Market Update: September 8th, 2025

Financial Markets

It was an important week for jobs data, with signs of continued softening in the labor market. Even so, stocks held firm as investors looked ahead to a likely rate cut later this month. In the shortened week, two of the three major U.S. indexes advanced, with the Nasdaq Composite leading the way up 1.14%, followed by the S&P 500 with a 0.33% gain, while the Dow Jones Industrial Average slipped 0.33%.

Market News

August Jobs Report

The most recent jobs report showed continuing weakness in the labor market, with nonfarm payrolls rising by just 22,000 in August, well below the 75,000 expected. Job gains in health care were partially offset by losses in federal government and in mining, quarrying, and oil and gas extraction, while most other major industries saw little change.

The unemployment rate ticked up to 4.3%, the highest level since 2021. Average hourly earnings increased 0.3% for the month, up 3.7% year-over-year, providing modest real wage growth for households. The average workweek held steady at 34.2 hours for the third consecutive month. Markets interpreted the report as evidence of a softer labor market, which has raised expectations for potential rate cuts later this year, helping markets remain relatively positive despite the weaker economic data.

Source: The Bureau of Labor Statistics

ISM Manufacturing

The US manufacturing sector contracted for the sixth straight month in August, with the ISM Manufacturing PMI registering 48.7%, slightly above July’s 48.0% reading. While new orders grew for the first time after six months of decline, production and employment continued to contract. Supplier deliveries slowed, inventories remained tight, and prices continued to rise, though at a slower pace than July.

Overall, the data indicates modest improvement in demand during August but continued weakness in the manufacturing sector as a whole, particularly as there remains a lot of uncertainty around tariff policies and global trade dynamics.

Source: The Institute for Supply Management

ISM Services

The services sector expanded for the third consecutive month in August, with the ISM Services PMI at 52%, well above the 50% neutral level. Business activity and new orders showed notable strength, however, employment remained in contraction territory for the third straight month, registering 46.5%, though slightly higher than July.

Backlogs of orders continued to contract, with the backlog index hitting its lowest level since May 2009, while prices remained elevated, though slightly lower than July. Overall, the services sector continues to expand modestly, supported by stronger business activity and new orders, but was tempered by weak employment and falling order backlogs.

Source: The Institute for Supply Management

Recession Indicators. Looking across several economic indicators, the trajectory of the U.S. economy remains uncertain. Our dashboard currently shows five bearish indicators, two neutral, and just one bullish reading, leaning the overall outlook toward the negative based on these indicators alone. However, the potential for meaningful rate cuts by year-end may provide enough stimulus to help offset some of the weakness.

Source: Synergy Asset Management

Among the recession indicators we track, the Anxious Index, a survey of professional forecasters on the probability of GDP declining in the next quarter (Q3), registered 22.8% in August, down from May’s 36.1%. While this represents some improvement, the reading remains historically elevated.

Source: Federal Reserve Bank of Philadelphia

Also central to the growth picture are the dynamics between fiscal and monetary policy. On the fiscal side, recent legislation extending tax rates reduces some uncertainty by making provisions more permanent, though tariff policies could reignite inflationary pressures and weigh on growth in the near term. Discussions around reigning in government spending could also act as a drag on short term economic momentum. Monetary policy remains fairly restrictive, with the federal funds rate at 4.25%–4.50%, a historically high range when looking back at the last two decades.

Consensus expectations call for a 25-basis-point cut next week (88.2% likelihood), with the possibility of another before year-end. Even modest easing could have an outsized effect given the broad reach of the benchmark rate, potentially cushioning the slowdown. Taken together, the mix of elevated recessionary indicators, policy uncertainty, and the prospect of rate cuts underscores the fragile balance the economy faces in the months ahead.

Source: CME Group FedWatch, as of 9/8/25

Summary

It was an important week for U.S. economic data, with reports pointing to a softer labor market and continued challenges in manufacturing. At the same time, the services sector showed modest strength, helping balance out the overall picture. These mixed signals, along with elevated recession concerns, have solidified expectations for a rate cut at the September FOMC meeting, and stocks largely held their ground last week as investors looked ahead to potential easing.

We appreciate your continued trust.

Thank you,

Joseph M. Maas,
CFA, CFP®, ChFC, CLU®, MSFS, CCIM, CVA, ABAR, CM&AA

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