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Well, the strength of the US economy surprised everyone once again on Friday. We learned that the unemployment rate fell to 3.7% in November, average hourly earnings grew by 0.4%, and 199,000 more jobs were added when economists were expecting around 185,000. 

It's a nice setup for the macro news in this week when we’ll get a broad economic view of just how merrily we may be rolling along.

The biggest datapoint comes Tuesday when we get November’s Consumer Price Index. The headline reading is expected to come in flat at 0.0%, with core rising a sequential 0.3%. There's something important to note here: while gasoline prices continue to fall, we are also getting some good, chunky increases in real wages. A month with 0.0% headline inflation and 0.4% average hourly earnings growth means a good deal more cash in people's pockets. Obviously for Fed watchers, core, which excludes energy and food prices, is the big thing that will matter. But it’s worth paying attention to headline inflation measure for a broader view of the easing cost burdens on US consumers right now, who can provide much of the torque propelling the economy.

Then on Wednesday we get the Fed decision. There's not going to be a change in the rate policy. But it will be a massive decision nonetheless, because in addition to Powell's press conference, we get a fresh look at the dots, the interest-rate projections of each Federal Open Market Committee member. So all of this conversation about the timing of the first rate cut (assuming the next move is a cut) will be informed by some fresh data on what the members of the FOMC see ahead. Had the unemployment rate jumped up to 4% in Friday's release, there might have been more chatter not just about cutting in March, but maybe even cutting sooner in January. That's probably less likely now.

Speaking of rates, pay attention to the cost of mortgages. Freddie Mac said last week that the average 30-year fixed-rate had fallen to 7.03%, which means we may be close to seeing a drop to 6-handle rates again. And so something to watch is whether we see a pickup in purchasing demand, as more people notice the drop in rates. The popular homebuilder ETF XHB is on a massive tear, having soared by 27% since late October. It's currently at its highest level ever. KRE, the regional bank ETF, is up over 26% since late October. 

One reason why a decline in mortgage rates is particularly interesting is because it may be contributing to improved consumer sentiment. It didn't get as much attention as the jobs report, but on Friday we also got a surprise bounce in the University of Michigan’s consumer sentiment report, which came in at 69.4 when people were expecting 62. Part of the jump was driven by the biggest drop in year-ahead inflation expectations in 22 years. Between falling rates and gasoline prices, we'll see whether the trends remain in place for strong consumer sentiment and resilient consumption. We’ll get a test of consumer purchasing on Thursday with the release of retail sales numbers. The expectation is that, excluding autos and gas, the number rises by 0.1%.

Finally there's two earnings reports that are coming out this week that will be interesting. On Thursday we hear from both Costco and the homebuilder Lennar. Both should speak for themselves, basically, in terms of what they say about homes and the hopefulness of their residents.

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(Updates time references.)

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