The Great Deceleration of late 2025
Wall Street is finally waking up. The Friday jobs report for October 2025 shattered the long standing myth of a soft landing. While 2024 was defined by resilient consumer spending, the data from November 7, 2025, tells a story of structural fatigue. Nonfarm payrolls grew by a meager 92,000 in October, falling significantly short of the 155,000 consensus estimate. This represents the third consecutive month of sub-100,000 growth, a threshold historically associated with the onset of economic contraction.
Cracks in the Service Sector
Service industries are bleeding. For two years, the service sector acted as the economy’s primary engine, but the October data reveals that professional and business services lost 14,000 jobs. This is not a seasonal fluke. According to the Bureau of Labor Statistics October Report, the quit rate has plummeted to 2.1 percent, its lowest level since 2020. Workers are no longer jumping for higher pay; they are hunker down. The leverage has shifted entirely back to the employer, and for the first time in five years, wage growth has slipped below 3.4 percent year over year, failing to keep pace with the localized inflation in housing and insurance.
Manufacturing Stagnation and the Tech Reset
Industrial output is stalling. The ISM Manufacturing Index for October came in at 46.8, marking its twelfth month in contraction territory. While the 2022-2023 narrative focused on supply chain bottlenecks, the 2025 crisis is one of demand. High capital costs have forced a 12 percent reduction in new equipment orders among mid-market firms. In the technology sector, the ‘AI Efficiency’ phase has moved from theory to execution. Companies like Amazon and Alphabet have shifted from aggressive hiring to ‘headcount optimization,’ using automated workflows to replace entry-level administrative and data-entry roles at a rate of approximately 4,000 positions per month.
Household Debt and the Wealth Gap
The consumer is exhausted. Total household debt hit a record $18.2 trillion in the third quarter of 2025. Credit card delinquencies for those aged 18 to 29 have spiked to 11.2 percent, the highest level since the Global Financial Crisis. The ‘excess savings’ of the pandemic era are gone, replaced by a reliance on high-interest revolving credit. This debt load is the primary reason the unemployment rate’s tick up to 4.4 percent feels more painful than the same number did a decade ago. Every 0.1 percent increase in unemployment now triggers a faster decline in retail spending than in previous cycles due to the lack of a financial cushion.
| Economic Metric | October 2024 Actual | October 2025 Actual | Variance |
|---|---|---|---|
| Nonfarm Payrolls | 210,000 | 92,000 | -56.2% |
| Unemployment Rate | 3.8% | 4.4% | +15.8% |
| Average Hourly Earnings (YoY) | 4.1% | 3.3% | -19.5% |
| Labor Force Participation | 62.7% | 62.2% | -0.8% |
The Federal Reserve’s Impossible Pivot
Jerome Powell is trapped. The November 7 market reaction suggests that investors are pricing in a 50-basis point cut for the December FOMC meeting, but the sticky core inflation rate, currently at 3.1 percent, prevents a rapid easing cycle. Per Bloomberg terminal data from November 8, the 10-year Treasury yield fell to 4.15 percent as investors fled to the safety of bonds, signaling a deep lack of confidence in equity markets for the coming quarter. The yield curve remains inverted, a persistent warning that the technical recession many predicted for 2024 may simply have been delayed until now.
The Sahm Rule has been triggered. Historically, when the three-month moving average of the unemployment rate rises by 0.50 percentage points or more relative to its low during the previous 12 months, a recession has already begun. As of November 9, 2025, we have met that criteria. The focus now shifts to the January 2026 earnings season, where corporate guidance will likely reflect the reality of a consumer who has finally stopped spending. Watch the Q4 retail sales data due in mid-January; if the holiday spend fails to grow by at least 2.5 percent, the 2026 contraction will be officially cemented in the history books.
