U.S. Economy Today (Dec. 4, 2025): Fed Rate‑Cut Bets Grow as Jobless Claims Rise and Confidence Falls

The U.S. economy is sending a mix of signals on Thursday, December 4, 2025. Financial markets are calm near record highs and forecasters are nudging growth estimates up. At the same time, new data show jobless claims edging higher, the dollar weakening on expectations of a Federal Reserve rate cut next week, and Americans’ confidence in the economy sinking to its lowest level in more than a year. ^[1]

Quick snapshot of today’s U.S. economy:

Markets: U.S. stock futures are flat after a strong run, but traders price in an almost certain Fed rate cut next week. ^[2]
Jobs: Weekly initial jobless claims ticked up to 219,000, slightly above expectations but still historically low. ^[3]
Growth: Fitch Ratings and the OECD both upgrade U.S. growth forecasts for 2025, citing booming AI‑driven investment even as tariffs rise. ^[4]
Sentiment: Gallup’s economic confidence gauge has fallen to its weakest level since mid‑2024; most Americans now say the economy is getting worse. ^[5]
Housing: Mortgage rates are holding roughly steady around the low‑6% range for a 30‑year fixed loan, offering only modest relief to homebuyers. ^[6]

Below is a closer look at the major U.S. economy stories shaping markets and households today.

Fed rate‑cut bets dominate Wall Street’s view of the U.S. economy

U.S. stock index futures were little changed early Thursday, as investors hit pause after a powerful rally driven by expectations that the Federal Reserve will cut interest rates next week. According to Reuters, Dow, S&P 500 and Nasdaq futures were each up about 0.1%, leaving Wall Street’s main indexes near recent highs. ^[7]

That rally has been fueled by two key data points from earlier in the week:

A weaker‑than‑expected ADP private payrolls report, and
An ISM survey showing easing inflation pressures in the services sector. ^[8]

Together, they strengthened the case that the Fed can begin easing policy without immediately reigniting inflation. Fed funds futures now imply roughly an 85–87% probability that policymakers will cut the benchmark rate by 25 basis points at their December 10–11 meeting. ^[9]

Small‑cap stocks, which are typically more sensitive to borrowing costs, have been outperforming the broader market on the assumption that easier policy is coming. Analysts quoted by Reuters say investors are “leaning into the idea that easier policy is coming,” lifting everything from blue chips to smaller companies. ^[10]

At the same time, markets remain fixated on upcoming data—including jobless claims, November layoffs and factory orders—as well as Friday’s delayed Personal Consumption Expenditures (PCE) inflation report, the Fed’s preferred gauge of price pressures. ^[11]

Dollar near five‑week low as markets price in Fed cut — and a new Fed chair

While equities have been buoyant, the U.S. dollar continues to soften. A widely watched dollar index is hovering near a five‑week low, down nearly 9% year‑to‑date, as traders bet heavily on a Fed rate cut next week. ^[12]

The euro is trading near a seven‑week high around the mid‑$1.16s.
The Japanese yen has recovered slightly from recent lows, with traders also eyeing a potential Bank of Japan rate hike later this month. ^[13]

Currency strategists note that a December rate cut is already “largely priced in,” and that what really matters for the dollar now is any hint about the path of policy in 2026. ^[14]

Politics are adding an extra twist. On Tuesday, President Donald Trump said he would announce a nominee to succeed Jerome Powell as Fed chair early in 2026, with markets viewing White House economic adviser Kevin Hassett as a leading contender. Hassett and several other potential candidates are widely seen as favoring lower interest rates, raising questions about how aggressively the next Fed will be willing—or able—to ease policy in the face of still‑elevated inflation. ^[15]

Bond investors have reportedly warned the Treasury that an overly dovish Fed chief could rattle confidence in U.S. assets if rate cuts are perceived as politically driven rather than data‑driven. ^[16]

Even so, analysts at major banks argue that economic conditions, not politics, will ultimately constrain how far rates can fall, given growth that remains resilient and inflation still running above the Fed’s 2% target. ^[17]

Jobless claims tick up, but labor market still looks resilient

The freshest hard data point on the U.S. economy this morning is the weekly initial jobless claims report—one of the earliest reads on labor market momentum each week.

