Analysts may not have necessarily digested this week’s lackluster labor data with glee—but it sure didn’t dampen their spirits either. Wall Street is hoping for a Christmas miracle with a final interest rate cut from the Fed, bringing the base rate down to 3.5% to 3.75%, and recent jobs reports may just have sealed the deal.
Investors’ expectations for a cut have been on a roller coaster in the final month of the year. Per CME’s FedWatch barometer, the likelihood of a cut only a matter of weeks ago was just 50%; it now sits just shy of 90%.
The Fed and the market are likely in the same boat: Analysts don’t know if the Fed is going to cut, because the Fed probably doesn’t know itself. Members of the Federal Open Market Committee (FOMC) are wrangling with conflicting pressures on their mandate: Inflation is at 3%, persistently above their 2% target and now solidly in the “sticky” category.
On the other hand, the labor market is on a knife edge. The unemployment rate has held relatively steady at around 4% thanks to a shrinking pool of talent, prompted by Trump’s immigration policy and a wave of retirees. However, job openings are fading fast, suggesting a moderate uptick in layoffs could tip the scales with more weight than usual.
Yesterday’s ADP jobs report didn’t help. The private data showed a surprise drop of 32,000 roles in November, with the report adding that pay growth has also been on a downward trend. “Hiring has been choppy of late as employers weather cautious consumers and an uncertain macroeconomic environment,” ADP chief economist Nela Richardson wrote in the report. “And while November’s slowdown was broad-based, it was led by a pullback among small businesses.”
Digging into the data, companies with between one and 19 employees axed 46,000 roles, while those with 20 to 49 employees cut 74,000. Conversely, companies with 500-plus employees added 39,000 employees.
Adding to the gloom was the latest jobs report from Challenger, Gray & Christmas, which revealed that through November, employers have announced 1,170,821 layoffs—an increase of 54% from the 761,358 announced in the first 11 months of last year. If those figures sound familiar, it’s because they’re pandemic-era bad: “Year-to-date job cuts are at the highest level since 2020 when 2,227,725 cuts were announced through November,” the career experts wrote. “It is the sixth time since 1993 that job cuts through November have surpassed 1.1 million.”
Bad news is good news
Wall Street won’t necessarily be rubbing its hands over the prospect of layoffs, but it will welcome a weaker macro outlook if it means that a rate cut will deliver a new round of cheaper money.
“The market shifted expectations after guidance from NY Fed President [John] Williams that he supported a rate ‘further adjustment in the near term,’” wrote Bank of America economists Aditya Bhave, Mark Cabana, and Alex Cohen in a note to clients this morning. “The Fed has not pushed back, and history suggests the Fed does not surprise hawkish. A December cut seems a forgone conclusion.”
“Data on the U.S. labor market continues to reinforce the case for easing, while inflation data shouldn’t stand in the way,” echoed Mark Haefele, UBS Global Wealth Management’s CIO. “Inflationary pressures appear to be moderating, as the ISM Prices Paid index fell to 65.4 in November, down from 70 in October, marking a seven-month low. Finally, although inflation is running around 1pp above the Fed’s 2% target, the personal consumption expenditures index—the Fed’s favorite measure—should show on Friday that price pressures are not intensifying.”
“Signs of weakness in the incoming lower-tier U.S. labor market data have been consistent with the market coalescing around a December Fed cut,” chimed Goldman Sachs in a note to clients this morning.
But the FOMC meeting next week won’t be plain sailing. In BofA’s opinion, Chair Jerome Powell will preside over “the most divided committee in recent memory.” Trump appointee Stephen Miran, for example, will likely once again advocate for a 50 basis point cut—in line with the reductions the White House has been lobbying for all year. A number of members are also expected to push for a hold, while the remaining majority will opt for a more minor 25 basis point revision.
“Turning to Powell’s press conference, we think he will attempt to strike a hawkish tone to placate the hawks,” BofA added. “We are skeptical this would work. Powell’s hawkish remarks in July and October jolted markets, but they didn’t stop the Fed from cutting. Investors might be wary of getting head-faked for a third time.”
Good morning. When experienced employees leave–whether they get laid off, or jump ship for a better opportunity–they take their years, if not decades, of experience with them. Over time, the company loses that institutional knowledge.
