The US economy has a remarkable slowdown in mid-2025, whereby the growth of the sluggish domestic need, the subdued jobs and new tariff campaigns have an impact on inflation and general economic dynamics, according to a recently carried out analysis by UBS Global Research.
Swiss bank’s US economic note found that real GDP in the first half of 2025 only grew 1.2% of only 1.2%, a significant step back from the speed observed in 2023 and the early 2024th quarter.
The demand for work reacts in kind. The monthly growth of wage and salary statements without agriculture has slowed down. July recorded only 73,000 jobs – well under expectations and accompanied by considerable downward regulations for the previous months. The three -month average for jobs is now only 35,000 per month, which Michelle Bowman and governor Chris Waller from Federal Reserve describes as a “stand speed”. (Are both Bowman and Waller Prominent names replace the Fed chairman Jerome PowellA number that the Trump White House has extensively criticized.) The unemployment rate set itself at 4.25%, the highest level since 2021, and the widest level of the interruption of workers, which is called U-6, is also higher than a percentage point above the pre-pandemic level.
It is crucial that the Pingle team is more of a shrinking employment participation than a sudden immigration or a population shock behind the weaker growth of the employment population. “The decline in the employment rate rate has masked how much deposit actually takes place,” says the report, stating that several demographic groups, including black Americans and teenagers, have greater unemployment and falling participation.
The population growth specified by the budget survey is close to the previous year near the level of previous years – the claims that a stricter immigration significantly restricts the labor market. UBS finds that these statements by Jerome Powell contradicts: “Despite the chairman Powell’s statement at the press conference after the FOMC, the slowdown of immigration slowed down the population growth and thus does not happen to the growth of workers. Budget survey estimates that population growth does not slow down population growth. ”
The average working week remains subject and is 34.25 hours in July – the level 2019 and far from the “stretching” typical if the labor markets are close due to workers’ shortage. Industry -specific data show that work losses are not concentrated on sectors with large workers with a migration background, which believes that Slack is due to a weakened demand and does not support any supply restriction.
Customs duties and threaten further tariffs
After a number of negotiations and management campaigns, tariff policy is on the right track to become even more restrictive. The new suite of mutual tariffs, including an interest rate of 35% for Canadian imports (without USMCA-compliant goods) and in general, which affect almost 70 countries, will probably increase the average tariff rates (WATR) from around 16% to around 19% at the beginning of August. UBS estimates that this will deduct 0.1 to 0.2 percentage points from growth next year.
There are sectoral carve-outs, but since the EU is now exposed to a tariff of 15% in most exports to the USA-illuminated than originally proposed, but still a significant increase in ascent UBS is still a direct pressure on the prices for automobile, semiconductor, pharmaceuticals and more. President’s proposals to hit a tariff of 200% on pharmaceuticals will continue to be discussed, but would have massive effects if they are implemented.
In installment cuts on the horizon
In view of the evidence that both growth and labor markets become softer and that the tariffs can currently increase the core inflation of 2.8% of up to 3.4% by the end of the year, the Federal Reserve builds up to facilitate monetary policy. While the chairman Jerome Powell kept a possible September rate on the table, he offered little guidance and explained that the entirety of the incoming data will determine the next step. UBS claimed his expectation that the Federal Open Market Committee will reduce interest rates by 25 basis points in September and up to 100 basis points before the end of 2025.
Ultimately, the bank found that the US economy has a clear slowdown with the unfolding of 2025, whereby the domestic dynamics, the cooling growth and the shadow of higher tariffs further dampen the outlook. UBS researchers argue that the data show a delayed delay, not about a quetting of the offer, and that the Fed will probably act soon to pillow land.
For this story, Assets Used generative AI to help with a first draft. An editor checked the accuracy of the information before publication.
