US Economy News Today: Fed Rate Cut Looms as Inflation Sticks Near 3%, Layoffs Surge and Housing Begins a “Great Reset”

The United States economy heads into the final weeks of 2025 with a strange mix of strength and strain. Growth is holding up, stocks are near record highs and inflation has cooled sharply from its 2022 peak — but price pressures remain above the Federal Reserve’s target, layoffs have climbed to their highest level since the pandemic, and the national debt has blown past $38 trillion. ^[1]

At the center of it all: a pivotal Federal Reserve meeting this week, new Trump administration economic moves, and early signs that the overheated housing market may finally be starting a slow reset.

Fed Set for a High‑Stakes December Rate Cut

The Federal Open Market Committee (FOMC) meets December 9–10 and is widely expected to deliver another quarter‑point interest rate cut — the third in a row — even as inflation remains above its 2% goal. ^[2]

Markets are pricing in a cut. The CME FedWatch tool shows investors assigning roughly an 80–90% probability of a 25‑basis‑point cut this week, according to reporting from Fox Business. ^[3]
The Fed is deeply divided. Minutes from the last meeting and fresh reporting from Reuters highlight an unusually contentious debate: many governors favor further cuts to support a softening labor market, while several regional Fed presidents want to hold rates steady until they are confident inflation will drift sustainably back to 2%. ^[4]

The decision is especially sensitive because it will help “set the stage” for President Donald Trump’s upcoming nominee to replace Fed Chair Jerome Powell when his term ends in May. ^[5] Trump has repeatedly pushed for faster rate cuts to relieve housing and affordability pressures ahead of the 2026 midterms, but Fed officials worry that easing too quickly with inflation still around 3% could reignite price pressures and force an embarrassing U‑turn later. ^[6]

Complicating the Fed’s job: data gaps. A 43‑day federal government shutdown in October and November forced the Bureau of Economic Analysis (BEA) to cancel its advance estimate of Q3 GDP and delayed several other key releases. ^[7] The most recent official readings for unemployment and inflation are for September, so policymakers will have to lean heavily on private data, surveys and their own regional intelligence when they meet this week. ^[8]

Inflation Has Fallen Sharply — But Is Stuck Around 3%

On paper, the inflation story looks far better than it did in 2022. But it hasn’t yet reached the Fed’s comfort zone.

Official data through September show:

Consumer Price Index (CPI): up 0.3% month‑over‑month and 3.0% year‑over‑year in September; core CPI (excluding food and energy) also 3.0%. ^[9]
Fed’s preferred PCE price index: 2.8% year‑over‑year in September, with a run of gradual declines from earlier in the year. ^[10]

Because of the shutdown, October and November readings for several key series are missing. To fill that gap, analysts are leaning on inflation nowcasts:

The Cleveland Fed’s real‑time model estimates that year‑over‑year CPI and PCE inflation are hovering just below 3% in November and December, with Q4 inflation running at roughly a 3.0–3.4% annualized pace. ^[11]

Professional forecasters expect only slow further progress:

The Philadelphia Fed’s latest Survey of Professional Forecasters (SPF) projects headline PCE inflation at 2.8% (Q4/Q4) in 2025 and 2.6% in 2026 — still slightly above the Fed’s 2% target. ^[12]
Economists at EY‑Parthenon see tariff‑related price pressures keeping core PCE around 3.2% in early 2026 before easing back toward the low‑2% range late next year. ^[13]

In short, inflation has round‑tripped from crisis to “annoyingly sticky”: high enough to keep rates restrictive, low enough that many households still feel squeezed when wage gains don’t quite keep up.

Growth Is Resilient Despite the Data Blackout

Even with delayed statistics, the broad picture of real economic growth remains surprisingly solid.

Q2 2025 GDP: The BEA’s third estimate shows real GDP growing at a 3.8% annual rate, the strongest since Q3 2023. ^[14]
Q3 GDP: The entire advance release for Q3 was cancelled because of the shutdown — a nearly unprecedented move for a major economy. ^[15]
Q4 nowcast: The Atlanta Fed’s GDPNow model currently pegs Q4 2025 real GDP growth at about 3.5% (SAAR)as of December 5, down slightly from 3.8% earlier but still well above stall speed. ^[16]

Treasury Secretary Scott Bessent has seized on that resilience, predicting that the U.S. will finish 2025 with about 3% real GDP growth, even after the shutdown, as the Trump administration prepares a nationwide “economy tour” ahead of the midterms. ^[17]

Private forecasters are more cautious:

The SPF’s consensus sees average real GDP growth of 1.9% in 2025 and 1.8% in 2026, a bit softer than the Fed’s own projections but nowhere near recessionary. ^[18]
A separate Reuters poll cited in the Fed coverage expects about 2% growth in 2026, with inflation still around 2.8% and unemployment near 4.4%. ^[19]

Overall, the data point to an economy that’s growing modestly above its long‑run trend, powered by consumer spending and massive business investment in artificial intelligence and data‑center infrastructure — but also increasingly constrained by higher rates, tariffs and population dynamics. ^[20]

Labor Market: Layoffs Surge While Unemployment Creeps Up

The jobs picture has clearly cooled from the “red‑hot” conditions of 2021–2022, but it doesn’t yet resemble a classic recession.

From the official September jobs report:

Nonfarm payrolls: +119,000 jobs in September after a small decline in August, below the 2024 trend but still positive. ^[21]
Unemployment rate: rose to 4.4%, the highest in roughly four years, as more people entered the labor force looking for work. ^[22]

Meanwhile, corporate layoff plans have ramped up sharply:

Outplacement firm Challenger, Gray & Christmas reports that U.S. employers announced 1,170,821 job cutsthrough November — 54% more than in the first 11 months of 2024 and the highest year‑to‑date total since the pandemic year of 2020. ^[23]
November alone saw 71,321 announced cuts — less than October’s spike but still elevated, with tech, telecom and interest‑rate‑sensitive sectors prominent in the totals. ^[24]

The Fed’s dilemma is that headline jobless claims remain low, suggesting underlying resilience, even as deeper indicators — slower hiring, more long‑term unemployed, weaker small‑business demand for labor — point to a gradually softening market. ^[25]

Professional forecasters expect job growth to downshift further:

The SPF sees payroll gains slowing to an average of about 125,000 jobs per month in 2025 and just 55,000 per month in 2026, with the unemployment rate drifting up to 4.5% on average in 2026. ^[26]

Put simply, the labor market looks more “fragile but functioning” than “booming” or “collapsing” — which is exactly why this week’s Fed decision is so contentious.

Housing and Mortgage Rates: Affordability Crisis Meets “Great Housing Reset”

Higher interest rates have cooled, but not crushed, the U.S. housing market.

Mortgage rates today

Freddie Mac’s Primary Mortgage Market Survey shows the 30‑year fixed mortgage at 6.19% and the 15‑year at 5.44% as of December 4 — down from 6.69% and 5.96% a year earlier, but still far above pre‑pandemic levels. ^[27]
Bankrate’s live tracker puts the average 30‑year fixed rate around 6.32% on Tuesday, December 9, with refinance rates higher. ^[28]

These rates, combined with years of rapid price appreciation, keep affordability under severe pressure, especially for first‑time buyers. Yet several new forecasts suggest that 2026 could mark the beginning of a slow reset rather than a crash.

What the experts see:

Zillow expects U.S. home values to rise only about 1.2% over the next 12 months, as soft demand and growing inventory cap price gains. Home sales are expected to reach around 4.09 million in 2025, just slightly above 2024, with stronger momentum in 2026 as rates ease. ^[29]
Fannie Mae projects its home price index will rise 2.5% in 2025 but slow to just 1.3% in 2026, and has trimmed expectations for 2026 home sales and housing starts, which are now forecast to fall 2.5% next year. ^[30]
Redfin has branded 2026 the beginning of a “Great Housing Reset,” predicting that income growth will finally outpace home‑price growth for the first extended period since the Great Recession — a gradual, not dramatic, improvement in affordability. ^[31]

