Thursday ╭∩╮（︶︿︶）╭∩╮ (on Saturday)

First, let's note home prices are partying like it's 2008, with house prices falling 1.4% in the last quarter:

Home prices have finally come down compared with last year, though just fractionally, according to daily reads from Parcl Labs, which looks at high-frequency listing data on single-family homes, condos and townhomes, both new and existing.

They may stay softer, though, as home prices are down 1.4% in just the last three months.

On a national level, home prices have not gone negative since mid-2023, a year after the Federal Reserve first brought rates up from zero, and mortgage rates moved sharply higher. From March 2022 to June 2023, the average rate on the popular 30-year fixed mortgage went from 3.9% to just over 7%, according to Mortgage News Daily.

But even then, prices were negative on a year-over-year basis for just a few months. It was nothing like the great financial crisis when home prices dropped 27% from their peak in 2006 to their trough in 2012, according to the S&P Case-Shiller National Home Price Index. 

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While other home price indexes and surveys measure just existing home values, this one measures both new and existing. There has been no government data on housing starts, building permits or sales of newly built homes since before the government shutdown started, so it's difficult to paint any kind of supply picture in the price forecast.

That said, builders reporting quarterly earnings have indicated that demand is still relatively weak and incentives are still necessary. Homebuilder sentiment is still well into negative territory.

Seeing as how the Federal Reserve had the news a few days ahead of the rest of us, this explains why they cut their baseline interest rate by 25 basis points (¼%):

Federal Reserve officials cut interest rates for a third straight meeting but signaled they might be done for now in the midst of unusual divisions over the path forward.

The decision Wednesday to reduce the benchmark federal-funds rate by a quarter point—to between 3.5% and 3.75%, a three-year low—is aimed at protecting against a sharper than anticipated slowdown in hiring.

The Fed voted 9-3, the first time in six years that three officials cast dissents. Two officials thought the reduction wasn’t warranted, while another favored a larger, half-point cut.

With progress on inflation stalled, officials had indicated in the run-up to this week’s decision that further reductions could require evidence of labor-market deterioration. “We’re well-positioned to wait and see how the economy evolves from here,” said Fed Chair Jerome Powell at a news conference.
On Wednesday, their painstakingly calibrated postmeeting statement signaled a higher bar to additional cuts by echoing a similar pivot after cutting rates one year ago.

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Still, Powell defended the decision to cut now rather than waiting until the Fed’s next meeting in late January, when it will have significantly more data that had been delayed because of this fall’s government shutdown.

He suggested that after adjusting for overcounting, job growth might have been slightly negative since April. “I think you can say that the labor market has continued to cool gradually, maybe just a touch more gradually, than we thought,” Powell said.

Predicting what the Federal Reserve will do, particularly when one of Trump's bully-boys replaces Powell.

Finally, we have the unemployment claims data, and there was a blood-bath in initial claims, though continuing claims fell slightly:

Applications for US unemployment benefits rose last week by the most since the onset of the pandemic, underscoring the volatile nature of claims at this time of year.

Initial claims increased by 44,000 to 236,000 in the week ended Dec. 6, according to Labor Department data released Thursday. That was the biggest jump since March 2020 and followed the lowest level of applications in more than three years in the previous week, which included Thanksgiving. The figure exceeded all but one estimate in a Bloomberg survey of economists.

Weekly initial claims tend to be choppy around the holidays and will likely continue to fluctuate through the end of the year, but Thursday’s figures are toward the higher end of readings seen in 2025. Companies like PepsiCo Inc. and HP Inc. have laid out plans to reduce headcount in recent weeks, and nationwide layoffs in October were the highest since early 2023.

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Continuing claims, a proxy for the number of people receiving benefits that are reported on a one-week lag compared to initial claims, were similarly volatile. Those dropped to 1.84 million in the Thanksgiving week, marking the biggest decline in four years.

I think that this is going to get worse over the next few months.