A '‘wobbly’ labor market, declining consumer confidence, and the first federal government shutdown since Dec. 2018 are among the significant issues facing the U.S. as it enters the final quarter of 2025. Whether any of these concerns has a major impact on stock markets, economic growth, and holiday sales remains to be determined in the weeks ahead.

U.S. stock market indicators were solid in Q3. The S&P 500 rose by 7.9 percent (+10.2% in Q2) and the Dow Jones Industrial Average grew by 4.3 percent (+5.0% in Q2). But the NASDAQ Composite was flat after increasing by more than 16 percent in the prior period. The economy grew by an average annualized rate of 1.8% in H1 despite persistent inflationary concerns among consumers and tariff trepidations among companies and retailers alike. For example, Nike hiked its estimated annualized tariff impact by 50 percent to $1.5 billion.

As the nation’s children returned to classrooms all over the country, consumer confidence declined sharply in September.  The Consumer Confidence Index dipped to 94.2 in Q3’s final month, its lowest level since April, according to the Conference Board.

Just as those in some circles expressed heightened concerns that any hiring slowdown could fuel inflation and recession fears, the U.S. government ground to a halt on Oct. 1. There is mounting concern that the first federal shutdown in seven years, if prolonged, could make it difficult for policymakers to steer the economy into 2026. Besides some lost economic activity, a government shutdown could also further erode consumer confidence.

But many economists suggest that any short-term stock market losses prompted by a federal shutdown are usually regained in subsequent quarters.

For sure, the economy needs further robust spending on goods and services, like what occurred in Q2, to bolster below-trend GDP forecasts for 2025 and 2026. Deloitte is forecasting 1.8% GDP growth this year, slowing to 1.4% in 2026. The Organization for Economic Co-operation and Development (OECD), meanwhile, is predicting 1.8% GDP growth in 2025 but only 1.5% next year due to higher tariffs and reduced net immigration.