by The Gould Asset Management Team
Note: This post is an excerpt from Gould Asset Management’s Economic and Market Review for the Third Quarter of 2025. The excerpt is posted here for the benefit of our blog subscribers.
US Economy Growing Despite Job Market Slowdown
The US economy expanded at a 3.8% annualized rate in the second quarter, rebounding from its 0.5% contraction in the first quarter. The economy maintained some of its momentum in the third quarter, with consumer spending increasing 0.5% in July and 0.6% in August.
The labor market, however, showed signs of stalling. The unemployment rate ticked up to 4.3%, and job growth slowed throughout the summer. Employers added only 22,000 jobs in August after averaging over 160,000 per month in 2024.
The manufacturing sector contracted for a seventh consecutive month in September. New orders and factory employment remained subdued as the industry continues to deal with the effects of tariffs.
Federal Reserve: One Cut, Continued Caution
The Federal Reserve lowered the federal funds rate by 0.25% to 4.00%-4.25% in September, its first cut in almost a year. Policymakers cited a softer labor market as justification for the move, despite ongoing concerns of stubborn inflation. The decision to reduce the rate was unanimous, although one member favored a larger reduction (by 0.50%).
Fed Chair Jay Powell offered no preset course to future interest rate decisions, saying that the committee was now in a “meeting-by-meeting situation.” Still, the latest Fed projections show a narrow majority of members expect two additional rate cuts by the end of the year, consistent with market forecasts.
Persistent inflation was the one notable change in the Fed’s latest round of economic forecasts. Officials penciled in higher inflation in 2026 (2.6%, up from 2.4%).
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