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Economy, the Fed, and Rates…

November 4, 2025

Economic Data & Inflation

• Corporate Layoffs Accelerate Amid AI Disruption: Amazon announced 14,000 job cuts, joining a wave of 31,800 office-based job cuts across major corporations this week. Companies are explicitly citing AI implementation as a driver—Amazon’s Beth Galetti noted the need to be “organized more leanly” to capitalize on AI opportunities. US companies have announced nearly 1 million job cuts YTD through September, the highest since the 2020 pandemic.
• White-Collar Recession Fears Mount: The labor market dichotomy is deepening. While blue-collar sectors like construction see increased openings due to immigration restrictions, professional and business services employment declined between January and September. As Allison Shrivastava at Indeed warned:

• Data Blackout Creates Pricing Divergence: With BLS sidelined, near-term inflation pricing is distorted, with front-end breakevens and CPI swaps sending conflicting signals under differing fallback rules — reducing the reliability of market-implied inflation as a macro guide.

Federal Reserve Policy

• Powell Delivers Hawkish Surprise: The Fed cut rates 25 bps to 3.75-4% as expected, but Powell’s blunt warning that December is “far from” a foregone conclusion jolted markets. The vote saw rare dissents in both directions - Stephen Miran pushed for 50bp while Jeff Schmid wanted no cut - signaling a fractured committee with “strongly differing views.”
• Regional Fed Presidents Push Back: Three Fed presidents publicly opposed this week’s cut. Dallas’s Lorie Logan said she would find it “difficult” to support December easing without labor market deterioration. Cleveland’s Beth Hammack warned:

• Miran Champions Aggressive Easing: Fed Governor Stephen Miran, still technically on leave from the CEA, argued the neutral rate has fallen to ~2.5% and warned of recession risk if policy stays restrictive:

• December Odds Plummet: Markets now imply ~65% odds for a December cut (vs. ~90% pre-meeting) amid the data blackout.

Treasury Yields & Bond Markets

• Yields Rise Despite Rate Cut: The 10-year Treasury jumped 10 bps on Wednesday to 4.08%, posting one of the biggest Fed-day spikes since 2022 – also ending the week at the same level. The move reflects growing skepticism about the pace of easing and persistent concerns about fiscal sustainability, as debt has passed $38 trillion.
• Fed to End QT and Resume Buying: The Fed announced that QT will end by year-end, with expectations of $35 billion in monthly Treasury purchases starting in Q1 2026. Evercore ISI expects the Fed to start buying “most likely January and at the latest in March,” providing crucial support for the massive Treasury financing needs.
• Corporate AI Spending Floods Bond Market: Tech giants have issued over $200 billion in bonds for AI infrastructure this year. Meta’s $30 billion offering this week drew a record $125 billion in orders. Goldman Sachs warns AI-related issuance now accounts for over 25% of net corporate debt supply. As Gil Luria at DA Davidson cautioned:

• Bill Gross Turns Bearish: The bond veteran is selling 10-year Treasury futures, citing “too much supply even if economy slows to 1% to 2%.” The fiscal backdrop remains daunting, with deficits headed toward $2 trillion annually.

Market Dynamics

• Tech Rally Powers Through Volatility: The S&P 500 notched its sixth consecutive monthly gain (+16% YTD) while the Nasdaq achieved its longest winning streak in eight years. Amazon surged to record highs on robust cloud growth, though concentration risk intensifies with the Magnificent Seven now representing 38% of the S&P 500 market cap.
• AI Investment Boom Continues: Companies explicitly tie spending to AI capabilities. Nvidia became the world’s first $5 trillion company. However, divergence emerges: Meta’s accelerating spending warning triggered an 8% drop, while Amazon’s AI revenue beat drove a 10% surge.
• Bubble Concerns Mount: Michael Burry cryptically warned retail investors about market exuberance. The S&P 500 trades at 23x forward earnings, well above two-decade averages. As Ed Smith at Rathbones noted about potential correction:

Implications for the CRE Finance Market

• Credit Allocation Crowd-Out: The flood of high-grade tech issuance may divert investor demand from CMBS, potentially widening spreads for new deals as traditional buyers chase AI-related corporate bonds.
• Office Demand Faces Dual Pressure: White-collar layoffs create immediate absorption headwinds for office properties, while data centers emerge as the sole bright spot - though power constraints and massive capital requirements raise execution risks.
• Private Credit Interconnections Deepen: Growing non-bank financing across both AI infrastructure and CRE creates dangerous spillover potential. A risk-off turn could trigger broad repricing as shared investor bases and warehouse facilities transmit stress across sectors.

You can download CREFC’s one-page MarketMetrics, which includes statistics covering the economy and the CRE debt capital markets, here.

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