According to Labor Department figures compiled by Investing.com, initial claims rose to 219,000 for the week ending November 29, slightly above the consensus forecast of 216,000 and up from 216,000 the prior week. ^[18]

In context, that’s still a very low number:

Claims have spent much of this autumn in the 200,000–230,000 range, consistent with a labor market that is cooling, but not collapsing. ^[19]
The uptick may signal a gradual loosening in hiring rather than a sudden wave of layoffs.

Broader labor market data are somewhat more mixed. The latest Employment Situation report, released November 20 but covering September 2025, showed:

Nonfarm payrolls up 119,000—a modest gain, with employment “showing little change since April,” and
An unemployment rate of 4.4%, up from 4.1% a year earlier. ^[20]

Job growth remained concentrated in health care, food services and social assistance, while transportation, warehousing and federal government employment declined. ^[21]

A federal government shutdown earlier this year has complicated the data picture. The Bureau of Labor Statistics has:

Canceled the October jobs report entirely, and
Delayed the November report to December 16, while also pushing back key inflation releases such as the November CPI to December 18. ^[22]

That means policymakers and investors are navigating with fewer timely datapoints than usual even as they debate when, and how fast, to cut rates.

AI boom cushions tariff shock as Fitch and OECD lift U.S. growth forecasts

Despite the noise in short‑term data, two major international forecasters delivered a surprisingly upbeat message on the U.S. economy this week.

Fitch: IT and AI investment doing the heavy lifting

In a new Global Economic Outlook published Thursday, Fitch Ratings said that surging investment in information technology—much of it tied to artificial intelligence—has been a key force cushioning the impact of sharply higher U.S. tariffs. ^[23]

Key points from Fitch’s analysis:

U.S. GDP growth is now projected at 1.8% for 2025 and 1.9% for 2026, both slightly higher than their September forecast. ^[24]
IT capital spending accounted for “almost 90% of U.S. GDP growth” in the first half of 2025, as companies poured money into AI‑related hardware, software and data‑center infrastructure. ^[25]
The effective U.S. tariff rate has jumped to about 13.6%, up from 2.4% in 2024—the highest level since the early 1940s—yet AI‑driven investment and wealth gains from equity markets have offset much of the drag. ^[26]

Fitch warns that booming AI‑related capex and rich equity valuations raise “bubble” risk, but notes that corporate indebtedness has not yet surged in tandem—a key difference from past credit booms. ^[27]

On monetary policy, Fitch expects the Fed to hold rates steady in December, then deliver three cuts by mid‑2026, as the initial tariff shock fades and the unemployment rate edges higher. ^[28]

OECD: U.S. growth upgraded to 2%

The Organization for Economic Cooperation and Development (OECD) echoed the theme of resilience in its latest outlook, also released this week and highlighted in U.S. media today. The OECD now expects: ^[29]

Global growth of 3.2% in 2025, up from a 2.9% forecast earlier in the year, and
U.S. growth of 2.0%, an upgrade from the 1.6% projected in June.

Even with that upgrade, however, U.S. growth would still slow from an estimated 2.8% in 2024. The OECD credits massive investments in AI and somewhat lower‑than‑feared tariffs for the economy’s resilience but warns that higher trade barriers are likely to feed through to higher prices and weaker consumer spending over time. ^[30]

Taken together, the Fitch and OECD forecasts sketch a picture of an economy slowing but far from stalling, with AI‑linked investment doing an outsized share of the work to keep growth positive.

Public mood slumps: Americans say it’s a bad time to find a job

If you look beyond spreadsheets and trading screens, the story gets darker.

A new Gallup survey, reported Thursday by Semafor, shows U.S. economic confidence falling seven points last month to its lowest level since July 2024. ^[31]

According to the survey:

Only about two in ten adults say current economic conditions are “excellent” or “good,” while around four in ten call them “poor.”
Just 27% believe the economy is improving; 68% say it’s getting worse.
Nearly two‑thirds of Americans now think it’s a bad time to find a job, despite the relatively low official unemployment rate. ^[32]

The gloom is already showing up in expected holiday spending. Gallup finds that respondents now plan to spend an average of $778 on gifts—down sharply from the $1,007 they estimated just a month earlier. ^[33]

For an economy in which consumer spending makes up roughly two‑thirds of GDP, that kind of pullback in household optimism and planned purchases could meaningfully restrain fourth‑quarter growth, especially in retail and services.

