Market Optimism Returns
Asset prices are once again reflecting an optimistic mood, with Bitcoin regaining the $112,000 level, trading at $112,366.98. European stocks also opened higher, as analysts emphasize that the odds of recession or stagflation are receding. This shift in market sentiment comes after a surprising update from the US Bureau of Labor Statistics (BLS), which showed that the economy likely added 911,000 fewer jobs than previously reported over the 12 months through March 2025.
Understanding the BLS Update
The BLS revision initially caused a stir in the market, with Bitcoin quickly dropping from $113,000 to $110,800. However, experts like Michael Englund, Chief Economist at Action Economics, believe that the data reveals more about the structural path of the US labor force than about the current state of the economy. Englund explained that the sharp post-COVID growth in the US labor force was driven largely by net annual immigration of about one million people, but this trend has now reversed into negative net migration estimated between one and two million people.
Impact on Labor Force Growth
According to Englund, this shift toward a lower and more stable labor force growth path means slower growth in civilian employment as measured by household surveys or nonfarm payrolls. The financial markets seem to be adopting this view, with European equities opening higher and Bitcoin regaining the $112,000 level. Alternative tokens such as Ether, Ripple, and Dogecoin also recovered much of Tuesday’s losses, while Solana surged to $222, its highest since February 1.
Stagflation Fears "Overdone"
The BLS revisions and upcoming US consumer price index (CPI) data have reignited discussions of stagflation, a scenario characterized by high inflation, high unemployment, and weak growth. However, experts like Marc Chandler, Managing Partner and Chief Market Strategist at Bannockburn Global Forex, believe that these fears are overstated. Chandler noted that US GDP is still growing above the Fed’s estimates for the "non-inflationary path," and that the Fed is likely to resume easing next week.
Focus on US CPI Data
The market is now eagerly awaiting the release of Wednesday’s producer price index (PPI) and Thursday’s consumer price index (CPI) data. If these reports show surprise signs of cooling inflation, it could strengthen the case for a rate cut and support high-risk assets at elevated levels in the near term. However, if the data fails to meet expectations, it could set markets up for disappointment. As Greg Magadini, Director of Derivatives at Amberdata, warned, "If markets expect a 50-basis-point cut but the Fed delivers only 25 at the September 17 meeting, we’ll see broad-based selling."
Conclusion
In conclusion, the market is once again reflecting an optimistic mood, with asset prices recovering from the initial shock of the BLS update. While there are still concerns about stagflation, experts believe that these fears are overstated. The focus is now on the upcoming US CPI data, which could provide further insight into the state of the economy and the likelihood of a rate cut. As the market continues to evolve, it’s essential to stay informed and adapt to the changing landscape.