On the ground, the picture is increasingly regional:

An Axios analysis of Zillow data shows Denver experiencing the sharpest drop in home values among major U.S. metros, with about 91% of homes losing value over the last year — part of a broader cooling across parts of the West and South where inventory has risen and climate risks are in sharper focus. ^[32]
In contrast, a new Realtor.com forecast for Salt Lake City expects home sales to rise 4% in 2026 with prices up just under 2%, giving buyers “a little bit more buying power” as more homes hit the market. ^[33]

Most housing economists agree: 2026 is shaping up as a reset year, not a rebound year, with outcomes heavily dependent on local job markets and migration trends. ^[34]

Wall Street Hovers Near Record Highs on AI and Growth Hopes

Despite all the macro cross‑currents, U.S. stocks are trading within a whisker of all‑time highs.

The S&P 500 is sitting around 6,870, just 0.3% below its record close of 6,890.9 set in late October, according to MarketWatch and other market trackers. ^[35]
Recent sessions have seen only modest pullbacks — a 0.3% dip on Monday marked just the second loss in the past 11 trading days — as investors tread water ahead of the Fed decision. ^[36]

Strategists remain broadly optimistic:

Oppenheimer’s latest market strategy note keeps a 2025 year‑end S&P target of 7,100 and sets a 2026 target of 8,100, implying nearly 18% upside from last Friday’s close near 6,870 if that longer‑term view plays out. ^[37]
Many outlooks anticipate that AI‑related earnings growth and steady (if unspectacular) GDP growth will continue to support U.S. equities, even if rate cuts are limited. ^[38]

For now, “everything is on hold until the Fed speaks”: stock futures are edging higher on Tuesday as Nvidia and other AI leaders rally ahead of the meeting, but volatility remains subdued. ^[39]

Debt, AI and the New Macro Risks Under the Surface

Beneath the day‑to‑day data, longer‑term risks are growing harder to ignore.

National debt blows past $38 trillion

The U.S. national debt has climbed to roughly $38.4 trillion, adding about $1 trillion in just over two months, according to Treasury figures cited in recent coverage. ^[40]
The Congressional Budget Office estimates that debt held by the public has risen to about 100% of GDP in 2025and is on track to reach a record share of the economy by the end of the decade. ^[41]
A Bipartisan Policy Center “Deficit Tracker” estimates the FY 2025 deficit at $1.8 trillion, only slightly lower than 2024, despite higher tariff revenues and strong nominal growth. ^[42]

Interest costs are exploding:

The Peterson Foundation’s latest tracker shows interest payments in October 2025 — the first month of FY 2026 — running well ahead of recent years, with cumulative FY26 interest costs already at $91 billion. ^[43]
Other analyses estimate the federal government is now spending more than $10 billion per week servicing the debt, putting annualized interest costs at over $1 trillion. ^[44]

While many economists still see a full‑blown U.S. debt crisis as unlikely in the near term, several high‑profile voices — from former officials to investors like Ray Dalio and Elon Musk — warn that without policy changes, the eventual adjustment may involve painful austerity triggered by a fiscal shock. ^[45]

AI borrowing spree raises systemic questions

At the same time, the AI boom that’s powering stock gains and business investment is also driving an unprecedented wave of debt:

Moody’s Analytics chief economist Mark Zandi warns that 2025’s AI‑related bond issuance already surpasses the Y2K‑era tech borrowing boom, even after adjusting for inflation. Unlike 2000, much of the new debt is fresh leverage, not refinancing. ^[46]
Zandi argues that if AI investments don’t deliver the expected payoff, losses would be felt across credit markets, not just by equity investors, raising the risk of a broader financial shock. ^[47]

BlackRock’s investment institute has taken note:

In its 2026 outlook, BlackRock turned underweight on long‑term U.S. Treasuries, citing a looming wave of public and private borrowing tied to AI and already‑elevated government debt. It expects higher structural borrowing to keep upward pressure on interest rates and increase the system’s vulnerability to fiscal or inflation surprises. ^[48]

Together, the debt and AI stories point to a key theme for the late‑2020s: higher for longer financing costs, even if the Fed trims rates at the short end.

