Federal Reserve cuts interest rates in 2025 amid cooling job growth

The Federal Reserve made a decisive pivot in 2025, cutting interest rates three times even as inflation stubbornly refused to return to its 2% target. The reason: America’s job market quietly fell apart beneath the surface. Each cut was 25 basis points, enacted in September, October, and December, bringing the federal funds target range down to roughly 3.5%-3.75%. That’s the lowest level in nearly three years, and it marks a clear signal that the Fed decided job market weakness posed a bigger threat than sticky prices. The numbers behind the decision US nonfarm payroll growth averaged just around 49,000 jobs per month in 2025. To put that in perspective, the economy needs roughly 100,000 new jobs monthly just to keep up with population growth. This was the weakest year for job creation since 2020, excluding periods that were technically recessionary. The deterioration was gradual, then sudden. Monthly payroll gains declined from over 100,000 early in the year to the low tens of thousands, and in some periods dipped into negative territory after revisions. Fed Chair Jerome Powell acknowledged that official job statistics likely overstated actual growth by approximately 60,000 jobs p...