Signal & Noise Filter

Frankenstein Macroeconomic Slop

This week gave us two data points that confirm the directional core thesis of the prior issue of this note, which was that “FOMC’s dots are too restrictive and two policy rate cuts in 2026 are unrealistically low”.

The problem is the numbers are Frankenstein iterations of macro data, pieced together for effect but limited in their utility.

Jobs came in positive and far above Chair Powell’s -20K projection, but the internals that Pinebrook is focused on suggest continued cooling without an upcoming employment extinction event.

With the U3 unemployment rate ticking up to 4.6% (rounded; 4.56% unrounded), we can expect the Sahm Rule to come back into focus.

Recall, the Sahm Recession Indicator signals the start of a recession when the three-month moving average of the national unemployment rate (U3) rises by 0.50 percentage points or more relative to the minimum of the three-month averages from the previous 12 months.

Currently at .43.

Another 4.6% print in December, published in January, would take Sahm to .53, indicating an imminent recession, which could motivate the FOMC to cut again in January.

Maybe.

There is a fly in the indicator ointment.