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Rate Cuts During A Recovery?!?
The Macro Institute's Weekly Economic Primer
The Macro Institute
September 29, 2025
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It’s our favorite data week of the month. The first week typically brings both the ISM indices and the widely followed payroll report. While Friday’s jobs number will grab headlines, the ISM surveys are the real tell. Their sub-components have long been some of the best leading indicators for payroll trends, and right now they aren’t signaling a rebound in employment anytime soon.
Also on deck this week are pending home sales (today) and consumer confidence (Thursday). These series give us two more pieces of the puzzle for gauging the health of the economy.
The Macro Week In Review
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The Macro Week Ahead
✂️ Rate Cuts During A Recovery?
The Citigroup Economic Surprise Index moved sharply higher last week on stronger-than-expected economic data. The Atlanta Fed’s GDPNow forecast for Q3 currently stands at 3.3%. Core PCE registered 2.9% in August, while consumption also exceeded expectations. With 100 bps of stimulus from 2024 still working its way through to leading indicators, these strong results hardly suggest an economy in need of the additional monetary easing delivered two weeks ago.
Despite the cut, the Fed Chairman emphasized that the policy path remains highly uncertain. That cautious tone drove bond yields higher and tempered expectations for further cuts in 2025.
This week’s data will be critical. Bulls want further weakness in labor markets to justify continued easing. However, if job openings, payrolls, and unemployment figures surprise to the upside during the current inflationary backdrop (125 bps of total stimulus in the pipeline), then yields could rise further, equities could struggle, and the Fed may be forced to reverse course.
For now, we don’t think we’ve reached that point. Payroll trends tend to lag ISM Employment data, which suggests that labor markets won’t bottom until early 2026 at the earliest.
📆 The Week Ahead
This is a packed week, with jobs data and ISM reports front and center.
Monday: Dallas Fed Index. Regional surveys have been uneven, but the S&P Global Manufacturing PMI at 52.0 signals modest growth. Survey commentary continues to flag tariffs and labor shortages as key drags on capacity utilization.
Tuesday: JOLTS Job Openings. Expect the “slow to hire, slow to fire” dynamic to continue. Although near-term labor market conditions remain strained, demographics and immigration could cushion the longer-term slowdown.
Wednesday: ISM Manufacturing Index (consensus is 49.3, just under the contraction threshold) and ADP’s September survey, which may garner more interest than normal given the controversies around the official Payrolls report. Also, keep an eye on jobless claims, which are up this year, but last week hinted at a potential trough.
Friday: Nonfarm Payrolls. Consensus calls for +50k jobs (vs. last month’s 22k) and unemployment steady at 4.3%. Revisions have been volatile throughout this cycle making the release more a barometer of market sentiment than a reliable GDP signal. We’ll be watching whether last month’s disappointing 22k figure proves to be an anomaly or a trend. Initial Claims have trended higher this year, implying short-term labor market weakness, but last week’s data hinted that a cyclical trough may be approaching.
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