With help from Katherine Long

MIXED MESSAGES — We received some good and not so good news in the heaping pile of economic data dumped out by the federal government today.

In the spirit of the holiday season, let’s start with the good: Inflation is finally relenting. A little. It’s at least no longer running out of control. And the downward trend is pretty consistent.

It’s no longer risky to say that inflation has finally peaked because it pretty clearly did so in June. All the Federal Reserve’s super sized rate hikes since March appear to be finally working, at least a bit. And consumers are still spending in spite of higher interest rates, keeping any potential Fed-induced recession off stage for now.

Now for the not so good: Inflation is still way too high. Consumers are keeping up their spending by quickly drawing down savings built up during Covid and increasingly turning to credit cards to keep up with expenses.

And we are likely to get a November jobs number on Friday that confirms other signals that the red-hot jobs market is finally slowing down. (More on that in a moment.) But first, let’s dig into the inflation side of the story.

The Personal Consumption Expenditure price index (PCE), the Fed’s Holy Grail of inflation measures, ticked down to a 6 percent pace in October over the same time last year, down from 6.3 in October.

That’s good news and will likely allow the Fed to implement only a half-point rate hike at its meeting this month, rather than the hefty 0.75 point hikes at the last four meetings. If inflation keeps trending lower, the central bank could move to a quarter point hike in January and perhaps pause after that. Fed Chair Jerome Powell essentially telegraphed this approach at a speech at the Brookings Institution today.

But hold off the champagne-soaked yacht parties. Six percent inflation is still three times the Fed’s preferred rate. So Powell stressed that much more work remains. And even if the Fed does manage to stop rate hikes early next year, it may feel compelled to keep them high for an extended period of time to get inflation where they want it.

In addition, the Fed has had relatively limited success bringing down wage inflation in a tight labor market. Higher wages are generally a good thing, but not so much when they feed into companies passing those costs along in the form of higher prices.

The problem here is that there are just nowhere close to enough people in the labor market right now to fill open jobs, putting sustained pressure on wages.

On the consumer front, U.S. households kept the cash flowing in October with personal spending up 0.8 percent.

But a lot of that money is coming from savings, not better earnings. Because annualized wage gains of 5 percent are just now managing to match or slightly exceed the pace of core inflation.

After soaring during Covid, the personal-savings rate — what consumers have left over after monthly expenses — is down to the lowest level since 2008 and credit card debt is rising again. There is still around $1 trillion in excess savings lying around, but most of it is held by upper-income households.

And now to the jobs market portion of our program. Wall Street forecasters expect to see a very respectable gain of around 200,000 jobs, a drop from 261,000 in October with the jobless rate staying at 3.7 percent.

It’s possible the number could come in slightly higher than that, which would be a welcome sign that the labor market isn’t close to falling off a cliff as some fear as companies implement hiring freezes and, in some cases, layoffs.

A number much lower than 200,000 would be cause for concern, especially as the number of open jobs and the rate at which people are quitting are also dropping, though from highly elevated levels. Weirdly, drops in job openings, the “quits rate” and the employment numbers are good in the sense that they should ease wage inflation, a key Fed goal.

But they are certainly bad for President Joe Biden and Democrats from a political point of view. And it would be really bad if all the rate hikes trigger a significant recession, the jobs market collapses and we’ve all burned through our Covid-era savings. Don’t put that outcome on your holiday wish list. 

Welcome to POLITICO Nightly. Reach out with news, tips and ideas at [email protected]. Or contact tonight’s author at [email protected] or on Twitter at @morningmoneyben.

RESHUFFLING — Rep. Jim Clyburn (D-S.C.) was elected to a new House Democratic leadership position today by voice vote after facing a short-lived challenge from Rep. David Cicilline (D-R.I.), writes Nicholas Wu.

Cicilline had launched a longshot bid against Clyburn for the leadership position, but ultimately abandoned it today. In a moving speech at a closed caucus meeting, sources familiar with his remarks said Cicilline addressed ongoing discrimination and the fight for equality and added he received assurances from the incoming leadership that LGBTQ voices would be heard.

Clyburn, who’d previously been the third-ranking House Democrat, opted to exit the upper three positions of leadership to make way for a generational change as Speaker Nancy Pelosi and Majority Whip Steny Hoyer (D-Md.) announced they would step down. Though he had previously hinted for months at moving aside from leadership completely to fill an emeritus role in the party, Clyburn’s decision to instead seek a position in the upper tier of leadership forced Democrats to reshuffle their positions to make room.

— Virulently antisemitic comments by Ye spark new GOP criticism: A virulently antisemitic interview with Ye by right-wing conspiracy theorist Alex Jones is sparking new GOP condemnation of the rapper formerly known as Kanye West, nine days after Ye brought a white supremacist to dine with Donald Trump. Ye appeared on Jones’ “InfoWars” show with Nick Fuentes, his guest during the Trump dinner — a known racist and antisemite — and made a host of antisemitic comments with his face covered by a black mask, repeating the lie that the Holocaust did not happen and praising Adolf Hitler.

— Michigan poised to replace Iowa as early Democratic presidential state: Michigan is poised to replace Iowa as an early Democratic presidential nominating state, upending the current primary lineup and breaking with a half-century of precedent. Biden signaled to Michigan Democrats during his trip to the state this week that he’d bless their bid to hold their primary in the early-state window in the future, according to a senior Michigan Democrat.

