# The Fed **JUST** Said "Recession." Source: https://www.youtube.com/watch?v=2MVSv1L8zO8 Recap page: https://rapidrecap.app/video/2MVSv1L8zO8 Generated: 2025-11-18T15:03:17.693+00:00 --- ## Quick Overview Federal Reserve Governor Christopher Waller's speech suggests the Fed is leaning toward supporting a rate cut at the December meeting due to softening labor market data and moderating inflation, despite acknowledging that the stock market boom does not reflect the financial conditions of most Americans. **Key Points:** - Waller supports a 25 basis point cut at the December FOMC meeting based on current labor market data and inflation tracking close to the 2% target. - The October ADP jobs report showed a significant slowdown, with only 153,000 job cuts reported in September and an expected eventual rise in unemployment leading to a recession. - Consumer sentiment data from the University of Michigan shows persistent drops heading into recession territory, with spending slowing significantly. - Waller contrasts the strong stock market, driven by AI, with weak consumer financial conditions, stating the stock market does not reflect the reality for most Americans. - He noted that his prior prediction that rate hikes would cause job losses without a spike in layoffs (based on the Beveridge curve) was confirmed by subsequent 'hard' data. - Inflation expectations remain well-anchored in the medium and longer run, supporting the view that tariff effects have been smaller than forecast. ![Screenshot at 00:40: The speaker highlights a section of Waller's speech transcript detailing that economic activity is tracking more closely with weak labor market data than previously assumed, justifying a potential rate cut.](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-00-40.png) **Context:** This video analyzes remarks made by Federal Reserve Governor Christopher J. Waller at the Society of Professional Economists Annual Dinner in London on November 17, 2025. Waller discusses the current state of the US economy, focusing on conflicting labor market data (soft vs. hard) and inflation trends, ultimately arguing for a cautious approach that favors a near-term interest rate cut. ## Detailed Analysis The video analyzes Christopher Waller's speech, "The Case for Continuing Rate Cuts," arguing that recent data supports a rate cut at the upcoming December FOMC meeting. Waller cites the October ADP jobs report showing only 27,000 jobs created over the past six months (down from 145,000 previously) and the downward revision of Q2 job numbers, suggesting the labor market is weakening and that a recession is possible if rates remain high. He contrasts this with the booming stock market, which he argues is driven by AI-related businesses and does not reflect the poor financial conditions of most Americans, citing persistent drops in consumer sentiment data (Michigan survey) as a warning sign for GDP growth. Waller recalls his earlier, correct prediction regarding the Beveridge curve in 2022, where he trusted the curve over the Phillips curve, leading to a decline in job vacancies rather than a spike in unemployment. He concludes that with inflation anchored and a weakening labor market, he supports cutting the policy rate by another 25 basis points in December as a matter of risk management. ### Waller's Stance on Rate Cuts - Supports a 25 basis point cut at the December meeting - Cites weak labor data and inflation near 2% target - Views this as risk management against further labor market weakening ### Labor Market Analysis - October ADP reported only 27,000 average job creation (vs. 145,000 prior) - Job openings are declining, consistent with a 'no hire, no fire' equilibrium - Unemployment rate expected to rise, potentially leading to recession ### Inflation and GDP Outlook - Inflation expectations remain well-anchored medium/longer term - Tariff effects were smaller than expected, modestly boosting inflation - GDP growth is slowing, with private forecasts pointing to modest growth. ### Consumer Sentiment Warning - Michigan survey shows persistent drops in consumer sentiment, historically correlated with recessions - Slowdown in spending (70% of GDP) has dramatic implications for growth. ### Critique of Stock Market Influence - Booming stock market (driven by AI) does not reflect financial conditions for most Americans - High mortgage rates strain households purchasing large assets like homes and autos. ![Screenshot at 00:05: Speaker pointing to his phone while discussing the latest data release.](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-00-05.png) ![Screenshot at 00:33: Display of the title page of Christopher Waller's speech transcript, "The Case for Continuing Rate Cuts."](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-00-33.png) ![Screenshot at 00:51: The Beveridge Curve chart \(2000-2019\) displayed, showing the relationship between Job Openings Rate and Unemployment Rate.](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-00-51.png) ![Screenshot at 01:40: Highlighting the section in Waller's speech stating his objective is to describe his outlook for the U.S. economy.](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-01-40.png) ![Screenshot at 02:00: Highlighting key points from Waller's speech that support rate cuts, including weak labor market and inflation near target.](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-02-00.png) ![Screenshot at 02:43: Speaker drawing red and pink arrows on the Beveridge Curve to illustrate the expected movement towards higher unemployment \(right\) and lower job openings \(down\).](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-02-43.png) ![Screenshot at 04:13: The promotional slide for the "Meet Kevin Membership" detailing included benefits like courses, trade alerts, and livestreams.](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-04-13.png) ![Screenshot at 07:07: The speaker points to text in the transcript emphasizing that the labor market is weakening, tracking more closely with weak labor data.](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-07-07.png) ![Screenshot at 08:30: Highlighting text in the transcript where Waller suggests that consumers are heading into recessions due to falling sentiment.](https://ss.rapidrecap.app/screens/2MVSv1L8zO8/00-08-30.png)