The Macro Minute with Darius Dale Does the US labor market support the Fed’s revised reaction function?
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Dec 16, 2025 Rising unemployment and soft payrolls signal a dovish shift from the Fed. Investors can expect policy easing until 2026, but watch out for bubbles in stocks, gold, and Bitcoin due to crowded bullish positions. Historic optimism among global asset managers is discussed, alongside the risks of fiscal dominance under potential future leadership. The discussion concludes with insights on why gold is currently favored over Bitcoin and strategic insights on managing macro risks.
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Labor Market Justifies Fed's Dovish Shift
- The U.S. labor market deterioration validates the Fed's shift to a more dovish reaction function.
- Investors should expect policy easing through the first half of 2026 ahead of a Fed chair change.
Payrolls Show Cooling But With Government Noise
- November payrolls rose only modestly and the unemployment rate rose to 4.6%, the highest since 2021.
- October's payroll collapse reflected a large federal government payroll drop tied to deferred resignations after the shutdown.
Markets Price Faster Easing Than Fed
- Markets price more easing than the Fed's median, expecting about 2.5 cuts in 2026 versus the Fed's one.
- Chairman Powell described the labor market as gradually cooling with downside risks including a jobless recovery.