NewYork – US
A new economic update from Interactive Brokers has painted a cautious picture of the U.S. economy, noting a more significant slowdown than anticipated in the first quarter of 2025. The report, which highlighted rising unemployment and weak wage growth, is fueling speculation that the Federal Reserve may cut interest rates as early as September.
According to the report, the U.S. economy contracted at an annualized rate of 0.5% in the first quarter, a sharp reversal from the 2.4% growth seen in the last quarter of 2024. This downturn was largely attributed to a surge in imports, as businesses reportedly stockpiled goods ahead of expected tariffs, which dragged down the overall GDP calculation. While second-quarter GDP rebounded to 3.0%, the average growth for the first half of the year remains mediocre.
The labor market is a central concern. The report notes that the unemployment rate has risen to 4.24%, and the average number of monthly job gains has fallen significantly in 2025. This weakness is compounded by weak wage growth, which is further weighing on consumer spending. The Federal Reserve has previously indicated it would be monitoring the labor market closely, and this data has increased the likelihood of a policy change.
Market analysts are now pricing in a high probability—as much as 85%—of a quarter-percentage-point rate cut at the Federal Reserve’s September meeting. This is a significant shift in expectations, as a week prior, a cut was considered less likely. The dismal jobs report for July, which saw a major downward revision to prior months’ hiring data, has been a key factor in this change. While inflation due to tariffs remains a risk, the weakening labor market is strengthening the argument for the Fed to ease monetary policy and support economic growth.
The report also noted that companies are feeling the pressure of trade policy uncertainty, which is delaying investment and product launches. This, along with a slowdown in consumer spending, will likely put additional pressure on the Fed as it considers its next steps.
