Lido Market Updates

8 September 2025

Monday Market Minute | 09.08.2025

By Candice Richardson, CFA, Investments & Analytics
Sergio Dueñas, CFA, Investments & Analytics
As of 9.5.25 | Source: Factset
As of 9.5.25 | Source: Factset

Market Update 

Last week, markets digested a series of economic reports that signaled a cooling in activity from manufacturing to hiring. On Tuesday, U.S. factory activity as seen in the ISM manufacturing index contracted in August, reflecting weaker demand and reduced production as higher import duties weighed on output. On Wednesday, job openings had fallen to a 10-month low, suggesting hiring is slow and unemployed workers face longer job searches. The labor market picture deteriorated further on Friday as unemployment rose from 4.2% to 4.3%, and the three-month average pace of job growth slowed to just 29k, compared with 105k previously. This softer tone prompted markets to price in the likelihood of three Fed rate cuts before year-end. Looking ahead, Thursday’s CPI release is expected to show a pickup from 2.7% to 2.9% YoY. ISM and PMI surveys highlight building price pressures from imports, though the full tariff impact may take longer to emerge as inventories are drawn down and higher intermediate costs ripple through supply chains. While stronger prints are likely in coming months, the adjustment may prove more gradual than initially assumed. This dynamic could complicate the Fed’s task, with inflation expectations still elevated but labor market risks remain the near-term priority.

 

Labor Market

The August jobs report reinforced the picture of a labor market that has been gradually cooling, with nonfarm payrolls up just 22k and the unemployment rate rising to 4.3%, the highest since 2021. Government employment fell 16k, driven by federal and state losses, while the private sector added 38k as service industries (+63k) offset a 25k decline in goods-producing jobs, including a fourth straight drop in factory employment. Healthcare and social assistance contributed +47k, though at their weakest pace since early 2022. Male employment declined by 38k, while professional services, finance, and information also slipped, raising concerns that AI and automation could be restraining white-collar hiring. The average workweek held at 34.2 hours, near cycle lows, and wage growth remained steady at 0.3% mom or 3.5% annualized, with production workers still outpacing the average at 3.9%. The household survey showed a further rise in slack: employment rose 288k but unemployment increased by 148k, entirely from those jobless for less than five weeks. This pushed the probability of job loss to 1.8%, a post-pandemic high, while the job losers-to-leavers ratio continued drifting upward, signaling early signs of more involuntary separations. The U-6 underemployment rate climbed to 8.1%, while labor force participation ticked up to 62.3%, led by prime-age workers. Overall, the report underscores a job market still expanding at the margins but increasingly fragile, with gains narrowly concentrated in healthcare and labor supply growth running ahead of job creation.

 

ISM

U.S. factory activity contracted for the sixth straight month in August, with the ISM manufacturing index at 48.7 compared to 48.0 in July, underscoring ongoing weakness from tariffs and soft demand. Factory output slipped back into contraction at 47.8, while employment remained among the weakest post-pandemic levels. A bright spot came from new orders, which expanded for the first time this year at 51.4, and input costs eased as the prices paid index fell to its lowest since February. Still, 10 industries, including paper, wood, plastics, and transportation equipment, reported contraction, and survey comments consistently pointed to tariffs raising costs, pressuring margins, and driving layoffs. While consumer spending remains resilient, with July posting its fastest growth in four months, ISM noted that roughly 69% of manufacturing GDP is in contraction, highlighting a sector still under strain despite early signs of stabilization.

 

 

Sources:  

https://www.bloomberg.com/news/articles/2025-09-02/us-manufacturing-activity-contracted-in-august-for-a-sixth-month

https://markets.jpmorgan.com/jpmm/research.article_page?action=open&doc=GPS-5072562-0

https://markets.jpmorgan.com/jpmm/research.article_page?action=open&doc=GPS-5075581-0

https://www.bloomberg.com/news/articles/2025-09-04/stock-market-today-dow-s-p-live-updates?srnd=phx-markets

https://www.bloomberg.com/news/articles/2025-09-05/us-employers-add-just-22-000-jobs-unemployment-rate-rises?cmpid=eveus&utm_medium=email&utm_source=newsletter&utm_term=250905&utm_campaign=eveus

https://www.bloomberg.com/news/articles/2025-09-04/trump-signs-order-cementing-deal-with-japan-setting-15-tariff

https://markets.jpmorgan.com/jpmm/research.article_page?action=open&doc=GPS-5075569-0

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