1. Labor Market Shows Clear Signs of Cooling
October's job report revealed significant cooling in the labor market, with just 12,000 jobs added - the smallest gain since December 2020 and well below estimates of 125,000. Previous months saw downward revisions (-31,000 for September, -81,000 for August). While this marks the 46th consecutive month of payroll growth, the annual growth rate of 1.4% is now below the historical average of 2% and at its slowest pace since March 2021.
Further evidence of cooling appears in job openings (7.44 million, lowest since January 2021) and quit rates (1.9%, lowest since June 2020). However, wage growth remains robust, with average hourly earnings up 4% year-over-year, still above the historical average of 3.1%.
Key Takeaway: The labor market is approaching equilibrium after periods of extreme tightness, though worker bargaining power remains strong.
2. Big Tech Defies Broader Market Trends
Q3 earnings from major tech companies showed extraordinary strength:
- Google: Revenue up 15% to $88.3B, net income up 34% to $26.3B
- Microsoft: Revenue up 16% to $65.6B, net income up 11% to $24.7B
- Meta: Revenue up 19% to $40.6B, net income up 35% to $15.7B
- Amazon: Revenue up 11% to $159B, net income up 55% to $15.3B
- Apple: Revenue up 6% to $94.9B, though net income fell 36% due to European tax charges
The "Big 4" combined revenue reached a record $1.6 trillion over the last 12 months, exceeding the GDP of all but 15 countries.
Key Takeaway: Tech giants continue to demonstrate remarkable growth and profitability despite broader economic uncertainties.
3. Fed Policy and Interest Rates
Today's Federal Reserve decision to cut rates by 25 basis points to 4.50-4.75% comes amid rising inflation expectations, with 5-year breakeven rates hitting 2.38%, their highest since May. Long-term bond yields continue climbing, with the 10-year Treasury at 4.36% and the 30-year at 4.56% - levels not seen since early July.
Market expectations for end-2025 rates have shifted from 2.80% to 3.60%, suggesting growing concerns about persistent inflation pressures.
Key Takeaway: Markets are signaling caution about the pace of rate cuts amid inflation concerns.
4. Economic Growth Continues
Q3 GDP showed a 2.8% annualized gain, marking 54 months of expansion since April 2020. Consumer spending (+2.5%) and government expenditure (+0.9%) continue driving growth. While this expansion is mature, it's worth noting that the previous four U.S. expansions lasted at least 73 months, with the 2009-2020 expansion running 128 months.
Key Takeaway: The economic expansion continues, though at a moderating pace.
5. Housing Market Dynamics
Existing home sales have fallen to 3.84 million annually, below even the 2020 COVID shutdown levels and on pace for the lowest annual total since 1995. This "frozen" market reflects both the lock-in effect of homeowners with low mortgage rates and record low affordability levels.
However, existing home inventory is up 22% year-over-year, the highest since September 2020, suggesting potential relief in home price appreciation ahead.
Key Takeaway: The housing market remains challenged, though increasing inventory may help ease price pressures.
6. Rental Market Shows Signs of Relief
Asking rents declined 0.7% year-over-year, marking the 17th consecutive month of annual declines. A multi-family construction boom has pushed vacancy rates to 6.8%, their highest since 2020. Adjusted for wage growth, rents are at their most affordable level since March 2021.
Key Takeaway: The rental market is becoming more favorable for tenants amid increased supply.
7. Government Spending and Debt Trends
Over the past decade, U.S. federal government tax revenue increased 63% while spending grew 93%. The national debt has surged by over $800 billion in just the last three months. Post-election policies from either party suggest continued high debt levels ahead.
Key Takeaway: Fiscal dynamics point to potential inflationary pressures ahead.
8. Notable Market Statistics
- Apple's $655 billion in stock buybacks over ten years exceeds the market cap of 490 S&P 500 companies
- Amazon's AWS generated $103 billion in revenue over 12 months, more than 468 S&P 500 companies
- Meta's Reality Labs unit lost $4.4 billion in Q3, bringing cumulative losses since 2020 to $55 billion
- Global home price changes since 2000: Australia (+391%), Canada (+349%), UK (+249%), US (+212%), Japan (-22%)
Key Takeaway: Market concentration in tech continues while significant divergences persist across global markets.
Looking ahead to next week, markets will focus on October's inflation data, retail sales figures, and continued Q4 earnings releases. Key attention will be on whether the cooling labor market begins to impact consumer spending patterns.
