Company: NLY-PF
Filing Date: 2025-10-30
Form Type: 10-Q
Source: 0001043219-25-000012
Chunk: 7

Company: ANNALY CAPITAL MANAGEMENT INC
Filing Date: 2025-10-30
Form: 10-Q
Item: Part I, Item 2
Chunk 7
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 six months of the year. However, consumers – especially lower income consumers – seem cautious as low savings rates, a slowing labor market, and declining confidence appear to weigh on spending behavior going forward. Of note, nonresidential investment activity – particularly related to AI – rebounded in the third quarter while residential investment activity remained muted. 

The labor market continued to slow in Q3 2025. According to the Bureau of Labor Statistics, seasonally adjusted total non-farm payroll employment rose an average of 55,500 workers per month in the first two months of the third quarter, below the nearly 83,000 workers per month gained in the first half of 2025 or the nearly 168,000 workers per month gained in 2024. The unemployment rate has gradually ticked up, reaching 4.3% as of August – the highest reading since October 2021. Yet, the supply and demand for workers remained in balance with the ratio of job openings per unemployed at 0.98 in August, compared to 1.42 in December 2023. At the same time, wage growth, as measured by the year-over-year change in Average Hourly Earnings, dropped moderately to 3.7% in August from 3.9% at the beginning of the year.

Inflation readings, as measured by the year-over-year changes in the Personal Consumption Expenditures (“PCE”) Price Index, remain above the Fed’s 2% inflation target, and disinflationary progress has stalled. Total PCE prices over the 12 months ended in August increased marginally to 2.7% compared to the 2.6% recorded by the same metric in June. Core PCE inflation, which excludes volatile food and energy prices, also ticked up to 2.9% in August from 2.8% in June. While tariff-related inflation pressures have been uneven and overall lower-than-expected, the inflation trend has leveled off, driven by rising goods prices and sticky services prices. Moreover, the forecast for inflation remains uncertain due to the most significant increase in the effective tariff rate in decades, whose full impact has yet to materialize. 

The Fed conducts monetary policy with a dual mandate: full employment and price stability. Despite the slow progress on inflation, the FOMC cut the target range for the Federal Funds rate by 25 bps to 4.00% - 4.25% at their September meeting given the weakness in the labor market. Updated