Nintendo, the Japanese video game giant, is an example. Its Japanese employees spend an average of 15 years at the company, which boasts a yearly retention rate of 98%. That’s not just better than the layoff-prone video game industry, it’s better than most of Japan. The average Japanese worker spends 11 years at their company; in the U.S., that number is closer to four.
“The people who first made Nintendo’s hits are still working at the company,” Keza MacDonald, the author of Super Nintendo, a forthcoming book about the developer, told me recently. “For the last 50 years, these people have been passing down knowledge and training up a new generation of Nintendo creatives.”
Both Nintendo’s business and creative leaders have long tenures at the company. Current president Shuntaro Furakawa joined the company in 1994 as an accountant. Shigeru Miyamoto, the brains behind franchises like “Super Mario” and “The Legend of Zelda,” joined as a staff artist in 1977.
There is a risk that companies that rely too much on institutional knowledge get stuck in their ways. Yet Nintendo, according to MacDonald, has combined institutional knowledge with fresh ideas to continuously replenish its pipeline of fun games: “It’s not like the oldest guy gets to decide what’s a good idea and what isn’t. Everyone puts ideas in.”
Nintendo has its share of flops, failed experiments, and puzzling business decisions–as does every firm. Yet the company maintains its share of the highly competitive video game industry against bigger, deeper-pocketed rivals like Sony and Microsoft.
The few designers who’ve left Nintendo still have fond feelings about their time there. As Lee Schuneman, a former Nintendo game designer and now Efekta Education Group’s chief product officer, told our Brainstorm Design audience this week, “I got to work with some of the most talented game designers in the world, including people like [Shigeru Miyamoto] at Nintendo, and [learn] a whole range of lessons about how to make playful experiences.”
That goodwill may be the result of Nintendo avoiding the industry’s boom-bust churn and valuing the expertise its workforce accumulates.
Nintendo “is still, to this day, making games differently from everyone else,” MacDonald says. You can check out the rest of our mainstage sessions from Brainstorm Design here.—Nicholas Gordon
The online streamer and the maker of the Superman and Harry Potter franchises are expected to announce a sale of Warner’s studios and HBO Max business to Netflix, the WSJ reports. Paramount Skydance chief David Ellison lobbied the White House against the deal even though Netflix offered a richer valuation, according to the New York Post.
“China’s Nvidia” stages IPO
Moore Threads, a maker of GPUs based in Beijing went public today at a valuation of $1.1 billion and its stock rose by 400% on day one.
$10 billion a week on U.S. national debt
The calendar year may have a few weeks left to tick off, but as far as the government’s budget is concerned, we’re in fiscal 2026. The Treasury has already paid out a 12-figure sum to service the nation’s debt. Unlike the tax and calendar year, the government’s financial calendar runs to the end of September. According to Treasury data, in the nine weeks since, it has spent $104 billion in interest on its $38 trillion borrowing burden. That’s more than $11 billion a week, and already represents 15% of federal spending in the current fiscal year.
Poor labor data may have locked in Fed cut
Analysts may not have necessarily digested this week’s lackluster labor data with glee—but it sure didn’t dampen their spirits either. Wall Street is hoping for a Christmas miracle with a final interest rate cut from the Fed, bringing the base rate down to 3.5% to 3.75%, and recent jobs reports may just have sealed the deal.
U.S. lobbied against E.U. seizing Russian money
American officials urged Europe not to use frozen Russian assets as the basis of loans that would fund Ukraine’s defense against Moscow’s invasion of its Eastern flank. The funds could be used as an incentive to end the war, Washington argued.
Analysts are publishing their notoriously unreliable annual stock market forecasts and this year nine investment banks are guessing that the market will rise about 10% in 2026.
The markets
S&P 500 futures were up 0.17% this morning. The last session closed up 0.11%. STOXX Europe 600 was up 0.18% in early trading. The U.K.’s FTSE 100 was up 0.19% in early trading. Japan’s Nikkei 225 was down 1.05%. China’s CSI 300 was up 0.84%. The South Korea KOSPI was up 1.78%. India’s NIFTY 50 is up 0.55%. Bitcoin fell to $91.4K.
