Top Biden economists shared a lesson for the Trump administration and beyond on Friday: Whenever the next crisis arrives, the government should not hold back in its response efforts.

Why it matters: The Biden pandemic bill has been criticized for its size and the role it might have played in the inflation crisis that contributed to the administration's election loss. Still, White House economists warn that doing too little in future crises could be an economic disaster.

What they're saying: The warning comes in the final Biden-era Economic Report of the President — issued by the Council of Economic Advisers — that was released on Friday.

• "There are risks to robust fiscal action—including rising prices—but a strong fiscal response can deliver durable growth, and the risk of underreacting to a large global shock is material," the economists wrote.

The big picture: The report acknowledges that many pandemic fears that might have inspired the 2021 American Rescue Plan did not bear out.

• "With full information about the future, policymakers may have allocated fiscal support differently," they noted.

The intrigue: "The emergence of inflation does not negate the wisdom of a strong fiscal response," the economists noted. The 2020s inflation shock was global, suggesting U.S. fiscal support was not totally responsible for higher prices, they said.

• "Inflation harms businesses and families across the income distribution, but the prospect of future inflation must be balanced against labor market pain amid a large, negative shock."
• The Fed is "well-positioned to respond to demand-driven inflation when it arises," they added.

The bottom line: Inflation stuck around far longer than most policymakers anticipated and weighed heavily on consumers.

• Still, America had the strongest economic recovery of all rich nations — a lesson that Biden economists want lawmakers to remember.

Rumors of a job market downturn were, it appears, greatly exaggerated.

Why it matters: A robust December employment report suggests the labor market is heating up — or at least not meaningfully cooling — as 2025 begins.

Catch up quick: The jobless rate fell, employers added to their payrolls, a larger share of the adult population was working, and wages rose at a healthy pace last month.

• That makes the outlook for further Fed interest rate cuts more remote. Another cut later this month now looks to be off the table, and market odds of a rate cut in March fell sharply Friday morning.
• With a solid labor market, officials can move more gingerly as price pressures look stickier.

What they're saying: "I have more confidence that the job market is not deteriorating," Goolsbee tells Axios. "There is a statistical pattern that when unemployment goes up, it tends to keep going up. I have more comfort now that we did stabilize and this time is quite different than previous business cycles."

By the numbers: The U.S. economy added 256,000 jobs last month — the most since March 2024 and about 100,000 (!) more than economists had expected.

• That partly reflects a bounce back from hurricane-induced payrolls weakness in the fall, but the strength is echoed in other data.
• The unemployment rate ticked down to 4.1% from 4.2%. (Remember the recession jitters that followed the jobless rate jump last summer? That looks increasingly more like a head fake.)
• The share of employed prime-age workers (those aged between 25 and 54) ticked up, rising 0.1% to 80.5% and recovering some of the losses since September.
• Average hourly earnings, a measure of wage growth, rose 0.3% in December and have increased by 3.9% over the previous 12 months.

The big picture: The final data point for 2024 came in hot, nearly matching the job gains that kicked off the year. Still, relative to 2023, the labor market has slowed a bit.

• The economy added an average of 186,000 jobs per month last year, down from the 251,000 in 2023.

The intrigue: Bond markets sold off on the news, driving an upturn in yields amid diminished prospects for Fed rate cuts.

• The yield on the U.S. 10-year government bond rose to 4.78% on Friday morning, the highest level since late 2023. That rate was 3.62% in mid-September when the Fed commenced its rate-cutting campaign.
• The Fed started its rate-cutting cycle with an eye on the labor market that, at the time, looked wobbly.
• Fears about the job market have since receded. Now there is a closer eye on inflation that has already ceased cooling, with risks that President-elect Trump's trade and immigration policies might reignite it.

"I think the most material thing is this question of, do you think the economy is overheating, or do you think we're in a stabilizing range with inflation getting back to target?" Goolsbee says.

• The Fed has cut rates by a full percentage point since September and Goolsbee says he still thinks "we have some to go."

The bottom line: Trump will inherit a labor market that has thrived under the weight of high inflation and high interest rates.

The U.S. economy added 256,000 jobs in the final month of 2024, while the unemployment rate ticked down to 4.1%, the Labor Department said on Friday.

Why it matters: Hiring unexpectedly roared in December, capping a year of resilient labor market conditions that defied naysayers and kept the economy humming.

• The report is being watched closely by Federal Reserve officials. Friday's strong figures will likely support expectations that the central bank might hold interest rates steady later this month, as the labor market shows few signs of slowing down.

By the numbers: The number is well above the roughly 155,000 jobs economists anticipated were added last month.

• In terms of revisions, the government said there were 212,000 payrolls in November — 15,000 fewer jobs than initially forecast.
• Meanwhile, jobs growth in October was revised slightly higher by 7,000 jobs to 43,000 payrolls.

What to watch: Jobs growth has held up, without the much-feared surge in layoffs, raising prospects that the economy can achieve a soft landing.

• But it's no guarantee that will continue. Inflation progress has stalled out, prompting many Fed officials to roll back how much the central bank anticipates lowering rates this year.
• Some Fed officials fear inflation could flare up again if President-elect Trump implements aggressive trade and deportation policies.

Editor's note: This story was updated with a new chart.

Go deeper: Trump jolts Fed outlook

Federal Reserve officials are worried that President-elect Trump's trade and immigration policies will stoke inflation, according to minutes from their latest policy meeting released on Wednesday.

Why it matters: Higher tariffs and mass deportations could make America's bumpy battle against inflation more difficult. In that scenario, the Fed could keep interest rates higher for longer — and put the central bank on a collision course with Trump.

