Asset prices displayed a vibrant recovery on Wednesday, with bitcoin (BTC) soaring past $112,000 to reach $112,401.43. European stocks also opened higher as analysts began to downplay concerns regarding stagflation and recession following alarming job data from the United States.
On Tuesday, the U.S. Bureau of Labor Statistics revealed a surprising revision, indicating that the economy potentially added 911,000 fewer jobs than previously reported over the year ending March 2025. This update jolted confidence among market participants who had been banking on a robust labor market to sustain economic momentum in the face of persistent inflation. As a reaction to the news, bitcoin slipped from $113,000 to $110,800.
While some investors interpreted the BLS revision as a sign of an approaching recession, Michael Englund, principal director and chief economist at Action Economics, voiced a different perspective. He emphasized that the data primarily sheds light on the long-term growth trajectory of the U.S. labor force rather than immediate economic conditions. “These revisions tell us more about the secular trajectory for the size of the U.S. labor force rather than where we are in the business cycle,” Englund noted. He expects trend growth for the labor force to slow to around 90,000 jobs per month, compared to previous expectations of 150,000-200,000.
Englund explained that the post-COVID growth in the labor force had been substantially influenced by a net annual influx of about one million people. This trend, however, has now turned to net out-migration, estimated at one to two million individuals, indicating a decline in civilian employment growth going forward.
This outlook appears to be echoed in the financial markets as European stocks opened positively, buoyed by bitcoin’s rebound above $112,000. Other cryptocurrencies such as ether (ETH), XRP (XRP), and dogecoin (DOGE) also made significant recoveries from the previous day’s declines. Notably, Solana (SOL) surged to $222, marking its highest level since February 1. Meanwhile, S&P 500 futures traded 0.3% higher at the opening.
Concerns over stagflation, characterized by high inflation coupled with stagnant economic growth and high unemployment, have been reignited by the BLS revisions and the upcoming U.S. consumer price index (CPI) data, which is expected to register inflation around 3%, significantly above the Federal Reserve’s target of 2%. However, Marc Chandler, Managing Partner and Chief Market Strategist at Bannockburn Global Forex, contends that fears of stagflation are overblown. He highlighted that the U.S. GDP remains above the Federal Reserve’s trend estimate, suggesting that the economy is still performing well despite elevated inflation.
Chandler remarked, “I think stagflation is still exaggerated,” pointing out that the Atlanta Fed tracker indicates GDP well above the non-inflationary pace. He also suggested that the Federal Reserve is likely to resume its easing policy in the coming week, with traders estimating a 91% chance of a 25-basis-point rate cut to 4% on September 17. Some analysts speculate a more substantial 50-basis-point reduction may occur.
As market participants focus on the upcoming U.S. CPI and producer price index (PPI) data, expectations for easing measures could solidify further if these reports unexpectedly indicate a trend towards disinflation. However, this heightened anticipation might lead to disappointment if the Federal Open Market Committee delivers a smaller rate cut than investors expect. Greg Magadini, Director of Derivatives at Amberdata, cautioned that if the market anticipates a 50-basis-point cut but receives only a 25-basis-point reduction, a sell-off could ensue.
