{"id":30282,"date":"2026-08-11T04:00:00","date_gmt":"2026-08-11T02:00:00","guid":{"rendered":"https:\/\/www.thebrokernews.ch\/?p=30282"},"modified":"2026-08-10T08:59:29","modified_gmt":"2026-08-10T06:59:29","slug":"the-barometer-broke-23000-jobs-lost-u-s","status":"publish","type":"post","link":"https:\/\/www.thebrokernews.ch\/en\/the-barometer-broke-23000-jobs-lost-u-s\/","title":{"rendered":"The Barometer Broke"},"content":{"rendered":"
The market is reaching a record high on the ruins of its own labor market.<\/span><\/div>\n\n\n\n

The American stock market made a new all-time high on the afternoon it learned the economy had lost jobs, because a shrinking labour market means a central bank that stays its hand. A market that celebrates its own decay has stopped measuring the economy and started measuring only whether it will be left alone. Meanwhile the real bomb ticks in Tokyo, and Washington has just spent Europe’s money trying to keep it from going off<\/strong>.<\/p>\n\n\n\n

On Friday afternoon the United States reported that its economy had lost twenty-three thousand jobs in July. Forecasters had looked for a gain of eighty-three thousand; the number came in beneath even the most pessimistic estimate on Wall Street, and the two months before it were quietly revised away by a further hundred and three thousand. Close to a million Americans have dropped out of the workforce since the spring. And within minutes of the figure crossing the wires the market began to climb, so that by the closing bell the S&P 500 stood at the highest level in its history. It is worth pausing on that, because it is the most revealing thing that happened all week. A market that sets a record on the news that its own economy is shrinking is no longer working as a barometer of the economy. It has become a barometer of one thing only: whether the central bank will leave it alone.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n
A market that fears good news<\/h6>\n\n\n\n

The logic, once you follow it, is perfectly coherent and slightly deranged. A weak economy means the Federal Reserve will not raise interest rates; interest rates are the price of money; and on Planet Finance the price of money is the force that does the work of gravity, the single number against which every share and every promise is discounted. So a market that has been terrified for months of that gravity increasing greeted the collapse of the labour market as a reprieve. Good news, a strong economy, is now feared, because it invites a rate rise. Bad news is welcomed, because it forbids one. The market has arrived at the point where it hopes not to be rewarded but merely to be spared, and it is worth noticing how far the bar has fallen to get there. Not so long ago, weak data was welcomed because it promised cheaper money, an actual gift placed in the market’s hands. Now it is welcomed only because it postpones a threatened rise. To hope to be paid has quietly become to hope merely to be left unharmed, and that is a considerable descent. It is not the posture of a confident market. It is closer to a flinch.<\/p>\n\n\n\n

Stagflation, with the lights on<\/h6>\n\n\n\n

What turns this from a curiosity into a warning is the company the jobs number keeps. The labour market did not soften into a calm of falling prices, which would at least be a coherent slowdown. It softened while inflation is still running near four per cent, fed by an oil price that the closure of the Strait of Hormuz will not let settle. Jobs falling while prices hold up is the textbook picture of stagflation, the one setting from which a central bank has no clean escape, because every lever it reaches for makes one half of the problem worse: cut, and inflation runs; raise, and an economy already losing workers buckles. The market spent the week celebrating precisely that. And the oil beneath it all was being priced not by events on the water but by the resolution the market had already decided it wanted. Two tankers a day now pass through a strait that used to carry a hundred and thirty; American imports of Saudi crude fell to precisely zero in July, the first time since 1985; and still the price spent the week yo-yoing on rumours of a peace deal whose published draft, when it finally appeared, demanded tolls and fines and the barring of American ships, and was refused in Washington inside the hour. The market bought the rumour and looked past the tankers, which is what it does once it has settled on an ending.<\/p>\n\n\n\n