What they're saying: Fed officials agreed during a two-day policy meeting last month that inflation would continue to decline toward its 2% target. But the process might take longer than previously thought.

• Progress in bringing inflation down has already stalled and Trump's policies look more inflationary than not.
• "As reasons for this judgment, participants cited recent stronger-than-expected readings on inflation and the likely effects of potential changes in trade and immigration policy," the minutes say.
• Officials also said supply chain disruptions from geopolitical events, strong consumer spending and quicker home price increases were other potential reasons why inflation might be harder to beat.

The big picture: The Fed lowered interest rates by a quarter percentage point at the end of its Dec. 17-18 meeting. But new economic projections released alongside that decision showed the median Fed official expected just two rate cuts in 2025 — half as many as anticipated just three months earlier.

• The projections also showed higher inflation for a longer period than previously thought. At a press conference, Fed chair Jerome Powell told reporters that some officials had factored potential impacts from Trump's policies into those projections.

The minutes released on Wednesday don't mention Trump by name, but they do show the extent to which officials fretted over the upside risks to inflation — even as details about potential trade and immigration policies remain fuzzy.

• All Fed officials agreed that "uncertainty about the scope, timing, and economic effects of potential changes in policies affecting foreign trade and immigration was elevated."
• Notably, a few officials said it could be hard to assess whether any upward pressure on inflation will be fleeting or stick around.
• "[I]t might be difficult to distinguish more persistent influences on inflation from potentially temporary ones, such as those stemming from changes in trade policy that could lead to shifts in the level of prices," the minutes show.

The other side: One Fed governor, Christopher Waller, said in a speech on Wednesday that he expects further rate cuts in 2025 and that tariffs wouldn't notably stoke inflation.

• "If, as I expect, tariffs do not have a significant or persistent effect on inflation, they are unlikely to affect my view of appropriate monetary policy," Waller said.

The bottom line: Trump said interest rates were too high at a press conference on Tuesday — reminiscent of his Fed criticism during his first term.

• No one knows how Trump's policies will weigh on the economy. For now, inflation is no longer on the back-burner for the Fed as it was when the central bank first started cutting rates.

Elon Musk wants his crusade to radically slash federal spending to resemble what is underway in Argentina, where the leader's name is now synonymous with drastic budget cuts.

Why it matters: Musk previewed last month how influential he might be on Trump-era fiscal matters.

• His admiration of the "chainsaw-like" approach in Argentina shows how hard he could push to axe the size of America's government — maybe with some success.

What they're saying: "The example you are setting with Argentina will be a helpful model for the rest of the world," Musk told Argentine President Javier Milei in an exchange on social media platform X.

• Vivek Ramaswamy, tapped by President-elect Trump to lead the Department of Government Efficiency (DOGE) alongside Musk, said late last year: "A reasonable formula to fix the U.S. government: Milei-style cuts, on steroids."

The big picture: The U.S. fiscal situation is starkly different from that of Argentina, a nation prone to financial and economic crises stemming from government overspending and sovereign debt defaults.

• Milei, a self-described "anarcho-capitalist," has been cheered by U.S. right-wing politicians who see his rise as an example of Trump-like populism spreading beyond America's shores.
• Most appealing to Musk and others might be how the eccentric economist — known to pose with a chainsaw to signal his affinity for spending cuts — has defied global naysayers with unconventional policies that look successful.

"Milei has changed the conversation about economic policy — not only in Argentina, but I think maybe a little bit more generally, too," Steve Hanke, a Johns Hopkins University professor who advised Argentina's economic officials in the 1990s, tells Axios.

• "But there is a tremendous amount of low-hanging fruit to pick in Argentina — it's just a different system," Hanke adds.

Between the lines: Milei cut government spending by about 30%, roughly in line with the share of spending DOGE wants to eliminate in the U.S.

• But spending cuts in Argentina happened in a very different context. Milei's austerity measures aimed to arrest double-digit inflation after years of failed economic reforms.

"There's a real sense of urgency in Argentina, that something dramatic has to be done to save them from the abyss," Cato Institute's Johan Norberg, who interviewed Musk and Milei in Buenos Aires last year, tells Axios.

• "Musk almost single-handedly has shifted the debate in the U.S. — suddenly there is a discussion about spending and whether things can be reformed," Norberg says.
• "That doesn't mean there is a popular mandate to do it, because I'm not sure that sense of urgency is there."

Milei laid off thousands of federal workers, scrapped many of the subsidies supporting Argentinians, eliminated government agencies and halted public works projects.

• Inflation has plunged as a result of Milei's shock therapy: In November, it was 2.4%, well below the 25% when he took office.

Yes, but: Milei's shock therapy comes at a steep cost to the real economy. Poverty rates last year soared to the highest in 20 years, according to the government's statistics agency.

Much of Milei's economic shock therapy was done via executive orders, though legislation ultimately passed to support his efforts.

The other side: DOGE is not a government agency. It's akin to an advisory council with no official power — and no guarantee Congress will take up the group's spending cut plans.

• Cutting $2 trillion in spending would likely require cuts to politically popular programs. The downside impact might be a hit to economic activity.

The intrigue: Trump, who campaigned on policies that would increase spending, might be the biggest roadblock to DOGE's efforts.

• Over the weekend, Trump urged Congress to pass a bill that would — among other things — renew his first-term tax cuts, secure the border and remove taxes on tips.

Flashback: Previous efforts to crack down on government spending accomplished little. The Reagan administration created the Grace Commission, which similarly aimed to eliminate waste and inefficiency.

