Economic data resumed this week after a 43-day government shutdown, revealing a job market losing steam, inflation cooling but not conquered, and consumers feeling the squeeze. Here's what the numbers tell us about where the economy stands heading into 2026.
Most major economies are grinding through late cycle, with manufacturing weakness widespread and services doing the heavy lifting. Canada and South Korea have tipped into contraction. The bright spot is Southeast Asia, the only region showing early-cycle momentum.
The economy is sending mixed signals as 2025 winds down. The Fed delivered its third consecutive rate cut, but the decision drew rare dissent, and officials are signaling a slower pace ahead. Workers are holding tight to their jobs, small businesses are shedding workers at the fastest pace since 2023, and consumers are bracing for higher costs on healthcare, rent, and groceries. This is an economy playing defense heading into the new year.
In 1863, a 74-year-old magazine editor finally convinced Lincoln to establish a national day of Thanksgiving. She'd been asking presidents for seventeen years. Her argument: gratitude could unify a fractured country. With consumer sentiment at near-record lows, her message feels surprisingly relevant.
Markets are questioning whether massive AI infrastructure spending will deliver matching returns, with skepticism growing that revenues can scale from $20 billion to $2 trillion annually by 2030. This doubt compounds broader concerns: economic data shows weakness masked by concentrated AI spending, creating a narrow foundation vulnerable to sharp reversals. The Federal Reserve faces its most difficult decision in years, forced to set monetary policy without two months of jobs and inflation data due to the government shutdown.
The S&P 500 barely moved this week, but beneath the surface, major shifts are underway. The government shutdown ended but left lasting damage to economic data. The Fed's path forward grew murkier. And high-profile investors are raising serious questions about whether AI stock valuations have gotten ahead of reality.