The long bond verdict is finally in. Jobs and growth outweigh inflation.
US Treasury Yield Notes
- Between August 5 and August 21, bond yields for US treasuries of 2 year duration or longer all rose.
- The period between August 21 and September 2 was very painful for 30-year long bond holders but favorable for the rest.
- Starting September 2, there was a bond market rally across the board.
Treasury Yield Changes Since September 2
What Happened?
- The ISM report on September 2 showed weak hiring.
- The BLS JOLTS repot on September 3 revealed unemployment was above job openings for the first time since the pandemic.
- The ADP report on September 4 was weak, especially small businesses.
- The nonfarm payroll report on September 5 was a disaster.
Related Posts
September 3, 2025: ISM Manufacturing Down Sixth Month, Employment Weak, Prices High
Employment vs Order Backlog
Order backlogs have been in contraction for 35 straight months.
Manufacturers facing massive tariff uncertainties and declining order backlogs will not do much hiring.
September 3, 2025: The Unemployment Level Is Now Greater than Job Openings
Openings vs Unemployment Level
- Job Openings: 7.18 million
- Unemployment Level: 7.24 million
The trends in openings and unemployment are not good. Yet, Fed Chair Jerome Powell cites a strong labor market.
September 4, 2025: Year-Over-Year Small Business Employment Growth Barely Above Zero
ADP reports the total YOY small business growth as +19,000.
September 5, 2025: Jobs Report Misery: Only 22,000 Gain in August, June Revised to -13,000
August was a bad month for job seekers. Here are the grim details.
The trend on the 10-year treasury note and the 30-year long bond are back in sync. Both are headed lower.
The discrepancy resolved to job weakness over inflation concerns, but Powell will be cautious unless there is a collapse.
Reader Allan (Last Post): Can you cite some sources, articles or books with statistics, to back up this claim:
“The bulk of the decline in manufacturing jobs is rising productivity” (versus outsourcing).
I am interested in how much automation versus outsourcing contributed to the decline in manufacturing employment over time. Thanks.
Mish
Sure – That’s a good question and I have charts.
Will be the subject of another post
The feeling is maufacturing is simply done elsewhere when you read imports
There is someone who mysteriously shows up here EVERY DAY and down-votes you, Mish.,,,every single comment!
That person would down-vote your announcement that all of “my readers are going to be given one ounce of Gold.”
What is the point of down-voting anonymously. OWN UP, MOFO!
Any chance Mish can do an article on data center construction and data center jobs? It seems like that is probably one of the niche employment areas immune from a downturn at the moment….
MSM propaganda regurgitated.
BRICS countries are selling US debt. US debt (what’s acknowledged) 130% percent of GDP. Adding a trillion of debt every 3 months = LIES
The only reason interest rates are lower is because the Fed is surreptitiously buying US paper. “Belgium” also (front for the Fed). Don’t forget the PPT (aka the Fed).
Lies, nothing but lies.
My company can’t find enough people for manufacturing AND new product design. My department has 2 people who came out of retirement because they got bored, so the company is trying to fill those skills while mentoring is still available. If younger workers are willing to put down their smart phones during the working hours, and make an effort, there is a lot of opportunity out there.
What does the bond market say about the military firing on its own citizens?
Bond market probably more worried about losing tariff income from courts…
lol-yep that 150B in a 7Trill budget into recession in a 100 Trill Worldwide Bond Market- Yep…probably worried about that tariff income- or, politically partisan…
Sol Alinsky rules: defund the police. Increase protests and mayhem. Summer of love. Control healthcare to make people sick and more obedience. Keep poverty level high to ensure dependence on transfer money. Induce gov debt to increase inflation, volatility, deflate the US dollar and limit liberties. Gun control. Education control. Religion control. Welfare control. Class warfare between the rich and the poor. Trump outsmarted Sol Alinsky. He distributed money to the poor. He is a law and order president. He deported illegal immigrants. He is fully committed to cutting debt. He brings mfg jobs to Sol Alinsky victims. He himself barely survived Sol Alinsky assassination attempts….
Too wordy.
Wordiness is the sign of poorly constructed thought patterns.
I am guilty of the same and I am now not commenting, only replying.
Yes, life is short.