• Congress ignored most of the recommendations by the group, which was led by and named after industrialist Peter Grace.
• "Businessmen think they can go into the public sector and use business techniques to right the ship and make it efficient," says Hanke, who worked with the group as part of his role as an economist with Reagan's Council of Economic Advisors.
• Of the Grace Commission, Hanke says: "We didn't really accomplish very much."

The biggest question marks for the 2025 outlook involve how the incoming Trump administration's policy agenda will reverberate through the U.S. and global economies.

Why it matters: The incoming administration has big plans in areas including trade policy, fiscal policy, immigration and more. These objectives are likely to create complex crosscurrents for the economy, making it hard to confidently predict how it will all net out.

• The U.S. economy was broadly stable in 2023 and 2024, with growth chugging forward, a solid but cooling job market, and downshifting inflation. 2025 looks to be a year with a wider range of possibilities.
• In converting the president-elect's campaign trail promises into policy, his appointees will face hard tradeoffs.
• The resolution of those tensions will determine the course of growth, the labor market, inflation, and interest rates over the next four years.

The big picture: In some of the most economically important policy areas, Trumpism contains internal contradictions that must be resolved.

• Are new tariffs going to be tactical and limited, meant to achieve specific strategic aims, or broadly applied and long-lasting? The result will determine how much disruption occurs in global supply chains and whether tariffs stoke inflation.
• Will Trump and the Republican Congress cut the budget deficit, as the incoming Treasury secretary seeks and Elon Musk's budget-slashing goals imply? Or will they follow the playbook of Trump's previous term of cutting taxes, keeping spending levels steady, and borrowing to cover the difference? The answer will shape interest rates going forward.
• Will the new administration's focus on tightening border security and deporting people who are illegally in the U.S. reach a sufficient scale to seriously crimp the labor supply? If so, it would mean slower GDP growth and disruptions to industries reliant on immigrant labor, like agriculture and construction.

Between the lines: Trump will hear from factions on all sides of these questions, both from inside his own administration and from business leaders and Republican lawmakers. But how they play out will depend on the whims of a president who is confident in his own instincts.

State of play: These uncertainties play out at a moment when the economy has significant momentum — which Trump's deregulatory push could help fuel.

• CEOs have become more optimistic about the outlook since the election, which could bode well for hiring and capital spending. Despite recent bumps, the stock market has remained near record highs.

Yes, but: Resilient growth and uncomfortably high inflation have led the Federal Reserve to back off its plans for further interest rate cuts this year. An up-in-the-air policy environment adds to uncertainty about what the 2025 economy will look like.

Outside the United States, the economies of some U.S. allies and adversaries alike — including Canada, France, Germany and China — are already slowing.

• The global economy is in a weaker position than it was in 2018 to contain the fallout from Trump's trade policies or any number of potential shocks.
• Central bankers are uncertain about how much further to cut interest rates — or whether they will do so at all, given still-simmering inflationary pressures.

What to watch: Across Europe, far-right populists are gaining political power and stoking political chaos that — at least, in the case of France — has led to higher interest rates.

• France has to cobble together a budget as investors revolt over widening deficits. Its parliament collapsed late last year after the far-right demanded fewer spending cuts.
• Germany will hold elections next month after its governing coalition fell apart, with swelling popularity for the Alternative for Germany (AfD) that just got Musk's endorsement.

Canada is in the grips of its own political chaos ahead of a trade war. Chrystia Freeland, the nation's finance minister who had been preparing the nation's Trump trade response, quit abruptly, and Prime Minister Justin Trudeau's political standing is tenuous.

Zoom out: China faces the harshest tariff threats of any other nation. Other countries besides the U.S. are threatening to impose tariffs of their own, citing fears that China is overproducing clean energy products and harming domestic industries.

• The Chinese government has implemented stimulus measures aimed at pulling the world's second-largest economy out of a deflationary, slow-growth malaise. What was once an engine of global growth is on shakier footing.

The bottom line: The global economy is already showing cracks that Trump threatens to widen. Ripple effects from the incoming administration's policy could hit financial markets, warp global trade patterns and reignite inflation that policymakers worked to crush.

American consumers are not feeling the holiday cheer: concerns about what's ahead for the economy shot up as tariffs loom, according to a barometer of consumer confidence released on Monday.

Why it matters: The post-election bump in consumer confidence in November now looks like a blip, at least by one measure.

• Long-running economic pessimism lives on despite solid economic conditions — a sign the next administration might see consumer moods at odds with economic indicators.

What they're saying: "Compared to last month, consumers in December were substantially less optimistic about future business conditions and incomes," says Dana Peterson, chief economist at the Conference Board, the group that has measured consumer confidence for decades.

By the numbers: The Conference Board's consumer confidence index fell by 8.1 points this month, reversing the prior two months' gains and remaining at the somewhat depressed level that has prevailed in the past two years.

• December's drop was overwhelmingly a result of more pessimism about income, business and labor market prospects in the months ahead.
• A sub-index that measures consumer expectations fell almost 13 points last month alone, "just above the threshold of 80 that usually signals a recession ahead," the Conference Board said in a release.

The intrigue: It's more likely now than ever before that politics will skew measures of confidence. That is why Republicans' economic outlook surged after the election and Democrats' view soured, with little change in the actual economic backdrop.

• The Conference Board does not report consumer confidence by political party. But the group said consumers mentioned politics more often this month as the key factor affecting how they view the economy.
• Mentions of tariffs, the centerpiece of Trump's agenda, continued to rise. Roughly 45% of consumers expected tariffs to raise the cost of living, while 21% said it would create more jobs.

