Everyday Economics: Has the labor market cooled enough to justify more cuts?

This week is light on major economic releases and heavy on Federal Reserve speeches. That shifts the spotlight to the question markets actually care about right now:

Has the labor market cooled enough to justify additional rate cuts, even though inflation – and inflation expectations – remain closer to 3% than 2%?

The latest inflation data argues for caution. At the same time, trade policy is back in the headlines: after the Supreme Court struck down the administration’s prior tariff program, the President responded by reinstating a temporary 10% global tariff (under Section 122 authority), adding a fresh dose of uncertainty to the inflation outlook and the growth path.

Inflation moved the wrong way at year-end

The Fed’s preferred inflation gauge firmed in December:

Headline PCE inflation rose to 2.9% year over year in December, up from 2.82% in November. Prices rose 0.4% month over month in December, up from 0.2% in November. Core PCE (excluding food and energy) also increased 0.4% m/m and is run...