In early September 2025, U.S. economic data once again captured market attention. Over the past week, U.S. labor market data showed signs of a continued slowdown, with the non-farm payroll report (NFP) taking center stage. Although the S&P 500 index briefly hit a record high, it subsequently experienced a significant correction, reflecting investor concerns about the economic outlook. Meanwhile, gold prices continued to rise, breaking through the $3,600/ounce mark, while global long-term bond yields, particularly 30-year bonds, showed an upward trend. These two major themes—a weak labor market and a sell-off in the bond market—are intertwined, highlighting macroeconomic uncertainty. This article, based on the latest data, provides an objective analysis of these phenomena and explores their potential impact. The analysis primarily draws on sources such as the U.S. Bureau of Labor Statistics (BLS), ADP reports, and global bond market dynamics. U.S. Labor Market: Slowdown Intensifies The U.S. labor market continued to show signs of weakness in August 2025, consistent with data trends over the past few months. According to the August non-farm payroll report released by the BLS, the U.S. added only 22,000 non-farm jobs, far below market expectations of 75,000. This figure not only fell short of expectations but also reflected a continued slowdown in job growth: July employment data was revised upward to 106,000, but June's revision showed a decrease of 13,000 jobs, the first negative growth since 2020. The unemployment rate rose slightly to 4.3%, a near four-year high, and the number of unemployed people remained around 7.4 million. Looking at broader indicators, the JOLTS (Job Openings and Labor Turnover Survey) data showed that job openings fell to 7.181 million in July, the lowest level since September 2024 and below market expectations of 7.4 million. This level is close to the pre-pandemic average, but considering US population growth, it means the current labor market is weaker than before the pandemic. The ADP private employment report also confirmed this trend: the private sector added 54,000 jobs in August, below the expected 65,000 and a significant decline from 106,000 in July. Regarding wage growth, the annualized wage growth rate fell slightly to 3.8%, while the average workweek shortened slightly to 33.7 hours. The industry distribution of job growth further reveals structural problems. According to BLS data, job growth over the past few months has been concentrated in healthcare and services, sectors benefiting from the demand of an aging population. For example, healthcare accounted for nearly 40% of total job gains, while manufacturing, retail, and construction saw job losses. The diffusion index shows negative employment growth in most sectors, suggesting that labor market weakness is not confined to specific sectors but rather a general lack of demand. Immigration may partially explain the increase in labor supply, but weak demand is more prominent. These data are consistent with the longer-term trend: since the beginning of 2024, average monthly nonfarm payroll growth has fallen from 200,000 to less than 100,000. Revisions further exacerbate uncertainty. The BLS will release a benchmark revision based on the Quarterly Survey of Employment and Wages (QCEW) on September 9th, which is expected to show an overestimate of employment figures for the first half of 2025, with a potential downward revision of hundreds of thousands of jobs. This could reinforce market concerns about a recession, similar to the nonlinear effect described in the Sam rule: a 0.5 percentage point increase in the unemployment rate triggers a recession. The potential impact of a slowing labor market on the economy is significant. If employment continues to weaken, consumer spending could decline, creating a vicious cycle. The labor force participation rate has risen slightly to 62.7%, but this is insufficient to offset weak demand. Federal Reserve Chairman Powell previously emphasized a strong labor market, but recent data suggests this view is outdated. On the contrary, some Fed officials, such as Waller, have warned that the Fed's actions are lagging and that more aggressive rate cuts may be needed to support the economy. Global Bond Market Selloff: Multiple Factors Driving Rising Long-Term Yields Contrasting the weak labor market is the selloff in global bond markets, particularly the rise in long-term bond yields. This isn't an isolated phenomenon, but rather the result of a combination of technical, fiscal, and inflationary factors. In early September 2025, the yield on the US 30-year Treasury bond approached 5% before ultimately falling back to 4.86%. 