Between the lines: Worries about the inflationary fallout from potential tariffs has not translated into diminished buying plans for cars, the group said — among the items that could be most impacted by Trump's tariff plans.

• Plus, the average inflation expectation in the year ahead in the survey was steady at 5%, the lowest since March 2020.
• Inflation remains somewhat elevated, with little progress in recent months toward dropping further — the reason why the Federal Reserve does not expect to reduce interest rates in 2025 nearly as much as it did earlier this year.

The Biden administration said on Monday it launched an investigation into China's semiconductor sector, which officials claim threatens U.S. national security.

Why it matters: It is a first step toward possible measures, like tariffs, that might seek to squeeze China-made chips out of U.S. products. But with one month left in office, the fate of the investigation — and the ultimate remedies — rests with President-elect Trump.

The big picture: The investigation will largely focus on China's foundational semiconductors — key inputs in automobiles, medical devices and military defense systems. These are distinct from advanced AI chips, though those have also been targeted by Biden.

• The probe will be conducted under Section 301 of the Trade Act, which the Biden administration previously used to impose steep tariffs on Chinese imports of electric vehicles, batteries and solar equipment.

Between the lines: This investigation will be in its early phase when Biden leaves office next month — like others under Section 301, the probe may take as long as a year to complete.

• Senior administration officials say initiating the investigation now builds a record for the incoming Trump administration to pick up.
• China doesn't stop pursuing its policies just because the U.S. is going through a transition, the officials said.

What they're saying: Commerce Secretary Gina Raimondo told reporters that Chinese manufacturers sell chips for ultra-low prices around the world, which makes it less appealing for other companies to compete.

• "We've seen chips companies hesitate to invest in the U.S.," Raimondo told reporters, keeping America reliant on China for chips.
• "We saw during COVID what happens when we need a chip and we can't have it — it fuels inflation, makes cars and washing machines more expensive and left our military supply chain vulnerable," Raimondo said.

What to watch: It's unclear what priority the investigation gets under Trump.

• It would fall to Jamieson Greer, who Trump tapped to lead the Office of the U.S. Trade Representative, assuming he's confirmed.
• Tariffs are a central part of the president-elect's economic agenda. He plans to impose import taxes on his first day in office via executive orders, not the Section 301 process.

The bottom line: The investigation is a parting shot from the Biden-era White House, which implemented a slew of measures aimed at curbing imports from China over the course of Biden's term.

• U.S.-China economic relations will likely stay frosty under Trump.

The Federal Reserve's preferred inflation gauge slowed in November, the Commerce Department said on Friday — the first indication of cooling price pressures in months.

Why it matters: Inflation remains too high for policymakers' comfort, but the data offers hope that progress bringing it down might just be bumpy, not completely stalling out.

By the numbers: The Personal Consumption Expenditures Price Index rose 0.1% last month, the smallest increase since August.

• The core measure watched closely by economists, which excludes energy and food prices, rose by a similar amount — the slowest pick-up in prices since May.
• Relief from the report was evident in the bond market. Yields on the 10-year bond fell back to 4.5% after nearly hitting 4.6% on Thursday, following a run-up driven by the Fed's pullback on rate cuts.

Yes, but: There was less inflation progress when compared to the same period a year ago.

• From the same month one year ago, the PCE price index increased 2.4%, a tick up from October. Core PCE held at 2.8%.

The big picture: The PCE data came alongside updates on disposable income and spending.

• Disposable income rose 0.3% in November, compared to the 0.7% increase the prior month. Adjusted for inflation, income rose 0.2% compared to the 0.5% increase in October.
• Personal consumption expenditures (a measure of consumer spending) was stronger last month, rising 0.4%, up a tick from October. In real terms, the increase was 0.3%, up from 0.1%.

What to watch: The Fed cut interest rates for the third time this week, but signaled fewer cuts in 2025 because of stickier inflation. The Consumer Price Index, a separate measure of inflation released last week, came in hot again for November.

• Cleveland Fed president Beth Hammack — who dissented against the decision to cut rates, preferring instead to keep rates steady — on Friday flagged risks of higher inflation in the months ahead.
• "The economy's momentum and recent elevated inflation readings caused me to revise up my inflation forecast for next year," Hammack wrote in a blog post explaining the reasoning behind her dissent.

The U.S. economy grew at a 3.1% annualized pace in the third quarter — stronger than previously thought, the Commerce Department said on Thursday.

Why it matters: The revision suggests 2024 was yet another shocker year in which the U.S. economy surprised to the upside, as other major nations grappled with sluggish growth.

By the numbers: The revision is an upgrade from the initial estimate of 2.8% growth in the July-Sept. period.

• It largely reflects stronger exports and better consumer spending, offsetting a bigger-than-estimated drag from inventory investment.

The intrigue: The third quarter grew at a slightly quicker pace than the prior quarter, which expanded at a 3% annualized rate.

• A tool developed by the Federal Reserve Bank of Atlanta estimates the economy might be even stronger in the current quarter, with 3.2% growth.

What to watch: The Fed cut borrowing costs for the third time on Wednesday, but signaled fewer cuts ahead in 2025. One reason: the economy is hanging on while progress on slowing inflation has come to a halt.

• "What we see happening in the economy again is most forecasters have been calling for a slowdown in growth for a very long time, and it keeps not happening," Federal Reserve chair Jerome Powell told reporters at a press conference on Wednesday.

