Americans hit the road and shopped over the holidays, while backlogged data keeps rolling in

Trend watch

As we expected, weekly air passenger counts surged to an all-time record 18.1 million during Thanksgiving week, including 3.1 million on Sunday, November 30^th – the busiest single-day ever at U.S. airports. 

Our take

Americans were definitely on the move during the week of Thanksgiving, which includes Black Friday – the day when many retailers finally are "in the black,“ which is an old-timey accounting term for turning a profit. Consumers both traveled and shopped. Interestingly, activity surged despite a major winter storm in the Plains, Midwest, Great Lakes, and eventually the Northeast that caused thousands of delays and hundreds of flight cancellations.

There was a record-setting retail spending and number of shoppers. Still, shoppers remain selective, increasingly favoring online over in-store purchases to capitalize on digital deals. However, it’s possible that the winter storm and cold temperatures helped convince some to shop online from the comfort of their cozy couches.

Nonetheless, the robust sales on Black Friday and Thanksgiving contradicts the persistent sour consumer sentiment, highlighting the continuing gap between hard economic figures and soft sentiment data. That said, November consumer confidence did nudge higher, albeit from near cycle lows.

Furthermore, the strong retail sales reinforce several of our economic views. First, the consumer remains resilient, pushing against the K-shaped consumer narrative, which implies low-end spending is declining. Indeed, there’s two-speed consumer spending – whereby higher-income consumers are spending at a much higher pace than lower-income households. Yet, while lower-income folks face slower wage growth, depleted savings, and persistent cost pressures, their spending is still increasing – just not as rapidly as the upper end.

Second, there’s the backlog in the economic data persists. Although the statistical agencies have done a great job of quickly releasing most series current through September, much of October’s data is still delayed and some cases can’t be recreated, so won’t be released. In many instances, data for October and November will be combined when it's released in December – but most of those will occur after the Federal Reserve’s (Fed) December 10^th meeting. And that includes the key inflation data.

We think that these factors probably make the chances of a December rate cut more of a toss-up. However, investors think – based on futures markets currently pricing in a 95% chance of a rate reduction – that a December cut is a slam dunk.

Fed voters remain split, with distinct ‘pause’ and ‘keep cutting’ camps. As we count the votes – based on their recent public statements – the committee appears evenly divided. While we wouldn’t rule out a December rate cut, it’s far from a slam dunk in our view.

Regardless, the market appears to be overreacting to the upcoming December meeting. Whether the Fed opts to continue cutting rates or pauses in December is unlikely to change the broader interest rate trajectory in the months ahead—lower rates remain the clear objective to mitigate employment risks while maintaining a gradual path toward controlling inflation.

In that context, the December decision is less important, especially knowing that there’s another rate-setting meeting coming about seven weeks later. In other words, nothing magical happens if they do or don’t cut rates at the December meeting.

Bottom line

The U.S. economy remains resilient, while continuing to navigate uncertainty from the government shutdown and limited economic data. Be prepared that we probably won't get a clean read on the economy until early 2026. As such, we expect the Fed to remain cautious; a December rate cut is a toss-up given missing timely economic data.