A number nobody quite believes<\/h6>\n\n\n\n

And now the genuinely uncomfortable part, the one a careful reader should not let slide. The number the market rallied on may not even be true. This is the second consecutive year in which the July payroll report has arrived carrying enormous downward revisions to the months before it; last year, when the figures displeased the President, he dismissed the head of the statistical agency that produced them, and the agency is now run by people who will have understood the lesson. Set beside that official portrait of an economy shedding workers, a range of private gauges has been describing something closer to an economy that is quietly still hiring, from what companies are paying to lure staff to surveys of small-business hiring intentions sitting at multi-year highs. The public figure and the private ones point in opposite directions, and it is the public one, the one with the troubled provenance, that the market chose to believe and to toast. I draw no conspiracy, but I will state the plain position we are in. The market set a record celebrating a possibly-wrong number of job losses, because of what that number implies for a central bank that has itself just announced it no longer trusts its own measure of inflation. When neither the growth data nor the price data can be relied upon, a market is no longer pricing reality. It is pricing a fiction it finds congenial.<\/p>\n\n\n\n

The Fed has handed over the wheel<\/h6>\n\n\n\n

Underneath the theatre sits the change this column has tracked for a month, and it did not improve. The Federal Reserve held its rate for a fifth straight meeting, but three of its own voting members dissented in favour of raising it, the sharpest split in a decade, and its chairman Kevin Warsh, pressed on why he would not move, replied in effect that he did not need to, because the bond market was already doing the tightening for him. Read that admission slowly, because it is an abdication dressed as patience. The man whose job is to mind the price of money has handed the wheel to the bond market and stepped back to watch.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

And the bond market has taken the wheel in the direction of no confidence. The thirty-year yield sits above five and a fifth per cent, its highest in nearly two decades; the long end climbs while the short end eases, the classic shape of investors who no longer fear an imminent hike but demand ever more to lend for thirty years to a government they doubt will ever master inflation. That is the true floor beneath every asset on earth, and it is rising while the referee applauds from the touchline. So consider what the market’s serene wager, the bet that it will simply be left alone, actually rests upon: a central bank that has stopped steering, and a bond market that is steering the other way.<\/p>\n\n\n\n

Even winning has stopped counting<\/h6>\n\n\n\n

If further proof were needed that the tape has detached from the companies underneath it, the earnings season supplied it. Profits across the S&P 500 grew by around fifty per cent, the best in years, and nine companies in ten beat their forecasts, and it scarcely mattered. Datadog beat on revenue, beat on profit, and raised its guidance for the year, and its shares fell by a fifth in a day.<\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

Western Digital and its former stablemate beat on both sales and profit and were sold; Figma slipped below the price at which it floated only a year ago; and SpaceX, reporting for the first time since June, nearly doubled its revenue and watched its stock fall through its own issue price on the size of its spending. What moves a share now is not the quarter just delivered but whether the market believes in the quarter still to come: Microsoft was handed four hundred and fifty billion dollars a week earlier for proving that its spending comes back as profit, while Meta was gutted for spending with nothing yet to show for it. Follow that to its conclusion. If a fifty per cent surge in corporate profits cannot lift the market, then the market was never really about the profits. It is about the discount rate; and the discount rate is about the Fed; and the Fed, this week, is about a jobs number that nobody believes. The whole structure has floated free of the ground it is supposed to stand on.<\/p>\n\n\n\n

Records over a sickbed<\/h6>\n\n\n\n

If you want the same broken instrument in an even purer form, cross the Atlantic. In the same week, the Paris index printed a fresh all-time high and the Frankfurt DAX vaulted past twenty-six thousand for the first time ever, and this was duly reported as Europe reborn. It is worth understanding what those records actually measure, because it is almost none of Europe. The giants of the CAC and the DAX are multinationals that keep a postal address in Paris or Frankfurt while earning the bulk of their money anywhere but home: the luxury houses live on Chinese and American appetite, the engineering and software champions on global demand, the drugmakers on the world’s pharmacy bill. A record in Paris is therefore a statement about the price of handbags in Shanghai and the level of the euro, and it says next to nothing about France. And there is a small, delicious irony folded into the euro part of it. A weak currency flatters the foreign earnings of these exporters when they are counted back into euros, and the euro has just been made weaker by, of all things, the American Treasury quietly selling euros to rescue the yen. The same act that shores up Tokyo helps mint the Frankfurt record. The index is not measuring the health of the economy beneath it; it is measuring the sickness of the currency it is priced in.<\/p>\n\n\n\n

