\n
Taken together, this doesn\u2019t look like a consumer in retreat. It looks like households are adjusting how \u2013 and where \u2013 they spend, even as job growth cools.<\/p>\n
Why Inflation Is Cooling Off<\/p>\n
Finally, we turn to the CPI report. It was a bit tricky to interpret because it covered two months of data due to the government shutdown. Even so, the results came in notably better than expected.<\/p>\n
Headline CPI rose 2.7% on a yearly basis in November, well below economists\u2019 expectations for a 3.1% increase. Core CPI, which strips out food and energy prices, rose 2.6% over the previous year, also below forecasts.<\/p>\n
One component I always pay close attention to is owners\u2019 equivalent rent, or OER. This measures the imputed rent homeowners\u00a0would\u00a0pay if they rented their own homes.<\/p>\n
Now, shelter costs overall make up about a third of the CPI. And they\u2019ve been responsible for a significant chunk of inflation readings for much of this year.<\/p>\n
But I have pounded the table, saying that these numbers would fall and that the Fed needs to get ahead of this.<\/p>\n
Well, folks, OER reading has now fallen for four straight months.<\/p>\n
What Needs to Happen Next<\/p>\n
Some investors continue to question the CPI data. But the bigger issue isn\u2019t whether inflation is easing \u2013 it clearly is. The real question is what comes next.<\/p>\n
The Fed has a dual mandate of taming inflation and maximizing employment. At this point, inflation pressures are cooling, while the labor market is showing clear signs of strain.<\/p>\n
So, I think the Fed needs to cut rates two more times in 2026, bringing it down to a \u201cneutral\u201d rate, which should help stabilize the economy.<\/p>\n
But the main thing I want you to do is to cheer up and enjoy the ride.<\/p>\n
I am unbelievably bullish for the New Year.<\/p>\n
Yes, unemployment is the highest it\u2019s been in four years. Why? Because we\u2019re getting more efficient, and those productivity gains will further add to GDP growth.<\/p>\n
As I mentioned before, companies are now relying more on AI. Is this disruptive? Of course it is, but it\u2019s a massive investment opportunity that you shouldn\u2019t overlook.<\/p>\n
It\u2019s what I\u2019m calling the Economic Singularity<\/a>.<\/p>\n It\u2019s a full-scale reset of how work gets done \u2013 where software increasingly outperforms humans at speed, scale and cost. Tasks that once took hours are now completed in minutes. Sometimes seconds. And this shift is already reshaping which companies will thrive \u2013 and which ones will fall behind \u2013 in 2026 and beyond.<\/p>\n That\u2019s why I\u2019ve put together a special presentation<\/a> to walk you through exactly how to position yourself for this transition. In it, I explain which stocks are most vulnerable as this shift accelerates \u2013 and which companies are best positioned to benefit as efficiency becomes the dominant competitive advantage.<\/p>\n If you want to be on the right side of this change heading into the New Year, I encourage you to watch the presentation now<\/a>.<\/p>\n Sincerely,<\/p>\n