— Freight rail strike averted, after frenzied negotiations: The Senate voted today to avert a freight rail strike just days before crucial drinking water, food and energy shipments were set to be sidelined, after hurried talks in both chambers of Congress and a visit to the Senate from two of Biden’s Cabinet secretaries. Ultimately the Senate voted 80-15, with Sen. Rand Paul (R-Ky.) voting present, on a bill that would impose the terms of a contract negotiated among freight railroads and most of their unions in September. Four out of the 12 unions involved had been holding out for additional paid sick days, making a strike possible as soon as Dec. 9.

— Appeals court tosses Trump’s lawsuit over Mar-a-Lago search: A federal appeals court has acted to shut down an outside review of the Justice Department’s use of nearly 3,000 documents the FBI seized from Trump’s Mar-a-Lago estate in August. A panel of the Atlanta-based 11th Circuit Court of Appeals ruled unanimously that a district court judge erred both by granting Trump’s request to block investigators’ access to the records and in her decision to appoint a special master to assess Trump’s claims that some of the documents could be protected by executive privilege or other legal doctrines.

‘BEYOND COMPREHENSION’ — President Joe Biden used his joint news conference with French President Emmanuel Macron today to take shots at Vladimir Putin over the war in Ukraine, but also didn’t rule out meeting with the Russian leader, writes Kelly Garrity.

“The idea that Putin is ever going to defeat Ukraine is beyond comprehension,” Biden said. “Imagine them trying to occupy that country for the next two, five, 10, 20 years, if they could. If they could. He’s miscalculated every single thing he initially calculated.”

“It’s sick what he’s doing,” the president later added.

Though he said he has “no plans” to meet with Putin, Biden did not close the door entirely. He acknowledged that he is open to a conversation “if in fact there is an interest in him deciding he’s looking for a way to end the war.”

The news conference followed a lengthy bilateral meeting between Biden and Macron as part of a state visit by the French President. They said they discussed a range of issues, primarily Russia’s war in Ukraine, and both leaders came away from the meeting voicing strong support for Ukraine.

“We will never urge the Ukrainians to make a compromise which will not be acceptable for them,” Macron said, adding that “if we want a sustainable peace, we have to respect the Ukrainians to decide the moment and the conditions in which they will negotiate about their territory and their future.”

‘DISASTER’ ZONES — Texas counties, many along the U.S. Mexico border, are increasingly adopting resolutions that declare “disasters” as migrants continue to come into the United States from Mexico. These resolutions are largely symbolic, but show that local Texas officials are trying to highlight what they see as a border crisis. Pooja Salhotra reports for The Texas Tribune.

PARTY CRASHERS — President Joe Biden will today host the first state dinner of his administration for French President Emmanuel Macron, after a years-long hiatus from the ritual that was imposed largely by the Covid-19 pandemic.

Biden is doing his level-best to bring the tradition back in style. This year’s state dinner is a star-studded affair, with Grammy Award-winning artist Jon Batiste set to perform for a guest list full of Washington leaders. It’s the sort of party that — if you like dressing up in evening-wear, finding an open bar and potentially striking up a conversation with a member of the Cabinet — might be a hot ticket.

Nightly thought it would be interesting to ask one of the most infamous state dinner guests of all time what it’s like to attend such an exclusive event.

During President Barack Obama’s 2009 dinner hosting Indian Prime Minister Manmohan Singh, business owner and television personality Tareq Salahi and his then-wife Michaele bypassed two security checkpoints and mingled with Obama, Singh and other notable political players. Arriving in black tie attire, Salahi and his wife contended that their invitations had been lost. According to the White House, the two had not received an invitation.

Nightly’s Katherine Long called up Salahi to discuss state dinners, the controversy that gripped D.C. in 2009… and wine pairings.

“It was a wonderful honor to be invited, albeit it turned into a reality TV show drama,” Salahi, who maintains his innocence, said.

The former Real Housewives of D.C. star said that he and his wife had received invitations from Michele Jones, then-special assistant to the secretary of defense and White House liaison. Copies of email threads between Salahi and Jones obtained by ABC News showed that the Pentagon official had never formally sent them an invitation. Despite the conflicting narratives, Salahi described his experience as an “opportunity to be part of celebrating a bilateral relationship with whatever country that may be at the time.”

To be sure, state dinners are not all about the food, they are also a chance for an administration to signal its commitments to alliances and strengthen relationships. During a joint press conference this afternoon, Biden and Macron focused on their support for Ukraine, joint plans to transition to clean energy and the Inflation Reduction Act.

No one here at Nightly has plans to crash the party this evening — and our invitations must have gotten lost in the mail — so we can’t say for sure if that will be the topic of dinner conversation this evening as well.

We do know that the two leaders will dine on artisan American cheeses and butter-poached Maine lobster to celebrate the bond between the two countries. Former guest Salahi said he is excited to see which French American celebrities make their way to the red carpet.

The business owner also provided Nightly with some recommendations for the White House’s wine pairings.

Salahi suggested that the White House offer Angelina Jolie’s Château de Miraval rosé as an option, describing it as “one of the best rosés in the world next to the one I make.”