And the economies beneath are not well, whatever the tape insists. Germany is the more painful case, because it was the one that was meant to be serious. Its model ran for a generation on two fuel lines, cheap Russian energy into its factories and bottomless Chinese demand out of them, and it has now lost both; what is left is an industrial machine idling on borrowed money, its famous discipline abandoned the very moment it tore up the constitutional debt brake it had lectured the rest of Europe about for twenty years, so that it might rearm and rebuild on credit. A country that can only reach a stock-market record after first resolving to borrow without limit is not an engine. It is a patient who feels marvellous for an hour after the injection. France has perfected a different trick, the art of looking magnificent while quietly insolvent: a state borrowing at four per cent, a budget no parliament will pass, a debt it has stopped even pretending to shrink, and above it all an index gleaming like the front of a chateau whose roof has fallen in at the back. So the barometer is broken in Frankfurt and Paris precisely as it is in New York, only more brazenly, for here it reads fair weather while standing squarely over a sickbed. The European economists will spend the week explaining that the record proves the recovery. They are reading the barometer and calling it the sky.<\/p>\n\n\n\n

The ticking bomb in Tokyo<\/h6>\n\n\n\n

There is a single flaw in the market’s comfortable wager that it will be left in peace, and it does not sit in Washington. It sits in Tokyo, and it is the nearest thing this whole system has to a lit fuse. Japan is the largest foreign owner of American government debt, holding well over a trillion dollars of it, and the machinery keeping its collapsing currency upright runs directly through that pile. To defend the yen, Japan must lay its hands on dollars; and the way Tokyo raises dollars, in size and in a hurry, is by selling American Treasury bonds. So a yen in freefall is not Japan’s private difficulty. It is a loaded gun pointed at the American bond market, because the moment Japan is forced to sell those Treasuries to save its currency, the supply lands on the market and American yields lurch higher.<\/p>\n\n\n\n

This is why the United States, three weeks ago, did something it had not done since 1998 and intervened to prop up a foreign currency, and it is worth being blunt about the reason, because the official one is for children. Washington did not buy yen out of affection for an ally. It bought yen to stop Japan from being forced to dump American debt, because a fire sale of Treasuries by the largest foreign holder would send American borrowing costs through the roof and lay bare the thing at the centre of the whole arrangement that nobody in office is allowed to say: a government that must sell some two trillion dollars of new debt a year, on top of rolling over the mountain it already owes, depends entirely on foreigners continuing to buy and never to sell. Strip away the diplomacy and that is the structure of a Ponzi scheme in a pinstripe suit, one that functions only so long as the largest creditor never asks for its money back, and the United States has just spent real money to make sure it does not begin asking. There is even a comic flourish to how it was done. The Federal Reserve did not sell its own dollars to buy the yen, which would have scuffed the strong-dollar image the President likes to wear. It sold euros instead, quietly reaching into Europe’s currency to fund the rescue, and left the European Central Bank to find out afterwards that it had helped pay for it. And behind all of it stands the oldest rule on the trading floor, that every equity crisis is preceded by a currency crisis, that the trouble shows up first in the money and only later in the shares. The one lever that could shatter this market’s trance and force the Fed’s hand, however badly it wishes to sit still, is the lever Washington does not hold, cannot reach, and has just paid a foreign nation, in a third party’s currency, to keep from being pulled.<\/p>\n\n\n\n

An instrument, unplugged<\/h6>\n\n\n\n

So here is the week, honestly told. A market made a record high on the wreckage of its own labour market. It has learned to fear prosperity and to toast decay. It cheered a number it has good reason to distrust, for what that number implies about a central bank that has stopped steering and now merely watches the bond market do its work. And it has done all of this while the true cost of money climbs to a twenty-year high and a currency on the far side of the world holds a fuse that Washington can only pay other people to keep from lighting. A barometer that reads fair while the ship lists has not been mended; it has been unplugged, and someone has decided to enjoy the view. I will not put a date on the moment the instrument is plugged back in, because the reading, when it comes, tends to arrive all at once. But the sober response to a market that has taught itself to smile at bad news is not to smile along. It is to prefer the things that do not depend on the Fed’s forbearance: cash, which at last pays you to wait; the few real assets that answer to scarcity rather than to sentiment; and a settled refusal to mistake a market being spared for a market being safe.<\/p>\n\n\n\n

Eric Lefebvre<\/p>\n\n\n\n

See also: Time on Hold<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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