Weekly Economic Update 10-31-25 Shutdown Edition #5: Case-Shiller Home Price Index; Consumer Confidence; and the Federal Reserve Meeting
Chair Powell had his own version of "trick or treat" this week.
The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.
Happy Halloween!
I had a wonderful week off, enjoying some saltwater fishing with a group of friends. We were able to bring back a cooler full of meat, and a good time was had by all. Of course, despite my comments to the contrary, I couldn’t help myself and had to put out the Weekly Economic Update, despite the fact that there was very little on which to report.
The Federal Reserve did meet this week, and to no one’s surprise, decided to cut interest rates again by one-quarter point, bringing the target rate down to a range of 3.75% - 4.00%. However, where Powell did surprise was in his hawkish tone regarding a December rate cut, which he said was not a “foregone conclusion.” The markets had assumed it was a foregone conclusion, so they pulled back on the news, but promptly rebounded on Thursday.
Interestingly, Powell did admit that there was a tension between the two primary goals of the Fed - stable prices and maximum employment. No kidding? You don’t say? Powell knows that further rate cuts will only exacerbate future inflation, but at the same time, the labor market is tanking.
Powell believes that the labor market is “a better indicator of the momentum of the economy than the spending data.” And in this, he is correct. Unfortunately, thanks to the gross incompetence of Congress, the government is closed, so we didn’t get any data on September employment, and it isn’t looking like we will be getting any data on October employment next week either. But the data we do have shows a significant trend down in employment growth. You can see a similar trend in the consumer confidence data reported below. Further, the last few weeks have seen some significant layoff announcements, including:
UPS: 48,000 employees
Amazon: 30,000 employees
Intel: 24,000 employees
Nestle: 16,000 employees
Accenture: 11,000 employees
Ford: 11,000 employees
Microsoft: 7,000 employees
Salesforce: 4,000 employees
…and the list could go on and on. With the labor market falling, the economy needs help. Chair Powell is implying that no more help is coming. He believes the “neutral rate” is between 3% - 4% and that is where they are. He is stuck between high inflation and shrinking employment. Certainly a problem of his own making, but a problem nonetheless. And the Fed doesn’t know which way to go, so they will stand still, frozen in their inaction and ineptitude. Given that Powell is certainly going to be out of a job come May, he is happy to dump this problem on the next Fed Chair and let them sort it out.
Oh, one last interesting tidbit from the Fed meeting. The Fed announced that it is ending the drawdown of its balance sheet and will reinvest mortgage-backed security (MBS) proceeds into Treasury bills starting December 1. So, much for “tapering.” They got the balance sheet down to $6.6 trillion from $9 trillion - kudos to them. However, the balance sheet is still 60% larger than it was pre-COVID. But, I guess someone has to buy U.S. debt, and at a yield of 4% it sure won’t be the market, so the Fed will have to step in. Of course, this is inflationary, as it injects money into the financial system, creating new reserves held by commercial banks. But again, what does Powell care? He is about to ride off into the sunset and leave the rest of us holding the bag.
Case-Shiller Home Price Index
On Tuesday, Case-Shiller released its data for the housing market for August (full release here). After five consecutive months of declines, home prices in the country’s 20 largest metro areas actually rose 0.2%. On an annual basis, prices were up 1.6% - the slowest rate since July 2023 and the seventh consecutive month of a deceleration in annual home price growth.
On a year-over-year basis, prices were down in 8 of the metros, including three of the largest cities in California - Los Angeles, San Diego, and San Francisco. Once again, Tampa leads the nation with the most rapidly falling home prices. On the positive side, prices in New York are still rising over 6% annually, which is the fastest rate among these metro areas. Atlanta was barely positive at 0.2% and is poised to fall into negative territory when the September data is released.
Consumer Confidence
Overall consumer confidence fell in October to 94.6, but that was slightly higher than was expected. The measure of consumer expectations for the next six months fell to 71.5, the lowest since June. However, the measure of present conditions increased for the first time in five months (full release here).
Digging further into the data, there is clear evidence of a weakening labor market as the difference between those who say jobs are “plentiful” and those who say jobs are “hard to get” has shrunk to the lowest level since early 2017 (with the exception of the COVID period). This kind of drop nearly always suggests a recession is at hand.
One More Thing…
Last week, I sent an email to all my “bronze” level subscribers, and I want to thank those who made pledges on the SubStack site. I appreciate all the support as I transition away from free subscriptions toward a paywall model. If you are a “silver” or “gold” level subscriber, I hope to get an email to you next week. Stay tuned.
I want to go ahead and start announcing some of my speaking dates for 2026. At the request of my friend Tommy Jennings, I will be presenting my 2026 Economic Outlook to the Barrow County Chamber of Commerce on Tuesday, February 3, 2026. Then, in March, probably the biggest and longest-running event I do, the Partnership Gwinnett 2026 Economic Outlook, will be on March 12, 2026. You can use the link above to register. There are various private events coming up, but these two are open to the public, and I hope to see you there.
If you do not yet have a paid subscription but would like to support this effort, please make a pledge on the SubStack app. If you would like to simply offer one-time support, you can still do that by clicking/scanning the QR code below.
The Weekly Economic Update is sponsored this week by:
