Signal & Noise Filter
Taking a Stand Before the Unemployment Report
We got the rate cut these pages expected back on November 1, 2025.
We did not get the bull rate flattener.
We instead got a bull steepener, with the 2s/10s spread expanding 8.19 basis points between EOD December 8, 2025 and close today, December 15, 2025.
The saying, “would you rather be right or make money” comes to mind. Pinebrook was affirmative in the former and dispositive on the latter.
Despite headlines about a hawkish cut, the FOMC delivered a dovish cut. Focus on what they do, not what they say.
Forget unchanged YoY spot inflation at 2.83%; the Fed is getting after the labor market.
This reaction function is what has given the Fed the confidence to keep the unemployment rate unchanged at 4.4% for 2026, despite Chair Powell’s claim that current payroll prints being overestimated by 60K jobs per month and likely coming in at negative 20K jobs.
The SEP’s message of lower inflation, faster growth, and a stable labor market dispatched the flattener and replaced it with a steeper yield curve.
This is the noise.
The signal is that Powell’s math is not mathing.
Powell was regurgitating old news by leaning on BLS benchmark revisions. But if Powell’s estimate of job losses is anywhere near correct and U3 remains at 4.4% next year then one or more of the following things must be true.