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With Christmas approaching, the coming week will be light on fresh economic data. That does not mean markets – or policymakers – are flying blind. Last week’s inflation and labor market reports, while noisy, still offer important clues about where the economy stands as the year comes to a close.
The picture that emerges is uncomfortable: inflation is likely to remain sticky even as the labor market shows clear signs of strain. That combination leaves the Federal Reserve increasingly stuck in the middle.
Start with inflation. The latest consumer price index (CPI) report appeared to show renewed progress, with headline inflation easing on a month-to-month basis. But that improvement deserves scrutiny. Part of the apparent disinflation reflects a downward bias introduced by the Bureau of Labor Statistics’ carry-forward methodology, which assumes unchanged prices when data collection is delayed or missing. When inflation is rising at the margin, that assumption mechanically understates price growth — and the longer it persists, the larger the distortion becomes.
Beneath the surface, inflation pressures remain uneven. Goods prices are no longer falling consistently, with energy prices and new and used vehicle prices moving higher in the latest report. Those increases were partially offset by easing shelter inflation, which continues to decelerate as market rents feed into official housing costs with a lag. Housing disinflation should continue to help in the months ahead, but it is unlikely to fully offset renewed pressure in goods prices. The result is inflation that is cooling, but still sticky, and not yet convincingly on a path back to 2%.
The labor market tells a similar story – noisy, but increasingly fragile, with job gains more likely to be revised downward than upward.
The most recent employment report showed payroll employment rising by 64,000, alongside an increase in the civilian labor force and a higher unemployment rate. On the surface, that looks acceptable: more jobs and more people either working or actively looking for work.
A closer look, however, suggests the labor market is late-cycle. Job gains remain positive, but they are becoming less evenly distributed. Several cyclical sectors – including manufacturing and parts of transportation and retail – are flat or shedding jobs, while gains are concentrated in a narrower set of industries. That pattern has appeared repeatedly in past expansions as growth slows.
The divergence between the two major labor market surveys reinforces that signal. Payroll employment comes from the establishment survey and counts jobs. The unemployment rate comes from the household survey and tracks people. The household survey is noisier month to month, but historically it has often detected turning points earlier – especially when unemployment begins to rise even as payroll growth remains positive.
That dynamic is now in place. The unemployment rate has climbed to 4.6%, its highest level in five years. At the same time, job openings have fallen below the number of unemployed workers – a configuration that becomes far more common late in the business cycle and in the 12 to 18 months preceding recessions. In prior cycles, similar conditions were followed by further slowing in payroll growth and downward revisions to earlier job gains.
Wage growth adds another piece to the picture. Average hourly earnings are rising at roughly 3.5% year over year, the slowest pace in four years and broadly back to pre-pandemic norms. That is welcome news for inflation, but it also signals diminishing labor market tightness.
Policymakers and markets appear to be taking these signals in stride. Following last week’s data, futures markets assign roughly a 22% probability to a rate cut at the Federal Open Market Committee’s January meeting, slightly lower than before the CPI and jobs reports were released. That cautious pricing aligns with the Fed’s own assessment that job gains have slowed, unemployment has edged higher, and inflation remains somewhat elevated, even as downside risks to employment have increased.
With little new data ahead, the focus now shifts from headline volatility to underlying trends. Those trends point to sticky inflation alongside a labor market that continues to loosen, making it difficult for the Fed to justify immediate action in either direction.

U.S. leaders want American products, including whiskey and milk, on Canadian shelves as part of any deal between the neighboring nations.
U.S. officials have laid out demands for trade talks with Canada and Mexico, making clear that they won’t rubber stamp the existing free trade agreement for the three North American nations without changes. President Donald Trump signed that deal, known as the United States-Mexico-Canada Agreement, or USMCA, in 2020 to replace the North America Free Trade Agreement, or NAFTA.
Canada has long been a key U.S. trade partner. In 2024, Canada was the top destination for U.S. exports and the third-largest source of U.S. imports. However, that relationship has changed in Trump’s second term. Trump hit trade with Canada with a 35% import duty for goods that don’t fall under terms of the USMCA.
Those tariffs hit Canada’s economy hard. Canadian exports dropped, business investment slowed, and tariff uncertainty continues to drag the nation’s economy, according to a recent report from the International Monetary Fund.
U.S. Trade Representative Jamieson Greer told Congress last week that the USMCA contains provisions for a joint review that are unique to the deal and were put in place specifically to make sure the U.S. keeps its economic leverage.
Greer said the USMCA was “successful to a certain degree.”
“But at the same time, it is clear that we have not achieved all of our goals with respect to strengthening U.S. manufacturing capacity and creating good jobs, and nearly all stakeholders advocate improvements,” he said in his opening statement. “I don’t think we can say that USMCA is an unqualified success.”