The bottom line: President-elect Trump will inherit a strong economy. Still unclear is how his proposed policies on immigration, taxes and tariffs will shape growth in the months to come.

Go deeper: Democrats are gloomy about the economy, and Republicans are optimistic

The Congressional Budget Office estimates sky-high tariffs promised by President-elect Trump might improve the nation's fiscal outlook — but at the cost of higher inflation and slower economic growth than would otherwise be the case.

Why it matters: The nonpartisan agency's findings are the highest-profile estimates yet of how such trade policy could slam consumers, businesses and the broader economy.

The big picture: The CBO's estimates, released in a letter to lawmakers on Wednesday, came at the request of Senate Majority Leader Chuck Schumer (D, N.Y.), budget committee chair Sen. Sheldon Whitehouse (D, R.I.), and Oregon Sen. Ron Wyden, who leads the finance committee.

• The lawmakers asked the CBO to look at a range of scenarios, including the combined economic and budget effects of a permanent 60% tariff on all Chinese imports, and a 10% tariff on all other goods imported into the country — the same trade policies promised by Trump.
• The estimates assume other nations slap retaliatory tariffs of the same magnitude on U.S. exports.

By the numbers: The CBO estimates tariffs would spur price hikes on consumer goods, at least initially.

• Higher tariffs on Chinese goods and all other U.S. imports would increase the Personal Consumption Expenditures index, a gauge of inflation, by a full point by 2026 — a notable risk as the Federal Reserve is trying to keep inflation at bay.
• After 2026, however, the CBO says that the tariffs would not have any "additional significant effects on prices."
• The CBO also said that poorer households would experience the largest drop in purchasing power, given that cohort spends the largest chunk of their income on goods.

As for economic growth, the CBO estimates the tariffs would lower GDP by as much as 0.6% in the next decade.

Yes, but: The agency notes the hit to growth might be offset as consumers and businesses replace certain imported goods with those made domestically.

Taking into account the economic effects, the CBO estimates tariffs would lower the budget deficit by up to $2.7 trillion over the next 10 years.

• The reduction of deficits might free up funds available for private investment, which provides a "substantial offset" to how much the agency anticipates tariffs would slow the economy.
• Without that effect, the CBO says the effect on GDP would be almost twice as large as their estimate.
• Still, the uncertainty associated with the policies might cause businesses to "delay or forgo new investments," while supply chain adjustments might prove costly.

The bottom line: The CBO says its estimates are highly uncertain, with little historic precedent of what tariffs of this size might do to the economy.

The Federal Reserve cut its target interest rate by a quarter percentage point Wednesday, while releasing new projections that signal less rate-cutting is on the way in 2025 than envisioned three months ago.

Why it matters: The Fed is entering a more cautious phase after cutting rates for three straight meetings, reflecting sluggish progress in bringing inflation down.

Driving the news: The policy-setting Federal Open Market Committee reduced the target range for the federal funds rate to between 4.25% and 4.5%, which makes for a full percentage point reduction in the target since rate cuts began in September.

• However, in September, the median top Fed official projected it would be appropriate to cut rates to 3.4% by the end of 2025. Now, that median projection is 3.9%.
• That implies only two rate cuts ahead next year, not the four signaled by previous projections. Fourteen of 19 top Fed leaders believe two or fewer rate cuts are likely to be justified in 2025.

What they're saying: "Today was a closer call, but we decided it was the right call," Fed chair Jerome Powell told reporters at a press conference on Wednesday, referring to the decision to cut rates.

• "We are at or near a point at which it will be appropriate to slow the pace of further adjustments," Powell added.

The intrigue: The S&P 500 fell as much as 2% during Powell's press conference. The yield on the 10-year Treasury note jumped to just over 4.5%, the highest level in more than six months.

Between the lines: Powell said that there is more uncertainty around inflation than previously believed. "It's kind of common sense thinking that when the path is uncertain, you go a little bit slower," he said.

• "It's not unlike driving on a foggy night or walking into a dark room full of furniture, you just slow down."

By the numbers: Fed officials bumped up their projections for GDP and inflation, reflecting the evolution of economic data since September.

• The median official now expects 2.5% growth for 2024, up from 2% in September.
• But the officials now expect core inflation to be 2.8% for the year, higher than the 2.6% projected three months ago.
• The officials also increased their 2025 and 2026 inflation projections, now seeing 2.5% inflation next year (up from 2.1% in September).

What to watch: After pushing rates sharply higher in 2022 and 2023 to try to combat inflation, the Fed is now moving to adjust them to a more neutral stance, neither stimulating nor restraining the economy.

• The economy faces a complex set of tailwinds and headwinds next year. The incoming Trump administration promises deregulation, tax cuts, and a growth-friendly approach — but also tariffs and deportations that are outside the Fed's control.
• Powell said some Fed officials began to incorporate "highly conditional estimates" of the economic effects that might play out from Trump's policy in their forecasts.

Of note: Beth Hammack, who became president of the Cleveland Fed earlier this year, dissented from the decision, preferring not to cut rates at this meeting.

• In a recent speech, she favorably cited past times when the Fed has cut interest rates by three-quarters of a percentage point — as it did in the last two meetings — before then pausing to assess conditions.

Editor's Note: This story has been updated with market reactions to the Fed decision.

One of the final major indicators of the year suggests a mixed narrative about consumer health during the holiday season: Spending is growing, but shoppers might be opening their wallets a bit more cautiously.

Why it matters: Consumer spending helped buoy the resilient economy in 2024, and any apparent slowdowns proved to be head fakes. But there is no guarantee it will continue in the months ahead.

