Three numbers that matter - Unhedged Recap

Podcast: Unhedged

Published: 2025-12-18

Duration: 17 minutes

Summary

The episode dissects the current state of the U.S. economy by examining recent jobs reports, inflation numbers, and borrowing trends in the Treasuries market.

What Happened

The episode kicks off with a discussion on the health of the U.S. economy, which is muddled due to disrupted economic data following a government shutdown. Despite Donald Trump's optimistic claims of an impending economic boom, unemployment numbers tell a different story. The November jobs report revealed an increase in the unemployment rate to 4.6%, a historic low but with a concerning upward trend.

The hosts explore how government shutdowns have caused delays in economic reporting, complicating the interpretation of job data. They note an unusual spike in temporary layoffs, which may correct in future reports. Meanwhile, job additions from private employers remain modest, averaging 50,000 to 100,000 new jobs per month, which is deemed just 'fine' in the current economic climate.

Household spending remains steady, with retail sales growing 1-2% year over year, although car sales are lagging. This stability is seen as sufficient to avoid a negative economic cycle despite not being spectacular. The episode highlights the mystery of how many job additions are necessary to maintain economic stability in a low-immigration, aging demographic context.

Inflation is a key focus, with U.S. inflation falling to 2.7% in November, defying expectations of 3.1%. This drop is largely attributed to housing costs, sparking a debate on the inclusion of housing in inflation calculations. However, services inflation remains above target, indicating ongoing concerns.

The potential for inflation to rise again is discussed in light of fiscal and monetary policy changes, including expected interest rate cuts by the next Federal Reserve chair. The hosts express concerns about future inflation spikes due to economic stimuli and increased consumer confidence.

The episode also examines the implications of a highly leveraged financial system, with $3.3 trillion in overnight secured financing potentially driving a hot stock market. This leverage could exacerbate inflation risks if asset prices rise.

Finally, in the Long Short segment, the hosts express their disdain for Wham's 'Last Christmas' and amusing Wall Street festive videos, highlighting the cringe-worthy nature of billionaire-led holiday cheer.

Key Insights

• The U.S. unemployment rate increased to 4.6% in November, indicating a concerning upward trend despite being a historic low.
• U.S. inflation fell to 2.7% in November, primarily due to a decrease in housing costs, contrasting with expectations of a 3.1% rate.
• Private employers in the U.S. are adding between 50,000 to 100,000 jobs per month, a figure considered adequate in the current economic climate.
• The financial system's $3.3 trillion in overnight secured financing could drive asset price increases, potentially exacerbating inflation risks.