After natural gas producer BKV expanded into the power business, the company went on its IPO roadshow two years ago and was met with suspicion and ridicule about its then-unusual business model. It’s rare—and uncomfortable for shareholders—for oil and gas producers to take over power plants that require very different skillsets. They’re both hydrocarbon industries, but drilling and extracting from the earth and producing electricity require completely different business models and technologies.
“I went to a very large institutional investor and explained our gas-to-power strategy in our business, and I got berated for like 30 minutes about how it was such a foolish thing for me to go into power,” BKV founder and CEO Chris Kalnin told Fortune.
Fast forward to today, and BKV’s stock has spiked 50% since going public in September 2024—rising from a small cap to a mid-market cap value of $2.5 billion. BKV is on the brink of making a deal with a hyperscaler to provide immediate gas-fired power to an AI data center campus and continue, according to analysts, before buying and building more power plants.
“It was a pretty controversial decision for us to buy power. It’s been, honestly, one of our best investments ever,” Kalnin said. “Hyperscalers need more generation. They used to talk about hundreds of megawatts. Now the conversations start with gigawatts. Can you give me gigawatts?”
“We’re going to have to build power plants. If they want gigawatt power, we’re going to have to add more power,” he said.
BKV was founded a decade ago in partnership with Thailand’s Banpu Power—BKV being short for Banpu Kalnin Ventures—so there was some built-in power expertise. After focusing on natural gas production, four years ago BKV started buying up two power plants in Temple, Texas—located between Austin and Dallas—which now provide a total of 1.5 gigawatts of electricity generation capacity—enough to power more than 1.1 million homes, or a major data center campus. There is room to expand.
BKV is in the process of increasing its ownership stake in the joint venture with Banpu from 50% to 75%—slated to close in the first quarter—to double down on the power business and to better disclose the financials to investors, now that BKV is public, Kalnin said.
Tim Rezvan, energy analyst for KeyBanc Capital Markets, said the new AI data center market is naturally finding its way to BKV and its power plants, as opposed to BKV chasing a boom from behind.
“It’s a lot of skill and a little bit of luck on top of that to take that power plant when they did,” Rezvan said. “They’re really in the catbird seat because they control these merchant power plants that can redirect power, in theory, the next day. The market is eagerly waiting to hear what’s going to happen with a potential, behind-the-meter deal with a hyperscaler.”
Despite BKV continuing to grow as a gas producer, Rezvan said the power segment is now a majority of the value of the stock and 90% of what investors want to talk about.
BKV also has one of the most advanced carbon capture and storage programs in the energy sector to deliver the power more cleanly, which may be especially inviting to Big Tech.
“The ability to deliver almost an carbon-neutral natural gas molecule—and then they can tie that in with the big hyperscaler—is a unique suite of services they can offer carbon-conscious consumers of power,” Rezvan said.
Birthplace of shale
An alum of McKinsey, Kalnin first connected to Banpu through that network. Banpu wanted to invest in U.S. shale gas after seeing the U.S. ship cheap natural gas to Asia in the early days of the shale boom.
The industry’s modern drilling and hydraulic fracturing, or fracking, techniques were pioneered in the Barnett Shale near Dallas, but those companies quickly fled the more mature Barnett to Louisiana’s Haynesville Shale, Pennsylvania’s Marcellus Shale and, eventually, West Texas’ oily Permian Basin.
As everyone was moving out of the Barnett, BKV bought in cheaply and, over time, became the dominant player there. “The Barnett was heavily undervalued relative to its risk,” Kalnin said. “The only way you find deep value is you see something that other people don’t see in the fundamental value. And so that’s the origin story of BKV.”
“Basically, all the players left the Barnett in that 2010 timeframe and went to other plays. Those plays have evolved how you fracked, and how you drill, and how you do directional drilling, and how you target [gas] zones. None of that technology was reapplied back to the Barnett,” he said. Now, BKV is taking those advanced drilling and fracking techniques and getting much more value from the Barnett than was believed possible, he said.
A lot of gas goes toward power generation, so Kalnin saw that as a natural extension. Borrowing on his McKinsey background, Kalnin said he sought to identify “mega trends” and take advantage. “It’s the idea of a glacier moving in a direction, and you can’t stop it. The idea is you want to get into that path or get the benefit from that trend. You’re not going to figure out all the nuances, but you’re going to get the direction correct if you think through it deeply.”
