Take This Job and Shove It: Why the job market gave the Fed cover to cut rates
When country songs describe economic conditions perfectly
Shaded area represents recession, as determined by the National Bureau of Economic Research
The U.S. economy maintained a path of robust yet moderated growth throughout the third quarter of 2025, though beneath the surface, monetary policy underwent a critical pivot. Preliminary estimates suggested that U.S. GDP growth was tracking solidly, with some nowcasts indicating annualized growth potentially as high as 3.9% . This growth occurred despite a major policy shift by the Federal Reserve, which executed its first interest rate cut of the year in September. The central bank lowered the target range for the Federal Funds Rate to 4.0%–4.25%, signaling an intent to balance persistent, tariff-induced inflation risks with clear evidence of a cooling labor market. This shift in policy reassured markets that the Fed was prepared to support the economic expansion.
The cooling of the labor market was perhaps the most compelling economic signal of the quarter and a primary justification for the Fed’s pivot. The unemployment rate ticked up in August, and monthly non-farm payroll additions slowed significantly, pointing toward a decisive moderation in wage and employment pressure. Commodity markets delivered highly mixed quarter-to-date results: precious metals were the clear standout, with gold surging to a record high per ounce, driven by safe-haven demand amid geopolitical tensions and the prospect of lower real rates. Conversely, ample supply and reduced global demand kept the broad energy sector range-bound, resulting in crude oil prices registering a slight net decline for the quarter.
Overall, the combination of resilient corporate performance and the perceived benefit of monetary easing drove the U.S. stock market higher. The S&P 500 Index delivered a strong quarter-to-date gain of approximately 8.12%, pushing the index near its all-time highs as of the end of September and the MSCI ACWI was up approximately 7.5%. Investor sentiment was bolstered by positive earnings guidance, with estimated year-over-year earnings growth for the S&P 500 tracking at approximately. Technology, Materials, and Financials were particularly strong performers, suggesting that corporate fundamentals remained solid despite trade policy uncertainty. Focus now turns to the fourth quarter, with expectations of further rate cuts hinging entirely on the continued trajectory of the jobs market and inflation.
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