Greer said he wants Canada to open its dairy market to U.S. farmers and change an online streaming law that U.S. officials say hurts American tech companies. Greer said the U.S. also wants Canadian provinces to lift bans on selling American spirits. Those bans were put in place in response to Trump’s tariffs.
Greer also pointed to “discriminatory procurement measures” in Ontario, Quebec, and British Columbia; complicated customs registration for Canadian recipients of U.S. exports; and “Alberta’s unfair treatment of electrical power distribution providers in Montana.”
The details come as leaders from the U.S., Canada and Mexico prepare for formal talks for a broader review of the USMCA next year.
Since Trump imposed tariffs on Canada, leaders in Ottawa have sought out trade deals with other nations around the world, hoping to take the sting out of U.S. import duties and reduce its reliance on the U.S.
Prime Minister Mark Carney said he plans to protect Canada’s economic interests in next year’s talks. He told provincial and territorial premiers on Thursday that the goal would be to secure the best deal for Canada.

Budget watchdogs are sounding the alarm as the U.S. hit an unfortunate fiscal milestone in fiscal year 2025: government spending on debt interest payments alone topped $1 trillion this year.
The federal government added roughly $1.8 trillion to the now $38 trillion national debt in fiscal year 2025. While net interest on the debt totaled $970 billion, according to the Congressional Budget Office, the federal government’s net interest payments exceeded $1 trillion for the first time.
That’s more than the U.S. spends on national defense, almost as much as it spends on Medicare, and about two-thirds of what it spends on Social Security benefits.
Chris Towner from the Committee for a Responsible Federal Budget said historically high interest payments – which are projected to rise to $1.8 trillion in 2035 – could cause a debt spiral in the future if Congress does not reign in spending.
“If we were to get into a situation where we have to keep borrowing, and then the people who loan us money get worried that we’re not going to pay it all back, we could see higher and higher interest rates – which means we have to borrow more to pay the interest on the debt, which means that the interest rates go higher, and that turns into what we call a debt spiral,” Towner told The Center Square.
“I hope we’re far away from that, but right now, we’re pretty close to the highest the debt that has ever been as a share of the economy, and that’s how economists think about it – the debt is equal to about 100% of the economy right now.”
The highest percentage the national debt has made up of Gross Domestic Product was 106%, and that was immediately following World War II. If it continues current borrowing rates, the U.S. will hit that level again within the next five years.
“We don’t really know what happens after that,” Towner said. “And what I fear is already starting to happen is that the higher debt we have, the slower the economy is growing. Every dollar that the federal government borrows results in about 33 cents less of investment in the economy from the private sector.”
The ripple effects of slowed economic growth are many, Towner added.
“Fewer buildings, fewer machines, being invested in fewer workers, being hired, all of that. And then what could happen, too, is interest rates could rise pretty significantly, because interest rates throughout the economy are really directly tied to how much it costs the government to borrow.”
Unlike other government spending, the $1 trillion spent on debt interest payments alone produces no benefits.
“So it’s a lot of money, and it’s basically something that we don’t get anything out of. It’s just to service our past borrowing,” Turner noted. “At least with Social Security, we’re sending that into people’s pocketbooks, or with Medicare, we’re mostly spending that on seniors’ medical bills. But we’re not getting anything for this interest. We’re just paying it because we borrowed so much.”
While there are ways Congress can address rampant spending while still protecting costly entitlement programs, Turner said, “there’s almost never going to be a politically painful overhaul.”
“We could actually pay for anything we wanted by raising taxes or just cutting any other spending,” Turner said, referencing ways to finance Democrats’ wish to extend the enhanced Obamacare Premium Tax Credits and Republicans’ desire to expand Health Savings Accounts.
“There are myriad ways to pay for the priorities we want to do. It’s just that whenever you cut spending or you raise revenue, you’re hurting someone’s pocketbook, so you’re going to get some disinterest in that.”
If lawmakers have no appetite to comb over entitlement programs for savings, there are still ways Congress can immediately address federal spending and lower both government borrowing and interest rates.
“We should be putting caps on discretionary spending,” Turner said. “But we also need to put together some sort of bipartisan fiscal commission that brings together Republicans and Democrats to talk about what are the right ways to make our finances sustainable, and what are the right ways to shore up Social Security and Medicare, which are both in danger of going insolvent in the next seven years. We need to act now to prevent that from happening.”

Secretary of War Pete Hegseth has pledged to tackle longstanding issues with U.S. military barracks that have frustrated troops, lawmakers, and taxpayers for decades.
In a recent social media post, Hegseth flipped through a 118-page Government Accountability Office report from 2023 that detailed problems with military barracks, where the most junior enlisted service members reside.
“For far too long, this department has failed too many of our warfighters,” Hegseth said. “Every member of our joint force deserves housing that is clean, comfortable and safe.”
Update on the Barracks Task Force. pic.twitter.com/46KBNFTFz7— Secretary of War Pete Hegseth (@SecWar) November 26, 2025
The 2023 GAO report drew attention to sewage backups, mold, inoperable fire safety systems, broken heating and air conditioning systems, brown tap water, rodent infestations, and other issues at barracks where troops are required to live during training.
“This isn’t just about creature comforts. This impacts morale, readiness and our ability to recruit and retain the best warriors. Quality of life for our warriors is a critical component of reviving the warrior ethos and rebuilding our military,” Hegseth said.
Hegseth blamed the problems on the previous administration, but the GAO report said that such conditions had existed for decades despite past attempts to address them, including taxpayer-funded investments and privatization efforts.
The GAO report found that the Pentagon lacked oversight of the problems, did not know how much was spent on barracks, and that the department’s own assessments of the conditions in its barracks were unreliable.
Earlier this year, Hegseth created a barracks task force that reports directly to him.
“We’ve completed wall-to-wall assessments across the entire Navy, Marines, Air Force, Space Force, and the 18th Airborne Corps,” Hegseth said. “And inspections are underway in the Army Reserves and National Guard.”
Hegseth said those would be completed by the end of January 2026.
He didn’t say if the Pentagon had changed the way it evaluates barracks. The Pentagon did not respond to questions from The Center Square about its latest assessments. The GAO report found the Pentagon’s assessments of conditions within its facilities were faulty. Military services calculate a condition score, ranging from 0 to 100, for each facility. However, those scores don’t always align with the actual conditions.
“We observed barracks at seven of 10 military installations we visited that appeared to require significant improvement, despite condition scores above 80,” according to the GAO report. “The scores indicated that barracks were in fair or good condition. For example, at one installation, we toured a barracks facility that had been closed for renovation due to long-standing plumbing and electrical issues. According to installation officials, the barracks were uninhabitable. However, at the time the barracks closed, its condition score was above 90, according to service documentation.”
The GAO made 31 recommendations in the barracks report. The Pentagon agreed with 23 of those recommendations and partially concurred with eight more. As of December 2025, 16 of those recommendations remained open and unaddressed, according to the GAO report.
Hegseth decried bureaucracy, saying it was a “find and fix” mission rather than something that required additional study.
Hegseth said that the Department of War was investing $1.2 billion to improve conditions in the barracks. The task force has $400 million to direct immediate work and $800 million for critical renovations, Hegseth said.
U.S. Rep. Don Bacon, R-Neb., who serves on the House Armed Services Committee and chaired a hearing on problems in the barracks in 2023, said it was time to take action.
“I am optimistic that these funds will begin to address the long-standing and well-documented issues with our military barracks, and I hope that the Pentagon will continue to update its internal methodologies for assessing needs and listen more to outside groups that highlight areas for improvement they are missing,” Bacon told The Center Square. “The recently announced task force is a positive step, but I remain concerned that they are still studying the problem when there are clear needs that exist today.”
Bacon said he’s watching.
“We gave the Defense Department over a billion dollars in the reconciliation bill this year to address this issue. I led the Quality of Life panel that identified the needs, so I firmly believe that the time for studying is over and the time for action is now,” he told The Center Square. “These funds are only the first step in rectifying the issue of the abysmal conditions that we are forcing our all-volunteer force to live under, and I remain committed to providing oversight to make sure that Secretary Hegseth moves out as fast as he is saying to fix the problems.”
The GAO report found the Department of War had not fully funded its facilities program for years, resulting in a backlog of at least $137 billion in deferred maintenance costs as of fiscal year 2020, according to the report. That figure was spread across all facilities, not limited to barracks.
During testimony before the House Armed Services Committee in 2023, Elizabeth Field, director of Defense Capabilities and Management for the GAO, informed committee members that 20 years prior, the GAO had identified similar issues. Ten years ago, in a report to Congress, the Pentagon praised the progress it had made in modernizing barracks with more funding. It promised to maintain those barracks.
“Obviously, that didn’t happen,” Field said at the time.
Fields also told the committee the problems would require a sustained effort to fully address the issues.
“It will take years to reverse the chronic neglect and underfunding we uncovered,” she said.
She said the problem wasn’t with Congressional funding, but with how the Department of War chose to use that money.
“The department tends to only fund about 80% of sustainment needs and the facilities that most often lose out are things like barracks,” she said.
Another problem was the lack of accountability, Field said.
“I think there has been a cultural perspective within the department that part of being in the military is toughing it out and ‘this is just going to get them ready for the military’ and unfortunately that has gotten us, in part, to where we are today,” she said.
Hegseth rejected that attitude.
“Barracks, that’s where our warriors live, rest and recover. How can we expect them to be ready for anything on the battlefield when their own living space is a constant source of stress and frustration?” the Secretary of War said.
When asked how much it would cost to get the barracks up to par in 2023, Field said there wasn’t an easy answer, in part because the Department of War doesn’t know how much it spends on barracks and its assessments of the conditions of those barracks were unreliable.
The Department of War did not respond to questions from The Center Square regarding how long it would take to bring the barracks up to department standards or whether the $1.2 billion in the most recent budget bill would be sufficient to complete the work. The department also did not respond to a question on whether anyone would be held responsible for the longstanding problems.

The U.S. Department of Health and Human Services’ action to bar “sex-rejecting” transgender procedures for minors has met with approval from groups that aim to protect children from harmful ideology, with some calling the move “long overdue,” stating that taxpayers should not be forced to pay for procedures that lack proven benefits.
President of family defense organization the American Principles Project Terry Schilling told The Center Square: “President [Donald] Trump and Secretary [Robert F.} Kennedy are providing long overdue protections to families across the country.”
“For too long, families have been left at the mercy of a medical establishment that seeks to disfigure vulnerable children for profit,” Schilling said.
Dr. Jay Richards, director of the DeVos Center for Human Flourishing and the William E. Simon senior research fellow at the Heritage Foundation, told The Center Square: “We’re delighted that Secretary Kennedy and HHS are taking such bold action to protect children who are struggling with the sexual aspects of their bodies.”
“The lack of evidence for benefits of sex-rejecting procedures (euphemistically called ‘gender affirming care’) is now well known,” Richards said. “And the recent HHS umbrella review underscores this fact.”
“Taxpayers should not have to pay for these ghoulish procedures, nor support hospitals that continue to perform them,” Richards said.
Richards said that Heritage hopes HHS’ move “will mean that fewer parents will be emotionally blackmailed by therapists or medical professionals [into] allowing their children to be subjected to these medical interventions, which can lead to permanent physical harm and sterilization.”
Chairman at Do No Harm – a medical group working to keep identity politics out of medicine – Dr. Stanley Goldfarb told The Center Square that “President Trump and HHS are taking another critical step to protect children from harmful gender ideology.”
“The proposed rule – banning hospitals from performing sex change interventions on minors as a condition for Medicare and Medicaid participation – is common sense, evidence-based, and morally imperative,” Goldfarb said.
“Many so-called gender clinics have already begun to close as the truth about the risks and long-term harms about these drugs and surgeries on minors have been exposed,” Goldfarb said.
“Now, hospitals that receive taxpayer funds from these federal programs must follow suit,” Goldfarb said, stating Do No Harm’s intention to “ensure American taxpayer dollars do not fund sex-change operations on minors.”
“This is just the beginning, but it marks a major step toward delivering a crippling blow to the child transgender industry,” Goldfarb said.
The Human Rights Campaign – an LGBTQ civil rights organization – sees the HHS’ move as “denying health care to this country,” as its president, Kelley Robinson, told The Center Square.
Kelley said that “these rules are proposals, not binding law,” and stated the Human Rights Campaign will fight alongside allies pushing back against the proposals.
“Families deserve the freedom to go to the doctor and get the care that they need and to have agency over the health and wellbeing of their children,” Robinson said. “These rules aim to completely cut off medically necessary care from children no matter where in this country they live.”
Do No Harm released a report this year that says the evidence behind sex trait modifications is “extremely weak,” and popular beliefs about “gender-affirming care” for minors have been debunked, such as the idea it improves quality of life and mental health or that it decreases suicide, The Center Square reported.
Additionally, the Heritage Foundation’s Richards told The Center Square that “the medical transition pathway from puberty blockers to surgery was always an experiment in search of confirming evidence.”
“As the HHS Report on pediatric gender medicine shows, the evidence now points strongly against this,” Richards said.
The American Principles Project (APP) told The Center Square it’s “important to note that the House passed the Protecting Children’s Innocence Act” this week, something that “would ban child sex changes nationwide.”
APP’s president Terry Schilling told The Center Square that “the American people gave Republicans a clear mandate in 2024 to end child mutilation.”
“Republicans in Congress and the White House are delivering on that promise while Democrats have been relentless in their defense of a multi-billion-dollar industry that preys on children,” Schilling said.
GBTQ advocate GLAAD did not respond to requests from The Center Square for comment.
This week, the U.S. Department of Health and Human Services (HHS) “unveiled a multi-pronged regulatory effort” that includes prohibiting surgical reassignment centers from receiving Medicaid and other funding as well as withdrawing Medicare and Medicaid funding from hospitals that perform sex-rejecting surgeries on minors, thereby ending such procedures, as The Center Square reported.