Basis Point — Issue #2

August’s jobs data brought a stark shift in narrative: nonfarm payrolls rose just 22,000, well under expectations, while the unemployment rate climbed to 4.3%, a near four year high. Adding to the weakness, June’s previously positive figure was revised into a 13,000-job loss. Beneath the surface, the picture looks even worse. Excluding healthcare, the U.S. economy has shed more than 142,000 jobs over the past four months, with declines of 53,000 in May, 71,800 in June, and 24,800 in August. Healthcare alone accounted for 125% of private service job growth during this period, meaning the rest of the private sector has contracted outright. Over the last 25 years, such a rapid reversal following a multi-year expansion has always coincided with the onset of a recession.

Earlier this week, another crack appeared: in July, the U.S. reported 7.18 million job openings against 7.24 million unemployed people. For the first time since April 2021, there are now more unemployed Americans than available jobs, marking the end of the long “worker shortage” narrative. At the same time, the underemployment rate jumped to 8.1%, the highest since 2021, as millions of Americans either settled for part-time roles or gave up looking altogether.

Despite these mounting signs of labor market stress, financial markets rallied. The S&P 500 hit a new record high and is now up 35% since its April bottom. Rate-cut expectations surged as traders fully priced in a 25-basis-point cut for September 17, while the odds of a 50-bp cut jumped to 12%. To investors, the jobs report was “weak enough to force cuts, but not weak enough to spark panic.”

This paradox defines 2025, the economy is weakening, but asset prices continue to climb. Those who own assets stand to benefit from lower rates and looser conditions, while those who don’t risk being left behind as inequality widens. The stock market has already made its judgment, it expects the Fed to cut into higher inflation, and it is positioning for asset prices to keep rising, even as the real economy slips closer to recession.

NAIRU stands for the Non-Accelerating Inflation Rate of Unemployment. In plain terms, it’s the jobless rate where inflation stays steady. If unemployment goes below that level, wages usual

Gold’s rally above $3,500/oz is the clearest expression of shifting expectations. Lower yields reduce the opportunity cost of holding non-yielding gold, while geopolitical risks and central bank demand amplify the bid. Bullion is now up more than 30% in 2025, cementing its role as both a hedge and a barometer of confidence in fiat assets.

Markets ended the week slightly lower, with Energy and Financials leading declines. Focus now shifts to inflation, with PPI on Wednesday and CPI on Thursday, the last prints before the September 27 Fed meeting. Both are expected at +0.3% m/m; a hotter read could stall the bond rally and pressure equities near record highs.

Key catalysts: