Markets Hit Record Highs—Then Questioned Everything

The Federal Reserve cut its benchmark interest rate by 0.25 percentage points (a quarter-point) to a range of 3.75%–4.00% on October 29, marking the second consecutive reduction this year. The decision, approved by a 10–2 vote, reflects growing concern about the labor market, with the unemployment rate rising to 4.3% in August. Inflation remains elevated at 3.0%, above the Fed's 2% target. Chair Jerome Powell offered cautious guidance, stating that another rate cut in December is "far from certain," which tempered market-implied odds for an additional cut. The Fed also announced it will end quantitative tightening on December 1—the process of shrinking its bond holdings to drain liquidity from the financial system. I wrote a separate blog post on the Fed rate decision and how it impacts longer-dated bond yields and mortgage rates. Here is the link: Why Mortgage Rates Went Up When the Fed Cut Rates — Rhino Wealth Management.

The U.S. labor market is sending conflicting signals. With the ongoing government shutdown suspending Bureau of Labor Statistics operations, we’re without official employment data to cut through the noise. In the absence of government reports, we’re relying on private payroll data from ADP, which shows a modest recovery—an average of 14,250 weekly job additions through mid-October—following September’s 32,000-job loss.

Beneath that surface stability, however, there is disruption. Major corporations announced more than 172,000 layoffs in October alone, bringing 2025’s total to 1.12 million—the highest since the 2020 pandemic. Amazon eliminated 14,000 corporate roles, citing AI investments and organizational efficiency. UPS cut 48,000 jobs throughout 2025, driven by cost reduction and network consolidation. This wave likely signals the end of the “no hire, no fire” approach that characterized much of 2025, replaced by aggressive workforce reductions concentrated in technology, logistics, and retail.

The unemployment rate stood at 4.3% in August (the most recent data available), with long-term unemployment at a three-year high. Workers face an increasingly fragile employment landscape: job security has eroded even as headline statistics suggest stabilization.

In October 2025, S&P Global's survey of purchasing managers showed the U.S. economy growing at a solid pace. The overall index was 54.8, a three-month high and the 33rd month in a row above 50. (In this survey, a reading above 50 means growth.) Services led the way at 55.2, the second-best result of 2025. Manufacturing also improved to 52.2.

But the strong headline numbers hide some problems:

• Business confidence is the weakest in three years, largely because companies are unsure about future tariffs.
• Sales to other countries are slipping as trade disputes worsen.
• Many manufacturers are stuck with record-high inventories—products they've made but haven't sold.
• Hiring is soft even though production is rising.
• Costs remain high due to tariffs, but many companies are absorbing those costs instead of raising prices for customers.

Overall, growth is firm right now, but the mix—lower confidence, weaker exports, high inventories, and muted hiring—points to rising risks ahead.

The Conference Board's Consumer Confidence Index fell to 94.6 in October, down one point from September. This survey matters because consumer spending drives 70% of U.S. economic activity. The report shows a troubling split: the Present Situation Index rose 1.8 points to 129.3, while the Expectations Index dropped to 71.5—below the 80 threshold that signals recession risk for nine straight months. Americans feel stable about today but increasingly worried about the next six months. When consumers expect trouble ahead, they often pull back on spending, which can slow economic growth.