What they're saying: "The headlines will say that retail spending remained resilient in November as consumers stocked up for the holidays," Nationwide senior economist Ben Ayers wrote in a note Tuesday morning.

• "But the underlying details suggest widening price-conscious shopping behavior as more households end 2024 on a cautious note," he added.

By the numbers: Retail sales rose 0.7% in November, a pick-up from the upwardly revised 0.5% increase in October.

• But much of the shopping activity was concentrated in a single category: cars. Spending at auto dealers surged almost 3% in November alone, following a 2% increase the previous month.

That is a "byproduct of dealer incentives offered to prospective buyers to clear excess inventory," Jim Baird, a chief investment officer at Plante Moran Financial Advisors, wrote in a note. (Our colleagues Tuesday morning wrote about the blockbuster deals for electric cars).

• "The go-go days of goods consumption have seemingly passed as consumers have tightened their belts to a degree," Baird added.

The big picture: The other bright spot in the report besides autos was online shopping, where sales grew by almost 2% last month.

• Spending fell across other categories, including grocery stores (-0.2%), department stores (-0.6%) and the catch-all category for various other shops (-3.5%).
• Consumers also pulled back at food and drinking establishments (-0.4%), the lone service sector category in the report.

Yes, but: Consumer spending has still strengthened over the past year. Retail sales, which are not adjusted for inflation, are nearly 4% higher than the same period a year ago.

• The cross-section of categories in the report that feed into GDP calculations still look OK in November, an encouraging sign for fourth-quarter growth: Retail sales excluding building materials, gasoline and autos rose 0.4%.

The bottom line: Consumers are not pulling back on spending in a way that would suggest the economy is in the midst of a downturn — but for those looking for signs of soft patches, this report offers some evidence.

• "From the Fed's perspective, scratching a little below the surface it will view this report as evidence of some moderate softening, consistent with another rate cut, but not evidence of any major weakening," Richard de Chazal, a macro analyst at William Blair, wrote in a note.

Global policymakers admit that how their economies fare next year largely rests on President-elect Trump and whether his trade agenda becomes a reality.

Why it matters: The economic backdrops in major nations from China to Canada are starkly different, but their outlooks all risk being blown up by tariffs.

• The extent of the blowback on the U.S. is anyone's guess.

The big picture: Central bankers try to prime financial markets for expected interest rate changes down the line.

• But now they are stepping into the equivalent of an economic void, with the unknown effects that a worldwide trade war — mixed with tax cuts, deregulation and other policy shifts — might have on inflation and growth.

"This is uncharted territory for central bankers," Brahima Coulibaly, vice president of global economy and development at Brookings and a former Federal Reserve Board economist, tells Axios.

• "They are less experienced and trained to manage policy and political uncertainty of this magnitude," Coulibaly adds. "Particularly in the United States, which emits the world's reserve currency and where policy has not historically been subject to significant unpredictability."

Between the lines: Trump promises to use tariffs liberally when he takes office, putting sky-high taxes on all imported goods. It would mark a step-up from his first stint in office, when just Chinese exports and select other products, like steel, were in the line of fire.

• Beyond Trump's claims that such policy will reinvigorate domestic manufacturing, tariffs now look like the go-to tool to extract desired changes from other countries.
• That leaves questions about how often (and by how much) Trump might raise the tariff stakes. For instance, Trump trade adviser Peter Navarro told Reuters the incoming president could "just raise tariffs higher" on China if the country devalued its currency.

"[T]he economic outlook is clouded by the possibility of new tariffs on Canadian exports to the United States," Tiff Macklem, the head of Canada's central bank, said last week after announcing a half-point interest rate cut to support its ailing economy.

• "No one knows how this will play out," Macklem added. "This is a major new uncertainty."
• Meanwhile, Chrystia Freeland — Canada's finance minister who resigned Monday — warned against new plans for government spending before Trump takes office: The country needs to keep its "fiscal powder dry today, so we have the reserves we may need for a coming tariff war," Freeland said in a statement.

Speaking in Frankfurt last week, European Central Bank president Christine Lagarde listed some of the unknowns: the scope of measures, the scale of retaliation and how trade traffic might be rerouted to avoid them.

• "That is a very complex situation, with movable parts," Lagarde said.

The Fed, which will probably announce a quarter-point rate cut this Wednesday, says it can't set policy based on how Trump's tariff agenda might take shape.

• The lack of clarity makes the Fed's projections, a fresh set of which are due out Wednesday, more hazy.
• "We don't know how big they'll be, we don't know the timing and duration," Fed chair Jerome Powell said at a New York Times conference this month. "We can't really start making policy on that. We have to let this play out."

Australia's head central banker, Michele Bullock, echoed that message last month. "We don't actually know what will happen. ... We can't be jumping at shadows."

The other side: The anticipation of Trump's policies alone was enough to push South Korean central bankers to lower borrowing costs for the second time in as many months — the nation's first back-to-back rate cut in 15 years, which surprised financial markets.

• The magnitude of the "red sweep" — on top of Trump's victory — "was well beyond our expectations, sending shockwaves with wide trade implications across the globe," the nation's top central banker said announcing the decision, according to The Korea Times.

What to watch: Trump's policies are anticipated to be inflationary, keeping rates higher in the U.S. That is one reason behind the U.S. dollar surge: a response to expected policy before Trump has taken office.

Continued dollar appreciation might wreak havoc around the world — one way the knock-on effects from tariffs might slam other nations.

• A stronger dollar here can stoke inflation abroad as imports get more expensive for nations with weaker currencies.
• For highly indebted nations, dollar-denominated debt becomes much pricier to pay off.

