As 2025 stretches into its final months, only the most steadfast economic optimists remain undeterred. The turbulence of spring’s tariff disputes and summer’s sluggish growth spurt has left confidence shaken. Those faint glimmers of hope that survived took another hit this September when the Bureau of Labor Statistics reported weak employment figures for the second consecutive month. Over June, July, and August, the U.S. added fewer than 30,000 jobs on average—a sobering reality check.
Bond markets have reflected the unease. Yields on Treasury bonds have fallen by 0.2 percentage points in the last two weeks, as jitters over slowing growth and a weakening labor market spread. The Federal Reserve, when it meets on September 17, is all but certain to cut interest rates. Additional reductions are likely in October and again in December. The rate cuts President Trump has long demanded are finally arriving, albeit for reasons far less celebratory than he envisioned.
But is the current pessimism overblown? Undeniably, growth has slowed. Yet, a closer look at the data offers reasons for cautious optimism. While the slowdown is real, it has been relatively modest and shows signs of stabilizing. The 1.4% annualized GDP growth recorded in the first half of the year, while underwhelming by American standards, would be a pleasant surprise in Europe. Over the past year, GDP growth has averaged 2%, which remains solid by global benchmarks.
Americans, for their part, are still spending. Real household consumption edged higher in July, recovering from a sluggish start to the year. Indicators of activity in the services sector suggest a similar upward trend, and retail sales have remained resilient throughout 2025. The Atlanta Fed’s GDP tracker projects that core components of the economy—private spending and investment—are on pace to grow by over 2% annualized in the third quarter. Meanwhile, stock markets continue to hit record highs, both reflecting and fueling the surprising strength in parts of the economy.
Those grim job numbers, while concerning, may not be as dire as they seem. Slow job growth is problematic if population growth is robust, but far less so when demographic expansion is stagnant or shrinking. The key question is the impact of President Trump’s crackdown on immigration. Early data suggests it has been substantial. The Congressional Budget Office recently slashed its estimate for net migration in 2025 from 2 million to just 400,000. Other think tanks, such as the American Enterprise Institute and Brookings Institution, estimate net migration to be between -500,000 and 100,000. Customs and Border Protection reported only 8,000 encounters with illegal migrants at the southern border in July, down sharply from 100,000 in July 2024 and nearly 200,000 in July 2023.
Slower population growth reduces the “breakeven” rate of job creation—the level required to maintain a stable employment rate. Jed Kolko of the Peterson Institute for International Economics calculates that just 90,000 new jobs per month would suffice under last year’s population estimates. With the CBO’s revised migration numbers, that figure falls to 50,000. If net migration turns out to be zero, the breakeven number slips below 30,000—right in line with the current numbers.
The labor market is softening, but it is far from collapsing. Unemployment remains at 4.3%, well below the highs of the 2000s and 2010s. Two of the best indicators of labor-market health—the ratio of job openings to unemployed workers and the rate of voluntary job quitting—suggest the market is as robust as it was in the late 2010s.
The U.S. economy’s resilience owes much to its underlying strengths. And while uncertainty loomed large this summer—after the chaotic “Liberation Day” and subsequent tariff disputes—stability is slowly returning. The outlines of America’s import-tax regime are clearer, and tariff revenues, after spiking, have stabilized. Measures of economic uncertainty, while still elevated, have begun to retreat.
Even with the Fed preparing to cut rates, there are few signs that monetary policy has been overly restrictive. Banks remain willing to lend, corporate bond spreads are narrow, and inflation sits comfortably above the Fed’s 2% target. Whether or not a series of rate cuts is prudent, they will inject additional fuel into an economy that has proven more resilient than many expected.
For now, the bulls may still have a case.