“Natural gas is the baseload of U.S. power, and not just as a bridging fuel, but actually as a core fuel for the future,” Kalnin said. “Most of the research at the time was showing that it was going to be all renewables. I called absolutely BS on that, and I said I’m going to double down on gas.”
Kalnin admittedly did not foresee the AI data center boom, but he did see the need for more power from population growth and greater electrification and manufacturing.
“We saw the trend,” he said. “And then, of course, the AI train has kicked things into high gear.”
What’s next?
BKV just expanded in the Barnett through a $370 million acquisition from Bedrock Energy Partners, and the company is launching another carbon capture project next year as part of its “Barnett Zero” emissions effort.
But the real focus is on power and attracting a hyperscaler. The pitch is for “closed-loop, net-zero power” from the gas fields and pipelines to the power plants and carbon capture.
“Not only do we have the power side, we can do the pipelines, we can do the gas, we can do the grid connection, we can do the whole thing soup-to-nuts in one company, and, by the way, we can decarbonize it with carbon capture,” Kalnin said.
“I can give somebody a fixed power price for 20 years because we can produce and sell the gas to ourselves and fix the gas price. Think about the ability to do that with a hyperscaler.”
Rezvan agrees. But, if BKV hasn’t signed a major power deal in the next six months or so, investors may start to get antsy.
“There will be some pressure to deliver,” Rezvan said. “The question is, why would a mega-cap tech company partner with a small energy company? The answer is because they have power right now. It’s not a greenfield project that would take many years. They could literally turn around and deliver that power in short order.
“This is a power-starved market. The ability to deliver on short notice is what gets them a deal I believe.”
The corporate world’s return to the office is in full swing. Employees across global companies like Amazon, JPMorgan and Goldman Sachs have been called back to the office five days a week. In early December, Instagram became the latest firm to announce a return-to-office mandate, with CEO Adam Mosseri justifying the move to boost employee “cooperation” and “creativity”.
Yet, many workers have dreaded the return to physical offices, and argued that hybrid work allows for flexibility without losing productivity. This presents a new post-pandemic challenge for workplace designers, who must now build attractive spaces to draw employees back to the office, said Ray Yuen, the office managing director at architectural firm Gensler.
“We’re no longer just designing workplaces, we’re actually designing experiences,” said Yuen, at the Fortune Brainstorm Design forum in Macau on Dec. 2. “You’ve really got to make the campus or the workplace more than work, and that’s the fun part of it.”
Citing results from a 2025 survey by his firm, Yuen said that when asked what makes for good workplaces, employees increasingly named factors such as food and wellness.
“They didn’t even mention anything about work—everybody just picked the stuff that we really want as human beings,” he added.
As such, workplace designers like Yuen need to think about how to reimagine modern offices. He pointed to a project Gensler worked on in Tokyo, Japan, for a company where 50% of its staff members had been working from home.
“We designed it [their office] with 15 different food offerings, including trying to bring Blue Bottle in. We ended up [also] designing a secret [vinyl] bar,” said Yuen.
Companies have also been seeking more transformable workspaces, Yuen added, and interior designers have responded by replacing built-in spaces with modular, removable furniture. “[This way,] you can transform a space when you need to, from an F&B [space] for the staff, to an events space or a happy hour space for your clients.”
The user needs for spaces are also becoming more complex, Yuen said. Airports, for instance, no longer serve as meagre transit hubs but are also places where travelers can work or rest.
Now, airports have “a lot more outdoor-indoor space [and] natural light, past the actual check-in area. Airport [experiences] used to be just you checking in, and sitting there, waiting,” the designer said. “It’s a destination, it’s no longer just a [place of] transit.”
As with other fields, artificial intelligence is also rewriting the playbook for designers.
Yuen recounted how some clients have pulled up visuals on AI image generators like Google’s Nano Banana Pro, before asking: “If they can do it in a second, why can’t design firms do it quicker?”
Many designers traditionally regard time and craftsmanship as core tenets of design, but AI is pushing them to change the way they work, Yuen said. Clients now want “immediate response, immediate gratification,” he continued.
“With AI, we’re now almost like a creator [of] all these art pieces, and we try to select what is suitable—that’s the only way we can manage that need from clients on speed and time,” said Yuen.
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