U.S. Economy: October 2025 Economic Report Reveals Late‑Cycle Cooling

1. Executive Summary

October 2025 economic indicators present a picture of an economy with mixed, late‑cycle signals. Because the Bureau of Labor Statistics was unable to collect October labor data during the government shutdown, the last available national unemployment rate is the September reading of about 4.4 percent, and official October figures will be released alongside the November report. Private‑sector hiring was soft: the ADP National Employment Report showed that employers added roughly 42 000 jobs in October, suggesting hiring remained subdued. Manufacturing continued to contract; the ISM Manufacturing PMI ticked up slightly to 48.7 percent in October but remained below the 50‑percent threshold that separates expansion from contraction.

Meanwhile the Treasury yield curve stayed positive: the ten‑year note averaged about 0.54 percentage points higher than the two‑year note across October, indicating a normal but flattened curve. In sum, the economy is still expanding but momentum is slowing as hiring softens and factory activity remains weak.

2. Labor Market: BLS vs ADP

The government shutdown prevented the Bureau of Labor Statistics from collecting October labour‑market data, so a direct comparison between BLS and ADP is not possible. The most recent official unemployment rate, from September 2025, stood at 4.4 percent, a modest increase from 4.3 percent in August. In contrast, ADP’s October report estimated that private‑sector employers added around 42 000 jobs. Gains were concentrated in education and health services as well as trade, transportation and utilities, while goods‑producing industries such as manufacturing continued to shed workers. Taken together, the available information suggests that hiring is slowing but not collapsing. Analysts will look to the delayed Employment Situation report in mid‑December to confirm whether unemployment rose further or stabilized.

3. Yield Curve Analysis

Treasury yields in October 2025 signalled a normal, though flat, yield curve. On average during the month, the difference between ten‑year and two‑year Treasury yields was about 0.54 percentage points, reflecting a modest premium for longer maturities. The positive spread indicates investors still expect moderate growth and inflation rather than an imminent downturn. However, the curve remains much flatter than in typical expansionary periods, and a sustained narrowing or inversion would be a warning sign. For now, the yield curve points to cautious optimism but underscores that growth expectations are subdued.

4. Manufacturing and Business Activity

The ISM Manufacturing PMI registered 48.7 percent in October 2025, up slightly from the prior month but still below the 50‑percent threshold that signals expansion. This reading marked the eighth consecutive month of contraction for factory activity. Respondents reported ongoing weakness in new orders, continued reductions in employment and elevated input prices, while production was supported by working through order backlogs. Only a few manufacturing industries showed growth; most faced slumping domestic and export demand. The October PMI thus confirmed that U.S. manufacturing remained in the doldrums even as the pace of decline eased marginally.

5. Integrated Economic Outlook

Piecing together these indicators portrays an economy entering the late stages of expansion. With official October labour data unavailable, the last unemployment reading of 4.4 percent and ADP’s modest job gains suggest the labour market is beginning to lose momentum but remains relatively tight. The manufacturing sector is contracting, as evidenced by an October PMI of 48.7 percent and reports of weak new orders and ongoing job cuts. The yield curve remains positive but flat, with an average ten‑year minus two‑year spread of roughly 0.54 percentage points, implying moderate growth expectations. Collectively, these signals point to an economy still growing but slowing, characteristic of a late‑cycle environment where businesses and consumers turn more cautious.

6. What to Watch Next Month

• The Bureau of Labor Statistics will release combined October and November Employment Situation data in mid‑December; watch whether the unemployment rate moves higher or holds steady.

• Compare ADP’s November employment estimate to the forthcoming BLS data to gauge consistency in private‑sector hiring trends.

• Monitor the manufacturing PMI for signs of stabilisation around the 50‑point threshold or renewed decline, which would indicate whether factory activity is bottoming out.

• Watch the ten‑year minus two‑year Treasury yield spread for signs of steepening, which would suggest improving growth expectations, or renewed flattening, which would amplify slowdown concerns.

• Track consumer spending through holiday retail sales and other high‑frequency indicators, as household demand will be a key driver of overall economic momentum heading into early 2026.