October 21, 2025
Quarterly Outlook: Job Growth Slows in the Face of Strong Growth
The U.S. job market has cooled notably, with job gains slowing and consumer sentiment weakening, prompting the Federal Reserve to cut interest rates. Still, economic growth and consumer spending remain resilient, supporting a 3.8% annualized expansion in Q3 and keeping recession risks relatively low.
Main Takeaway
A cooling job market has shifted the conversation about the overall strength of the U.S. economy, prompting the Fed to cut interest rates. Job growth slowed sharply in Q3, averaging just 27,000 per month from May through August, though the unemployment rate has held steady at 4.3%. Despite softer labor conditions, economic growth has recently accelerated, while inflation has begun trending higher in recent months.
Top Risks
The job market is raising fresh concerns about the health of the U.S. economy. August added just 22,000 jobs, while payroll figures for May and June were revised sharply lower. Consumer sentiment is also weakening, with the University of Michigan Consumer Sentiment Index falling to 55.4 in September, its lowest since May and 21% below its level a year earlier. Meanwhile, inflation remains a concern, with recent readings trending higher.
Sources of Stability
The U.S. economy strengthened in Q2 and is on pace to expand at a 3.8% annualized rate in Q3. Consumer spending, which accounts for nearly two-thirds of GDP, remains resilient and is projected to rise 2.2% in Q3, supported by easing trade uncertainty and a more accommodative monetary stance. While job growth has cooled, unemployment remains low at 4.3%, and recession odds have fallen to 20%.
For our latest perspectives on markets and economic conditions, view our Quarterly Outlook report for Q4 2025.
Sources: Bureau of Labor Statistics, University of Michigan Surveys of Consumers, Atlanta Fed, CNBC, and Apollo Academy.
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