In a surprising turn of events, bond markets experienced a significant fluctuation recently, with the US 30-year Treasury yield approaching the crucial 5% mark, often viewed as a trigger for market panic. However, overnight trading in both the US and European bond markets saw recovery, resulting in a decline in yields. This rebound played a pivotal role in boosting stock market performance.
Interestingly, recent labor market data provided a stark backdrop for these movements. The latest Job Openings and Labor Turnover Survey (JOLTS) revealed that job openings in the US plunged to their lowest level in ten months, reaching 7.181 million in July. This figure fell short of analyst expectations of 7.38 million and was a downward adjustment from June’s revised count of 7.357 million. For the first time since the onset of the COVID-19 pandemic, the number of job openings has dipped below the number of unemployed individuals.
The decline in job openings was particularly pronounced in the retail sector, suggesting that businesses are tightening their budgets amid rising costs, potentially linked to tariffs. Notably, the private sector’s quits rate remained steady at 2.2%, and about a third of job separations were due to layoffs, with the remaining two-thirds being voluntary resignations. This trend aligns with the prevailing narrative of “low hiring, low firing” that has persisted throughout 2025.
Furthermore, while headline GDP growth appears to maintain a trajectory above trend for the current quarter, the Federal Reserve’s Beige Book—a comprehensive report on economic conditions—indicated that 11 out of 12 districts have observed minimal to no change in economic activity and employment levels. Economic pressures are contributing to a squeeze on real incomes, as rising prices outpace wage growth, impacting consumer spending patterns. Tariffs have been identified as a contributing factor to this economic strain.
These developments provide the Federal Reserve with a plausible rationale for potential interest rate cuts at their upcoming meeting scheduled for September 16-17. Traders had expressed concerns that the Fed might reduce rates amidst an already strong economy, which could inadvertently fuel inflation and lead to higher interest rates in the longer term. The latest economic signals, however, suggest that such an economic overheating scenario may be less likely, reassessing the path forward for monetary policy in the coming weeks.