Trump Administration’s New Economic Moves: AI Chips, Farm Aid and Tariffs

President Trump has been busy reshaping the economic backdrop in ways that could matter for growth, inflation and global trade.

Easing AI export controls — for a price

On Monday, Trump announced that the U.S. will allow Nvidia’s advanced H200 AI chips to be sold to “approved customers” in China under a new arrangement under which 25% of the sales value would be paid to the U.S. government. ^[49]

The administration says similar frameworks could be applied to AMD and Intel, pitching the policy as a way to:

support U.S. manufacturing and jobs
maintain a lead in cutting‑edge “Blackwell” and future “Rubin” chips that remain restricted
generate tariff‑like revenues while managing national‑security risks. ^[50]

Critics argue the move could complicate efforts to limit China’s access to high‑end AI hardware, but markets have largely welcomed the prospect of restored export volumes for U.S. chipmakers.

$12 billion in emergency aid for farmers

Trump also confirmed $12 billion in assistance for American farmers, particularly soybean producers hit by trade tensions and water shortages, with funds drawn from the Commodity Credit Corporation. ^[51]

The White House frames the aid as a way to:

stabilize farm incomes
help lower food prices by keeping production flowing
cushion the blow from tariffs and weather‑related disruptions. ^[52]

At the same time, Trump has threatened to impose an additional 5% tariff on Mexico if it fails to release water owed under a bilateral treaty, arguing U.S. farmers are being unfairly harmed. ^[53]

Taken together, these moves underscore how trade policy, tariffs and targeted subsidies remain central tools in the administration’s economic strategy — and important variables in inflation and growth forecasts for 2026.

What the 2026 Outlook Looks Like Right Now

Putting all the new data, forecasts and policy shifts together, a rough consensus is emerging for 2026:

Growth: Most mainstream forecasts (SPF, Reuters polls, Deloitte) see real GDP growth around 1.8–2.0%, a downshift from 2025 but not a recession, barring shocks. ^[54]
Unemployment: Expected to average 4.4–4.5%, modestly higher than today but still low by historical standards. ^[55]
Inflation: Most projections have headline and core PCE in the mid‑2s by late 2026 — still above 2% but close enough that the Fed might feel comfortable with a slow, cautious easing path. ^[56]
Housing: Home‑price growth is expected to slow sharply, with many forecasts clustered around 1–2% annual gains and some cities likely seeing outright price declines. Real incomes are finally projected to grow faster than home prices, slowly improving affordability. ^[57]
Markets: Equity strategists see further upside for U.S. stocks, driven largely by AI and productivity growth, but bond strategists increasingly warn that higher structural deficits and AI‑linked borrowing will keep long‑term yields from falling back to pre‑2020 norms. ^[58]

Key risks to that benign baseline include:

a sharper‑than‑expected slowdown in the labor market
an inflation flare‑up from tariffs or energy prices
a sudden loss of confidence in U.S. fiscal policy
or an AI‑driven investment bust that exposes the new pockets of leverage building up in corporate and sovereign debt.

What to Watch Next

For anyone tracking the U.S. economy right now, three near‑term events loom large:

This week’s Fed decision and dot plot – not just whether the FOMC cuts 25 basis points, but how many cuts (if any) officials pencil in for 2026, and how they describe the balance between inflation risk and labor‑market weakness. ^[59]
The delayed November jobs report (due December 16) – markets will scrutinize whether payroll gains remain positive and how much unemployment has drifted since September. ^[60]
Updated fiscal and debt data – as Congress debates spending and taxes on the way into 2026, fresh numbers on deficits, interest costs and debt‑to‑GDP will shape how investors price long‑term Treasuries and how the Fed thinks about the “neutral” rate of interest. ^[61]

For now, the headline on December 9, 2025 is this: the U.S. economy is still expanding, inflation is no longer out of control, and markets are almost euphoric — but under the surface, higher debt, AI‑driven leverage and a cooling labor market are giving policymakers their toughest balancing act in years.