Cotton Incorporated
Executive Cotton Update
U.S. Macroeconomic Indicators & the Cotton Supply Chain
December 2025
Macroeconomic Overview: The government shutdown ended November 12th, but many data streams are still facing delays. This month’s employment report is an example. It generally is released on the first Friday of the month but was postponed until December 16th and that was the reason this month’s Executive Cotton Update was published later than usual.
On December 10th, the Federal Reserve decided to lower interest rates by a quarter percentage point. Since August 2024, the Fed has cut rates a total of 1.75 percentage points (from 5.25-5.50% to 3.50-3.75%). In statements following their meeting, Fed Chair Jerome Powell indicated that, “In the near term, risks to inflation are tilted to the upside and risks to employment to the downside—a challenging situation. There is no risk-free path for policy as we navigate this tension between our employment and inflation goals.”
Participants of the Federal Open Market Committee (FOMC) that determines rate policy offered differing views on the outlook for further rate cuts. The median projection suggested one rate cut in 2026. Seven of the nineteen individual members indicated rates should hold at least at their current level next year, while there were eight forecasters that proposed more than one (quarter point) rate cut and one member that indicated rates could be as low as 2.00-2.25% next year.
Relative to current economic conditions, Federal Reserve comments indicated that consumer spending remained solid and business investment was expanding while the housing sector remains weak. The National Retail Federation (NRF) reports that the number of consumers that shopped in the five days around the Thanksgiving holiday (Thanksgiving Thursday through the Sunday after) set a new record (202.9 million). Increases in shopper numbers were recorded for both in-person and online shopping. Adobe analytics indicated that shopping activity on Cyber Monday (the Monday after the Thanksgiving holiday) was up 7.1% year-over-year and set a new record.
Other indicators reflect the concerns mentioned by the Federal Reserve. The latest reading for the overall CPI suggested prices increased +3.0% year-over-year in September. Job growth has slowed, with gains in recent months describing a definitive slowdown in hiring since the spring. While there has not been a definitive uptick in layoffs (as represented by initial claims for unemployment insurance), the unemployment rate has been edging higher.
Employment: Due to the shutdown and its effects on data collection, there will not be a report on job gains or unemployment for October. In November, the U.S. economy was estimated to have added +64,000 positions. Revisions for previous months (August and September, no October data), resulted in a net reduction of -33,000 positions relative to existing estimates (-22,000 in August to -26,000 and -11,000 to +108,000 in September). Following these updates, the average monthly change in jobs since May is +37,000. Over the previous twelve months (May 2024 to April 2025), the average monthly change was +150,000.
The unemployment rate in November was 4.6%. In September, the unemployment rate was 4.4%. In November 2024, the rate was 4.2%. Monthly averages for initial claims in unemployment insurance (weekly data) have been holding steady near 220,000 claims/week.
Average wage growth slowed in November to +3.5% year-over-year. The latest decrease continues a downtrend that has been in place since a peak was formed in May 2022. While higher than most levels posted in the decade after the financial crisis, the latest reading is the lowest going back to 2021.
Consumer Confidence & Spending: The Conference Board Consumer Confidence Index® decreased -6.8 points in November to 88.7. Recent levels have been below the general range between 95 and 115 that contained values since 2022 and are within the range experienced with the pandemic in 2020 and 2021.
Despite some of the weakness in confidence, consumers continue to spend. The latest data from the Bureau of Economic Analysis (BEA) indicated overall consumer spending was flat month-over-month in September, but it was up +2.1% year-over-year. Spending on clothing was down -1.2% in September, but it was up +7.2% year-over-year. Consumer spending on apparel shifted higher in early 2025. Since January, the average rate of year-over-year increase in apparel spending was +6.4%. Over the longer-term, the average rate of year-over-year growth is near two percent (average rate of year-over-year growth since 1990).
Consumer Prices & Import Data: The latest reading for the CPI for garments was +0.7% month-over-month in September. Year-over-year, average retail apparel prices were -0.3% lower.
Even with tariff increases, import volumes have not decreased dramatically. In terms of weight volume, imports May-September were down -3.6% year-over-year. Cotton apparel imports have been more stable, and were nearly flat (+0.3%).