U.S. LABOR MARKET: STRONG ON PAPER, BUT CRACKS EMERGING
Headline unemployment remains low (~3.9%), and wage growth has held above 4% YoY. However, underlying stress signals are flashing:
- Full-time job growth has stagnated, while part-time employment is rising — often a sign of disguised weakness. – Weekly hours worked for non-supervisory employees continue to drift downward, reducing total income despite stable wage rates. – Job openings are declining while voluntary quit rates have dropped, indicating reduced worker confidence. – Labor force participation among men aged 25–54, though improved post-COVID, remains structurally below pre-2008 levels.
Taken together, these data points suggest that while the labor market is not collapsing, its margin of strength is eroding, increasing recession risk.
- CREDIT MARKETS: TIGHTENING UNDER THE SURFACE
Despite nominally accommodative central bank policy, credit markets are increasingly strained:
- Delinquency rates on credit cards and auto loans have surpassed pre-pandemic levels, particularly among younger borrowers. – Commercial real estate defaults are rising, with regional banks most exposed to office vacancies and property repricing. – Corporate debt issuance is skewing heavily toward high-yield (“junk”) bonds — a sign that quality borrowers are tapping out, while speculative credits push forward. – CLO (collateralized loan obligation) spreads have widened, and corporate bankruptcies have increased YoY.
The risk is a credit event triggered by rising defaults, tightening liquidity further in the private sector even without official rate hikes.
CHINA: DRAGGING THE WORLD INTO STAGFLATION?
China’s post-COVID rebound has faltered:
– Youth unemployment remains above 20%, despite official suppression of the data. – Property sector defaults (e.g., Evergrande, Country Garden) continue to ripple across the economy, freezing household wealth and spending. – Exports are weak, and domestic consumption remains tepid. – The yuan has seen controlled depreciation, while capital controls tighten amid rising capital flight.
China’s government has avoided large-scale stimulus, wary of moral hazard and structural overleverage. Yet in doing so, it risks a slow-motion balance sheet recession — one that drags down global demand and commodities, especially in emerging markets tied to Chinese growth.
- THE AGE OF PERPETUAL MONEY PRINTING: A GLOBAL DEBT TRAP
Since the Great Recession of 2008, central banks have unleashed over $25 trillion in cumulative balance sheet expansion:
- The Fed’s balance sheet surged from under $1 trillion in 2008 to a peak of $9 trillion in 2022 — only modestly rolled off since. – The ECB and Bank of Japan continue asset purchases in disguised forms, despite official tapering. – Government debt as % of GDP in major economies (U.S., Japan, EU, China) now exceeds wartime levels — without the political or social consensus to reduce it.
While asset bubbles, inequality, and inflation were all direct outcomes of QE policies, central banks remain trapped: tightening leads to asset deflation and recession; easing reignites inflation.
The most concerning risk is “monetary fatigue”: a moment when markets no longer believe central banks can manage outcomes — triggering a crisis of confidence in fiat currency itself.
JAPAN: THE CARRY TRADE UNDER THREAT
Japan’s bond market is undergoing a historic pivot:
- After years of yield curve control and sub-zero rates, the Bank of Japan (BOJ) is signaling an end to its ultra-loose policy. Negative interest rates may soon be eliminated — a shift with global implications. – The Japanese yen has fallen to multi-decade lows against the U.S. dollar (hovering near ¥160/USD), despite BOJ currency interventions. – Japanese government bond (JGB) yields are rising, and investor demand is weakening. For the world’s largest public debt market (over 260% of GDP), even minor shifts in yield expectations have outsized effects. – These dynamics threaten to unwind the famed “yen carry trade,” where global investors borrowed in yen at low rates to invest in higher-yielding foreign assets.
The potential reversal of the carry trade could have cascading effects — including a repatriation of capital, rising global funding costs, and stress in dollar liquidity markets. Japan’s shift from deflationary to inflationary regime may be one of the most underappreciated macro risks of 2025.
SUMMARY OUTLOOK: A FRAGILE SYSTEM IN NEED OF HONESTY
While no single data point suggests immediate collapse, the confluence of stress — labor softening, credit tightening, China’s economic drag, Japan’s pivot, and the long tail of money printing — paints a picture of structural fragility. Investors, professionals, and policymakers should remain highly vigilant.
This special edition of *The Weekly Shift* is intended to help physicians and professionals be aware of macroeconomic trends that may impact contracts, capital access and loan availability, retirement planning, and practice finances.
Key Sources and Citations:
1. U.S. Bureau of Labor Statistics (2025). Employment Situation Summary.
2. Federal Reserve Bank of St. Louis (FRED). Weekly Hours of Production and Nonsupervisory Employees.
3. New York Federal Reserve. Quarterly Report on Household Debt and Credit (Q2 2025).
4. Moody’s Analytics. Commercial Real Estate Default Monitor (April 2025).
5. Bloomberg. “Corporate Defaults Climb Amid Tightening Credit Conditions.” May 2025.
6. IMF Global Financial Stability Report – Spring 2025.
7. People’s Bank of China. Monthly Financial Statistics Bulletin.
8. Financial Times. “China’s Youth Unemployment Soars Past 20%.” April 2025.
9. Bank for International Settlements. Central Bank Balance Sheet Tracker (2008–2025).
10. ECB, BOJ, and Federal Reserve official monetary policy statements, 2008–2025.