It is not “Sol” Alinsky. It is Saul Alinsky.
The rest of the errors, you have to fix yourself!
Sol Alinsky -> Obama’s sun. Obama’s teacher and educator. Fix reeducate yourself !
You mean that Obama has an exclusive sUn … all just for him?
The Travest-eeeeeeeeeeeeee.
I sure hope so. I’m looking forward to a bond rally.
I know family in Michigan who have high school diplomas and work in manufacturing. They tell me manufacturing jobs pay more and are easier than they have ever been. Much of that increase is due to trade deals put in place during Trump 1.
Their earnings are beating inflation, so they are fat and happy.
Good for them, but Mish says Trump can’t do anything about the decline in manufacturing. In fact, he’s going to accelerate it, if we’re to believe his charts & historical analysis.
Well, my opinion / analysis says that as we remove more illegals, this will open up more good paying jobs for Americans. In GA, ICE just raided the Hyundai plant under construction & nabbed 450 illegals.
America might actually benefit from a short / mild to moderate recession that forces some Americans to make the necessary career adjustments. And, no, I’m not talking about picking fruit or making beds.
The main opportunity here is construction. Time will tell.
My grandsons work in infrastructure construction and are doing quite well (think data centers). High tech jobs are shaky. Intel has had significant layoffs here and more are expected. My company has a semiconductor customer base and we expect some significant ripple effects but are bolstered by the AI boom.
Software is soft and getting softer. AI is a real thing and it’s starting to show with job cutbacks. I’m on the west coast and I expect that if there is a manufacturing tool up due to Trumps tariff dream (big IF, folks) it will occur in states with lower living costs- not here. We are hedging in accordance with this expectation.
If Trump goes full “War Department” to pull the manufacturing sector’s ass out of the fire, it will not be surprising. War, is truly, a racket (old USMC here, but not as old as Smedley). Quite frankly, I’m surprised that long bonds haven’t gone to the moon with the debt load of our government. Trump is trying his best to set interest rates himself. What could go wrong?
Agree and I am short 20 year Treasuries. The US has only two choices, inflate or default. Yet, when there is a flight to safety, short Treasuries is not a good thing.
I agree with your inflate or default point over the long-term, but IF the US goes into recession, long yields are going to drop, not rise.
At least for now, a recession will trump the national debt’s grip on long bond yields. So IF we skip a recession, then your short is probably a good bet. However, if we make it into a recession, again long bonds yields are going to drop. The Fed will step in & start up QE again, pushing them even lower.
The 20Y bottomed @ 0.77% in July 2020. I don’t think it will go that low, but sub 2% is a good bet. And what happens this time after QE and profuse government stimulus to pull the economy out of a recession will be very scary.
Stagflation is born finally. We needn’t discuss the origins anymore. Now, how much damage and how will it be ended?
It only ends with either A higher rates or B lower gov spending. So A since B never happens..
When we approach our sovereign debt crisis, austerity will come & result in spending reductions. When this happens is hard to say, so it’s pointless to guess.
Austerity happened twice, i think, in history (Arg & ?). Money printing is the solution 99% of the time…
What about WAR???
this is an easy read. i thought this was elementary to most modern economists and traders. https://www.pewresearch.org/short-reads/2017/07/25/most-americans-unaware-that-as-u-s-manufacturing-jobs-have-disappeared-output-has-grown/
Thoughts:
– Considering everything i buy (other than food) comes from China, I’m skeptical of their statistics. E.g., i would not use BLS inflation statistics. Certainly not over long time periods where the error is compounded.
– “The biggest categories were food, beverages and tobacco products”. So factory farming expanded to feed the growing population? Okay. It’s good food production kept up. (Hopefully the portion consumed domestically kept up.)
– Oligarchs skim from the totals. Everyone experiences “per capita” numbers. The population grew by how much during this time? Adjust the output figures to properly account for inflation and then divide the output by population. That’s how everyone else experiences manufacturing output.
Fact-checking the article’s claims is a non-trivial research project, especially because i wouldn’t trust anything they say without drilling down into the collection and reporting methods. I’m too lazy to do it. But I did start a discussion with an LLM. It started giving me different numbers than Pew. That alone would be time-consuming to reconcile.
