Fed Watch – 11/6/2026

The below transcript is a literal translation of the podcast audio that has been machine generated by Adobe Podcast.

Well, the midterm elections are over, but is winning the election fight on inflation different than winning the fight against inflation? I’m Lauren Saidel-Baker, and thank you for joining us for this November 6th edition of Fed Watch.

Midterm elections were the big news out of this week, with a so-called blue wave sweeping through in the election results. And in all of that political messaging, we really saw a continued focus on inflation. This gets back to a theme that we have been talking about frequently here at ITR and frequently here on Fed Watch, about the difference and the growing disparity between what the economic data actually say versus what people are feeling in their lives. And inflation is the thing that bridges that gap more than anything else. A lot of political candidates and political parties seized on that cost of living, that strained affordability picture in their campaign messaging. And we saw a lot of effectiveness as a result. So, I want to remind all of our viewers that we here at ITR, we are nonpartisan, we are apolitical. We don’t find significant differences in things like inflation, or GDP growth, or industrial production over time given different political parties in power. However, we can see what this theme means for the voting populace, which is also our American consumer.

And then the real question becomes, can the incoming party in power deliver on their campaign promises, in this case, to bring down costs? I think that’s going to be a very tough road ahead, really, because there isn’t just one political thing that is driving higher inflation today. There are some politically centered drivers, right? We think about the conflict in the Middle East and what it’s done to oil prices and therefore energy inflation. Tariffs are another great example of a political driver of inflation, or even fiscal spending, although I do want to caution that fiscal spending over history has been elevated from both parties, there’s really no clear winner here in the political landscape. But there are also so many drivers today of inflation that are just not politically based. Things like the AI and data center build out. Maybe we’ll get some moratoriums, right? Pumping the brakes in certain areas under certain jurisdictions. But overall, it’s this competition for labor to build these new facilities for the materials, the products, the components that go into them, that is driving up costs across that entire complex. We also still see elevated wage pressures, home prices, high mortgage rates, shelter costs. Those are a major contributor to the consumer price index. And those are other things that we just can’t see a politician flip the switch on. So, none of our forecasts here at ITR are being changed as a result of this midterm election. I really want to stress to our viewers, your plan going into this election should still be your plan coming out of it. No major change and no major adjustment to the playbook is required.

I do also want to move to today’s news. The jobs report came out first Friday of the month. We saw actually a huge number here, 165,000 jobs gained. We also saw some significant upward revisions to both August and September job numbers. The unemployment rate actually ticked down, it fell to 4.1%. And so, as we’ve been talking about this balance in the labor market, let me be clear one month never makes a trend. But this is a solid contribution. And it does, in fact, fall in line with the general theme of labor that we’ve been seeing, which is stability. Overall, our labor market is still quite solid. Where we do start to see the cracks forming is things like folks who don’t have a job, who are either looking for work, maybe had lost their job or entering the market for the first time. In today’s economy, if you have a job, you’re really not more likely to lose it. But if you don’t have a job, it’s taking longer to find a new one. So, the length of time that individuals are out of work that is high and still potentially rising. We also saw that earnings are rising. I mentioned wage pressures earlier in this show. Earnings were up 3.1%. So again, a pretty solid contribution. But that is really being tempered by inflation. That 3.1% is still behind the headline CPI. So overall, people are earning more in nominal terms but they’re not feeling better off. They’re seeing inflation take a bigger and bigger bite out of that paycheck. They’re not actually feeling better or to have greater purchasing power. So that is influencing a lot of the consumer decisions that we’re seeing. That’s not really content for this show. But if you have questions about those different levels of income or the different types of choices that consumers are making, that’s a great thing to talk to your ITR Economist about.

Overall, both the midterm election and today’s labor market result that keeps the focus on inflation. So, I think more than anything else, that is what the Federal Reserve is going to be targeting going forward. That is the thing to watch. We hope you’ll watch it right here with us on Fed Watch.