Mortgage rates hold in the low‑6% range, keeping housing tight but not frozen

One area where Americans are watching the Fed particularly closely is housing.

Fortune’s daily rate tracker reports that average 30‑year conventional mortgage rates are roughly 6.2% today, little changed from earlier in the week and only slightly below where they stood a year ago. ^[34]

Separate data compiled from Zillow and summarized by other outlets point to a similar picture:

30‑year fixed mortgage: about 6.1–6.2%
15‑year fixed mortgage: roughly 5.5%, up a few basis points in recent days. ^[35]

After peaking well above 7% in late 2023 and early 2024, mortgage rates have eased, but they remain far higher than the 3–4% norms of the pre‑pandemic era. Real‑estate forecasts from Realtor.com, cited in recent coverage, suggest that rates may average around 6.6% in 2025 and 6.3% in 2026, offering only gradual relief for affordability. ^[36]

That combination—still‑elevated rates and record‑high home prices—continues to lock many first‑time buyers out of the market and helps explain why consumer sentiment can look weak even as national GDP data look reasonably solid.

Credit markets still calm: high‑yield spreads stay tight

Despite public pessimism and noisy politics, credit markets do not appear to be pricing in an imminent recession.

The widely watched ICE BofA U.S. High Yield Index option‑adjusted spread, which tracks the extra yield investors demand to hold junk bonds over Treasuries, is sitting around 2.9 percentage points, according to Federal Reserve Economic Data (FRED) as of December 2. ^[37]

That’s very low by historical standards, more consistent with steady growth and manageable default risk than with a looming downturn. Fitch, however, cautions that frothy equity valuations and AI‑driven capex booms could be sowing the seeds of future instability if momentum persists unchecked. ^[38]

For now, though, relatively tight spreads and contained credit stress provide a key backstop to the broader U.S. financial system.

The world is watching U.S. slowdown risks

Today’s U.S. economy stories are not just domestic. Overseas markets are reacting in real time to perceived shifts in American growth and policy.

In Singapore, for example, the Straits Times Index (STI) slipped 0.4% on Thursday, snapping a six‑day rally as investors cited U.S. slowdown fears and Fed policy uncertainty as reasons to take profits. TS2 Tech

Analysts there point out that lower U.S. bond yields and a softer dollar can be a double‑edged sword: they reduce global financial stress and boost some emerging markets, but they also signal concern about future U.S. demand. TS2 Tech+1

Given the depth of U.S. capital markets and the dollar’s role in global finance, how the Fed balances growth, inflation and political pressure will remain a central factor for risk assets worldwide.

What to watch next for the U.S. economy

Looking ahead from today’s news, several upcoming events will shape the trajectory of the U.S. economy into 2026:

Fed meeting (Dec. 10–11):
Markets are almost fully pricing in a 25‑basis‑point rate cut. The bigger question is how many cuts the Fed signals for 2026, especially with Trump set to nominate a new chair early next year. ^[39]
PCE inflation and other delayed data:
The September PCE report, delayed by the earlier federal shutdown, is due shortly and will update the central bank’s favorite inflation gauge. Factory orders and other backlogged data will help clarify how much tariffs and higher rates have slowed activity. ^[40]
November jobs report (Dec. 16):
With October data canceled, the November Employment Situation release will be the first full jobs snapshot in months and a crucial test of whether unemployment is drifting up from September’s 4.4%. ^[41]
November CPI and real earnings (Dec. 18):
The November CPI and real earnings readings will give a clearer sense of whether disinflation is continuing and how household purchasing power is holding up heading into 2026. ^[42]
Fed chair nomination early 2026:
Trump’s choice to replace Powell—and the Senate’s response—will shape expectations for monetary policy, central bank independence and inflation risks for years to come. ^[43]

The bottom line on the U.S. economy today

On December 4, 2025, the U.S. economy looks strangely two‑speed:

Top‑down data and forecasts show moderate growth, a still‑tight labor market, booming AI and IT investment, and financial markets that are optimistic enough to bet heavily on a smooth Fed pivot to lower rates. ^[44]
Bottom‑up sentiment, however, tells a more sobering story of households strained by high prices and borrowing costs, increasingly wary about job prospects, and trimming their holiday budgets. ^[45]

How those two stories converge—whether confidence catches up to the data, or the data eventually slide toward the mood—will be the central question for the U.S. economy as it heads into 2026.