The week ahead begins with Martin Luther King Jr. Day, a moment that invites reflection not only on civil rights, but on how economic systems function – and malfunction – when opportunity is unevenly distributed. That reflection is not merely philosophical. A substantial body of economic research shows that discrimination and segregation impose real, measurable costs on economic output.
Economists have long argued that barriers faced by women and Black Americans distort occupational choice, weaken incentives to invest in human capital, and misallocate talent away from its most productive uses. Quantifying those effects, research by Hsieh, Hurst, Jones, and Klenow estimates that declining barriers to opportunity for women and Black Americans accounted for roughly 15-20% of growth in U.S. output per worker since 1960. In other words, discrimination was not just inequitable – it acted as a persistent drag on growth, suppressing GDP by trillions of dollars over time. Other work shows that racial segregation and labor-market discrimination reduce earnings, employment, and educational attainment in ways that compound across generations, further lowering economy-wide output. Put differently: inclusion is not just a moral imperative; it is a growth strategy. When large segments of the population are prevented from fully participating in the economy, the entire economy underperforms.
That theme – an economy whose headline numbers can mask deeper structural imbalances – runs through this week’s data as well.
The economic calendar itself is relatively light, but the releases we do get will help clarify how growth, housing, and inflation are evolving as we head into 2026. The key reports are December pending home sales and the delayed November personal income, personal spending, and PCE inflation data. None are likely to change the macro narrative outright, but all will sharpen it.
Housing: affordability helps, seasonality still bites
The December pending home sales report should be interpreted through a seasonal lens, and it is worth being explicit about what “seasonality” means in housing markets.
Housing activity reliably slows at the end of the year for reasons that have little to do with interest rates or demand fundamentals. Cold weather in much of the country reduces showings and discourages moves. Christmas, year-end travel, school breaks, and holiday spending shift household attention away from buying and selling homes. Listings decline, showings drop, and fewer contracts are signed – even in years when affordability or demand is improving.
Against that backdrop, Zillow data show that housing affordability improved meaningfully at the end of 2025, with typical monthly mortgage payments down more than 5% from a year earlier. That improvement matters. Lower payments expand the pool of qualified buyers and help stabilize demand at the margin, especially for first-time buyers who are most sensitive to monthly costs.
The Zillow data also capture the seasonal slowdown clearly. Newly pending listings fell sharply on a month-to-month basis in December, a pattern that repeats every year. Importantly, however, activity still ran modestly above year-ago levels, suggesting that improved affordability is providing a floor under demand even if it cannot fully overcome the calendar-driven slowdown in activity.
This is also where measurement matters – and why waiting for the National Association of Realtors’ pending home sales index can sometimes obscure what is already visible in the market.
Zillow’s housing indicators are based on hard counts of observed behavior: listings entering the market, homes going under contract, and buyer engagement occurring in real time on its platform. These data reflect what actually happened, not what respondents believe happened or expect to happen.
By contrast, the NAR pending home sales index is survey-based, relying on responses from real estate professionals to estimate contract activity. While valuable for historical continuity, survey data are inherently noisier, subject to response bias, and often revised as more information becomes available.
That distinction is especially important right now. When activity is already suppressed by holidays and weather, hard-count data provide a more stable and complete read of underlying demand. The NAR data remain useful as confirmation, but by the time they are released, much of the story has already played out in higher-frequency housing indicators.
The takeaway is straightforward: a month-over-month decline in pending sales in December would not signal renewed weakness. It would largely reflect seasonal effects that recur every year. The more meaningful signal is the year-over-year comparison, which is likely to look firmer than earlier in 2025 as affordability conditions gradually improve and carry into the spring selling season.
Income and spending: steady on the surface, uneven underneath
The delayed November personal income and spending report will arrive against a mixed but increasingly familiar macro backdrop.
The labor market has cooled, but it has not collapsed. Layoffs remain low, consistent with still-tight labor markets in some sectors. At the same time, hiring has slowed, limiting upside in aggregate income growth. This “low-fire, low-hire” environment tends to stabilize employment levels while dampening momentum in wages and total income.
That makes a strong acceleration in personal income unlikely in November.
Spending, however, likely tells a different story. November marked the beginning of the holiday shopping season, and private-sector data suggest consumers continued to spend, even as income growth softened. That combination points to downside risk to the personal saving rate, particularly if households relied on credit or drew down accumulated savings to maintain consumption.
But the most important nuance comes from who is doing the spending.
U.S. consumption has increasingly become K-shaped. The top 20% of households by income-those earning roughly $175,000 or more per year-now account for nearly 60% of total personal outlays, the highest share in data going back to 1989. Much of the increase in spending concentration occurred during periods of strong asset-price appreciation, including the late 1990s and the post-pandemic era, when equity values surged.
This matters for interpreting the personal spending data. Aggregate consumption can look resilient even as large portions of the population experience financial strain. An economy that relies heavily on high-income households-whose spending is tied closely to stock market performance-can appear stable right up until asset prices or confidence falter.
In other words, strength in headline consumption does not necessarily signal broad-based economic health.
Inflation: PCE data will help, but it won’t fully clean up the noise
The November Personal Consumption Expenditures (PCE) inflation report will also draw attention, particularly after recent CPI data appeared softer than expected.
Conceptually, PCE inflation is a broader and more flexible measure than CPI. It uses a chain-weighted methodology that accounts for changes in consumer behavior and covers a wider range of expenditures. For that reason, it is the Federal Reserve’s preferred inflation gauge.
However, it is important not to overstate its precision in this release. PCE inflation relies heavily on CPI and PPI inputs, and earlier CPI data were affected by data-collection disruptions that introduced downward bias. As a result, some of that noise can carry through into the PCE estimates.
That means a soft November PCE print would be directionally encouraging – but not definitive. Policymakers and markets will need several clean readings before concluding that inflation pressures are decisively fading again.
Putting it all together
This week’s data are unlikely to shift the macro narrative on their own, but they do sharpen the contours of the current expansion.
Housing activity continues to stabilize as affordability improves, even as predictable seasonal forces suppress December contract activity. Consumer spending remains resilient in aggregate, but that resilience rests increasingly on higher-income households and asset-market performance rather than broad-based income growth. Inflation readings may continue to look softer, but measurement issues mean policymakers and markets should be careful not to over-interpret a single print.
The economy is still growing, but it is doing so in a more uneven and fragile way – one that leaves it increasingly sensitive to labor-market momentum, financial conditions, and confidence as we move deeper into 2026.
