Americans' paychecks grow stronger as Main Street shows new economic strength

Economic Strength and Consumer Behavior - Recent economic data indicates growing strength on Main Street, with Americans' take-home pay increasing by 1.42% after inflation from January to December 2025, contributing to rising retail sales and home purchases [1] - Retail spending rose by 3.3% year-over-year in November and increased by 0.6% from the previous month, surpassing economists' expectations of a 0.4% rise [2] Housing Market Dynamics - Lower interest rates have led to a 5.1% increase in existing home sales in December, as reported by the National Association of Realtors [3] - The average 30-year fixed-rate mortgage fell to 6.19% in December, down from 6.24% in November and 6.72% a year ago, indicating improved housing market conditions [6] - Inventory levels in the housing market remain tight, with fewer sellers eager to move, but more inventory is expected to come to market starting in February [6] Inflation Trends - Inflation remained elevated at the end of 2025, with the consumer price index (CPI) showing a 0.3% monthly increase in December and a 2.7% rise year-over-year [9] - Core CPI, excluding food and energy prices, rose by 0.2% in December and is up 2.6% from the previous year [9] Employment and Federal Reserve Actions - The US economy added 50,000 jobs in December, contributing to a decline in the unemployment rate [10] - The Federal Reserve has cut its benchmark federal funds rate by 25 basis points in its last three meetings, indirectly contributing to lower mortgage rates [12] - Market expectations indicate a 95% probability that the Fed will maintain its current target range of 3.5% to 3.75% in the upcoming meeting [13]