UBS On-Air: Market Moves Top of the Morning: State of the U.S. economy & Fed monetary policy
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Oct 3, 2025 Join Paul Hsiao, an expert Asset Allocation Strategist at UBS, as he navigates the intricate landscape of the U.S. economy. He dissects the impacts of the ongoing government shutdown on economic activity and consumer confidence. Hsiao also reveals concerning trends in the labor market, highlighting weakening job growth and alternative indicators. With insightful predictions for Fed monetary policy, he anticipates rate cuts into 2026, emphasizing significant personnel changes at the Fed and their implications for the market.
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Labor Market Softness Confirmed
- Job growth has been weakening and private indicators like ADP confirm labor-market softness.
- Forecasters expect continued softness, which has pushed the Fed toward easing this year.
Shutdowns Weigh On Real Activity
- Markets often 'look through' short shutdowns, but real economic measures can weaken quickly.
- A prolonged shutdown deepens weakness as furloughed workers face pay uncertainty.
Consumption Is Keeping Growth Alive
- Consumption remains strong and accounts for about three quarters of US GDP, supporting growth despite labor weakness.
- Atlanta Fed's GDPNow tracked near a 4% annualized Q3 pace, implying above-trend output.