30-year bond yields in Europe and Japan also rose in tandem, reflecting global pressures. First, technical factors are particularly prominent in Europe. Dutch pension reforms are a key driver: the Netherlands has the largest pension system in the eurozone, with approximately €2 trillion in assets. Starting in 2025, the country will transition from a defined-benefit pension model to a defined-contribution model, eliminating the need for pension funds to purchase large amounts of long-term bonds to hedge liabilities. This reduces demand for long-term bonds, pushing yields higher. Dutch pension funds lost €54 billion in investment value in the first quarter. This reform is likely to ripple through the entire eurozone bond market, pushing German 30-year bond yields to their highest level since 2011. Secondly, fiscal deficits are exacerbating bond market pressures. The UK's fiscal deficit exceeds 5% of GDP, and the yield on 30-year gilts has risen to 5.6%, the highest level since 1998. The UK's Debt Management Office recently sold £14 billion of 10-year gilts at a yield of 4.8786%, a premium of 8.25 basis points. France faces a similar situation, with its 2025 deficit projected to reach 5.6%-5.8% of GDP, exceeding its official target. Political uncertainty is amplifying risks: France's 30-year bond yield has risen to 4.5%, the highest since the 2011 Eurozone debt crisis. While the US fiscal deficit isn't as severe as Europe's, policy uncertainty (such as potential tariffs) has also pushed up risk premiums. US debt has reached 100% of GDP, potentially increasing debt interest payments by $22 billion. Third, inflation expectations are another key driver. US inflation has stabilized around 3%, with core PCE inflation rising to 2.9% in July, the highest since February; the annualized CPI is projected at 2.9%. This makes the 2% target seem distant, and investors worry that long-term inflation will erode the value of bonds. Inflation in Japan is even more pronounced: CPI fell to 3.1% in July, but remains above the Bank of Japan's (BOJ) 2% target. An aging population is exacerbating inflationary pressures: the working-age population has passed its peak, and the labor force participation rate for those aged 65 and above has reached a high, but the female participation rate has reached saturation, leading to rising wages. BOJ Governor Kazuo Ueda confirmed at the 2025 Jackson Hole Conference that aging is a factor in inflation. The BOJ projects core CPI at 2.4% for fiscal 2025 and maintains the policy rate at 0.5%. These factors have led to a general rise in 30-year bond yields globally: 4.86% in the United States, 5.52% in the United Kingdom, 4.5% in France, and continued increases in Japan. Although short-term yields have fallen due to expectations of rate cuts, the yield curve has steepened, reflecting investors' concerns about long-term risks. Weak employment data triggered asset price volatility. Gold prices soared to nearly $3,600 per ounce, a 1.4% increase, benefiting from safe-haven demand and expectations of rate cuts. The US dollar index fell to a 16-month low, reflecting the Federal Reserve's easing outlook. The S&P 500 initially rose but subsequently retreated, closing near 6,460. The market interpreted this as "bad news is good news," but caution is advised: weak data could signal a recession rather than simply be bullish for the stock market. Expectations of a Federal Reserve rate cut have intensified: the probability of a September rate cut is 100%, likely 50 basis points, not 25. Three to four 25 basis point rate cuts are expected throughout the year. Next week's CPI data will be crucial: if it falls short of expectations, it could prompt deeper rate cuts. Global central banks, such as the ECB and the Bank of Japan, will also adjust their policies to address fiscal and inflationary pressures. Conclusion: The slowdown in the US labor market and rising global bond yields reflect cyclical challenges and technical adjustments. Data suggest that insufficient demand and structural issues are dominating the labor market, while the bond sell-off stems from multiple pressures. If inflation remains at 3% and fiscal deficits remain unchecked, yields may continue to rise. Investors should monitor benchmark revisions and CPI data to assess recession risks. Overall, while these trends increase uncertainty, they also provide room for policy intervention, potentially supporting the prospect of a soft landing.
Alex
Kikyo
Hui Xin
Brian
Joy