Still, the article makes some claims and tries to back it up with some data. Interesting.
…
Since “manufacturing” includes food, it’s highly likely “manufacturing” grew with population, even though people increased how much they spend on foreign goods as a percentage of their overall budget for goods.
And defense spending i suppose…
Rent is the CPI largest component. A few years ago multi family landlords got 4% loans. Today it’s 8%. Before debt mature MF landlords increase rent, in tranches, in order to meet future obligations. But turnovers and vacancies are rising. When debt mature CRE loans rates might fall. Trump’s Fed will keep them low.
stagflation leading into recession is my guess. per manufacturing, the main gauge is to see actual output of manufactured goods, not how many humans are employed in aforementioned goods. pro tip. many places in usa still produce goods, we just don’t need HS dropouts in modern fabricating plants. the supply chain and actual building of and for manufacturing of some products is across government drawn borders. this is the story of mankind since domestication of plants and animals 10,000 years ago. why leisure and sports and entertainment and obesity are so popular. the amount of calories humans need to expend to produce a calorie of food is staggering compared to past decades and centuries for instance. the same is true for manufacturing and construction. i’ve met men decades ago who built houses using hand saws. now obese men can be carpenters.
” the amount of calories humans need to expend to produce a calorie of food is staggering compared to past decades ” – I cannot believe this is true with the equipment we have today and the low % of population involved in ag
Perhaps we will just get stagflation. The collapse in supply with outweigh the collapse in demand, especially as the fed cuts, and more so if Trump ushers in stimulus before the midterm.
That is possible.
Thanks for the article but I think the reaction has been taking place for a long time but this is just the noteworthy point in time. We finally have confirmation of all the other data points in the economy. The long end of the bond curve is growth and inflation expectations. No growth or deflation has finally overtaken growth of M2, inflation. This is stagflation. The Fed nightmare scenario because they are late again. So what is next? Something the Fed can not control with interest rates only react. Deflation- Defaults and the destruction of money/debt and zero % interest rates to support collateral prices which in their case is bonds. Not all the other assets. Your article should be depression is on the way or proof the Fed is late again.
In 2018 JP tried to extract negative rates from Germany and Japan. It didn’t work. When the CPI reached 9% gravity with Germany and Japan pulled negative rates, up.
Gravity prevents the 30Y from rising > 5%. The bond market needs to inflate (lower rates), before rising in a sling shot to 8%/12%, or above. Trump’s new Fed will stay the course and keep interest rates down, as long as they can, to cut gov debt. Zero to 10% is a normal inflation. 10% to 20% might spike to 20%/80% or to hyperinflation. At 3% the CPI is safe. Plenty room to grow.
The thing about bond traders is that they’re traders. They’ll overlook inflation if they think the trend is their friend for the near term. That’s why even though it’s possible for a cut in short term rates to raise longer yields (like Sept ‘24), most of the time cutting short term rates pulls yields down across the curve – at least for a while.
Traders and hedge books dominate bond volumes.
Volume doesn’t change net investment….
Neither trading nor hedging is investment.
That’s what I was saying…
So the Fed cut is in but how much will inflation spike afterwards?
“It’s Trump turtles all the way down and inflation all the way up!”
That has been my issue for months as you know,
Even the ISM report reeked of stagflation.
However, at the moment, the long bond has convinced me a recession with falling or stable prices (~2% or so) and lots of job losses is more likely than not.
I remain flexible.
Long-term the Fed has a problem. Trump will have ushered in inflation.
If the tariffs go away- whether due to SCOTUS or because they’re just ended (with Trump declaring that they did their job, of course) – maybe inflation would subside.
Tariffs going away would cause a jump in yields given less income to pay interest on debt. I agree with Mish – recession probable. Prices dropping would help the consumer, but with gov spending so high, deflation seems unlikely. So we’ll end up with the usual fix to high gov debt of high inflation. This will be really painful for the average consumer…. can you say smells like the early 80s? I think high and unproductive gov spending is the cause and pain is the fix… plus ça change…
Also, Trump is trying to stick the landing to avoid recession – cutting social spending offset by investment spending to avoid recession. He’ll probably fail, but the direction still improves. In the end, we need to swallow the pill and cut gov spending.