The bottom line: "The extent of the worry tends to be correlated with the extent of the dependence on the U.S.," Coulibaly says.

• "But given the role of the dollar and U.S. monetary policy, and the way in which it spills over into global financial markets, all countries are monitoring this."

Wholesale prices rose at a quicker pace in November, the latest evidence following Wednesday's CPI report that inflation is no longer cooling.

By the numbers: The Producer Price Index rose 0.4%, the biggest monthly gain since this summer. The index increased 3% in the 12 months through November, the largest increase since February 2023.

• A pickup in goods prices — largely for food — accounts for almost 60% of the index's monthly increase.
• Among the goods with the sharpest price increases: chicken eggs, which rose 55% in November alone. Prices for vegetables, melons, poultry and residential electricity also jumped.

Yes, but: Key PPI components that feed into calculations of the Fed's preferred measure of inflation, including portfolio management fees and hospital care, saw slower price gains or fell outright.

• Economists now anticipate that November's Personal Consumption Expenditures Price Index, to be released next Friday, will be better than previously thought.
• Both Morgan Stanley and Bank of America now estimate core PCE, which excludes food and energy costs, rose just 0.1% — a slowdown from the 0.3% increase in the previous two months.

What they're saying: "If our forecast proves correct, it would be a relief and leave us less worried about the recent trajectory of inflation," BofA economists Stephen Juneau and Aditya Bhave wrote in a note Thursday morning.

• "That said, the outlook beyond that remains murky," they add. "Progress on inflation has stalled of late, and there are upside risks to inflation on the horizon."

Confidence among America's top chief executives is soaring after President-elect Trump's re-election, with high hopes the former president will usher in an era of low taxes and regulations.

Why it matters: Mainstream economists warn the economy will take a hit from some of Trump's proposals, but business leaders see a brighter outlook for their industries in the months ahead.

• The Business Roundtable's latest economic outlook index — first seen by Axios — jumped 12 points from last quarter to the highest level in more than two years.

What they're saying: Cisco CEO Chuck Robbins, who chairs the Business Roundtable, said in a statement that top executives feel "energized" by Washington set to "consider measures that can protect and strengthen tax reform, enable a sensible regulatory environment, and drive investment and job creation."

By the numbers: Nearly 80% of the lobbying group's CEO members expect higher sales in the next six months, up from 71% who expected the same last quarter.

• Now more than 40% plan to increase capital spending, an increase from the 35% who previously said so.

What to watch: A smaller share of executives plan to lay off workers in the months ahead, while roughly 38% plan to increase their workforce — up 4 points from last quarter.

• But slightly more CEOs plan to keep their workforces steady (40%). That's in line with a dynamic playing out in the macroeconomy: The job market looks "frozen," with low firing and hiring rates.

The intrigue: It's not just big businesses that are more optimistic. An index measuring sentiment among small business owners also surged after the election — notching the single largest one-month gain in the survey's 40-year history, according to the National Federation of Independent Business.

• "The election results signal a major shift in economic policy, leading to a surge in optimism among small business owners," NFIB chief economist Bill Dunkelberg said in a release.

The other side: Economists, including some employed by firms whose CEOs belong to the Business Roundtable, say Trump's plans to slap across-the-board tariffs on U.S. imports is a risk to economic growth.

• In a statement, Business Roundtable CEO Joshua Bolten urged the incoming administration to avoid "overly-broad tariffs that could stoke inflation and raise costs for American businesses and consumers."

What to watch: That the election is over — without subsequent drama — might also be boosting CEO confidence.

• The economic backdrop has also improved. The labor market is still gently cooling, not sharply deteriorating as late summer data might have suggested.
• The Fed cut interest rates and signals it intends to lower them to a level that neither slows nor boosts the economy, though sticky inflation might delay the process.
• The global market selloff last quarter has given way to a rally with the S&P 500 near all-time highs.

The Consumer Price Index rose 2.7% in the 12 months through November — a bigger increase than the prior month — while the core measure that excludes energy and food prices rose 3.3%, the Labor Department said on Wednesday.

Why it matters: Inflation has plunged since the height of the crisis, but progress on cooling it further stalled out again last month.

By the numbers: CPI ticked up from the 2.6% increase in the year ending in October, while core CPI held at 3.3%.

• On a monthly basis, CPI rose 0.3% in November, after rising by 0.2% for three straight months. Core CPI rose 0.3% for the fourth straight month.

Between the lines: Housing has been the key component keeping inflation elevated.

• Even though price gains across the category slowed slightly in November, the shelter index still accounted for almost 40% of the increase in overall inflation last month.
• The shelter index rose 0.3% in November, down a tick from October.
• Rents rose 0.2%, while owners' equivalent of rent — which gauges how much it would cost homeowners to rent their own homes — rose by a similar amount.
• The Labor Department said these were the smallest monthly increases since 2021.

Among the other categories with faster price gains: hotels. Prices jumped 3.2% after rising just 0.3% in October.

The big picture: What looked like slowing rates of price gains earlier this year has given way to fears that inflation might get stuck above the 2% level desired by policymakers.

• "Growth is definitely stronger than we thought, and inflation is coming a little higher," Federal Reserve chair Jerome Powell said at a conference hosted by the New York Times last week.
• The Fed has cut interest rates by a combined 0.75 percentage point since September, when it looked like policymakers needed to worry more about the labor market — and less about inflation.
• That might no longer be the case: the Fed is likely to cut rates at the end of its two-day policy meeting next week, though it is unclear how officials see rates evolving in 2025.

Go deeper: Understanding Powell's Fed plan for Trump 2.0

Editor's note: This story was updated with additional context and a new chart.

Hiring rebounded in November as the effects of hurricanes and a strike that held down October numbers dissipated. But beneath the surface of the new numbers are some warning signs that all may not be well for American workers.

Why it matters: Robust headline job growth isn't telling the whole story, as the number of people unemployed, and the share not in the labor force at all, both increased.

• Meanwhile, wage growth actually ticked up, which could make some Federal Reserve officials wary of moving too aggressively to cut rates.
• The report should not incite meaningful worries about the labor market, wrote Seema Shah, chief global strategist at Principal Asset Management — but "there are cracks in the labor market that require Fed attention."

By the numbers: There were 227,000 jobs added in November, a gain that reflects employers adding workers back to payrolls as hurricane and strike effects subsided. September and October payrolls were revised up by a combined 56,000 positions.

• Leisure and hospitality and transportation equipment were among the sectors with strong jobs growth after flat growth and job losses last month.
• Average hourly earnings rose by 0.4% in November and have risen at a 4.5% annual rate over the last three months — rather elevated for the Fed's comfort.

Yes, but: That data is from the survey of establishments. The takeaway from households — the other survey that comprises the jobs report — is less reassuring.

• The unemployment rate, while still historically low, increased to 4.2% after moving sideways in the prior two months. Unrounded, the jobless rate came in at 4.246%, only slightly below the most recent high seen in July (4.253%).
• Roughly 193,000 workers dropped out of the labor force last month. Contrary to the hiring boom signaled by the establishment survey, this data shows there were 355,000 fewer employed workers relative to October.

Of note: The share of 25- to 54-year-old Americans who were employed fell for the second straight month. As of November, it is 80.4%, down from 80.9% in September.

• After reaching multidecade highs over the summer, it is now below its pre-pandemic levels.

Between the lines: The report still offers a green light for the Fed to cut its target interest rate at a meeting concluding Dec. 18.

• "The argument for the Fed to act preemptively to prevent further economic deceleration strengthened today," Lazard chief market strategist Ron Temple wrote Friday morning.
• But the outlook for policy in 2025 remains murky, given both uneven progress on inflation, mixed signals in the labor market, and the prospect of big policy changes in the new administration.

The U.S. economy added 227,000 jobs in November, while the unemployment rate ticked up to 4.2%, the Labor Department said on Friday.

Why it matters: The report reflects a strong bounceback of jobs after hurricanes and a major strike sidelined workers in October.

By the numbers: Two hurricanes and a now-resolved Boeing strike weighed on job creation during the period covered by the previous report.

• Employment in transportation equipment manufacturing jumped by 32,000 in November, "reflecting the return of workers who were on strike," the government said.
• The government also said that October job growth was better than initially thought, adding 36,000 jobs — about 24,000 more payrolls than the first estimate.
• The report also showed September's job gains were revised slightly higher to 255,000 from 223,000.

The big picture: The November jobs report offers a slightly clearer snapshot of the underlying health of the labor market. Other indicators, including low levels of unemployment filings, suggested the jobs market was still chugging along.

• Federal Reserve officials appear less concerned about the job market relative to earlier this year when the unemployment rate was inching higher. The Fed pivoted to cutting rates in September, in part, to preserve the labor market.
• "While I am pleased at how well the labor market has held up under restrictive monetary policy, I am less pleased about what the data have been telling us the past couple of months about inflation," Fed governor Christopher Waller said in a speech this week.

What to watch: The latest jobs data is unlikely to weigh on Fed officials' decision on whether to cut interest rates at its next policy meeting on Dec. 17-18.

• Financial markets see a cut as a near certainty: Market-priced odds of a cut rose to 89%, compared to about 69% before the release of the jobs report, according to the CME's FedWatch tool.

Go deeper: What's next for the "remarkably good" economy

Editor's note: This story was updated with a chart and additional developments.

The French government collapsed on Wednesday as parliament voted to oust Prime Minister Michel Barnier and his cabinet, throwing the nation into the worst political and fiscal turmoil in decades.

Why it matters: The chaos leaves Europe's second largest economy without a functioning government for the first time in 60 years — the most severe fallout to date from the efforts to shrink its deficit.

• It is the latest political drama to stem from a bleak fiscal situation that caused backlash from financial investors. The UK faced its own economic and political turmoil that forced its central bank to intervene in 2022.
• While an ocean away, it is a warning for President-elect Trump whose fiscal plans are expected to drive the deficit higher.

The big picture: Barnier was ousted after just three months in the job. He was appointed by French President Emmanuel Macron, who called the snap elections that resulted in a deeply fractured parliament with no majority.

Catch up quick: The "no-confidence" vote was called this week after Barnier pushed through an unpopular social security measure without parliamentary approval.

• Barnier's budget proposal, which came against a fiscal backdrop that was worse than initially thought, included roughly $60 billion worth of tax hikes and spending cuts.
• France's far-right firebrand Marine Le Pen has led the opposition against the budget.
• The left-wing New Popular Front alliance joined forces with Le Pen's National Rally to pass the no-confidence motion.

The intrigue: Investors have been dumping French government debt, pushing up the nation's borrowing costs — upping the pressure to get its fiscal house in order.

• The yield on France's 10-year government bond briefly surpassed that of Greece, the country that faced its own devastating debt crisis a decade ago.

What's next: A caretaker government will have to lean on unprecedented measures to avert a shutdown this year.

• Macron will have to appoint a new prime minister.
• That official will begin the budget process again.