Where are the jobs?Pic.

August 30 – September 5, 2025

Big news. This is, of course, the SCO summit in China. And its key significance was that the “Big Three” of Xi-Putin-Modi was formed. The essence of this three is not that it is going to fight the Bretton Woods system in the “Reagan version”, but that its members understand that this system has exhausted all its potential.

At the SCO meetings, no one proposed an alternative model. Firstly, it does not exist, and secondly, it will most likely be different for different currency zones. That is, there is no point in talking about a single “anti-dollar” system; the question is how to deal with the consequences of the collapse of the dollar system.

Of course, this whole story caused serious panic in the countries controlled by the Euro-Atlantic elites. Trump even said that India and Russia chose China (as if he himself had not done much to make this choice). But this statement is incorrect. The members of the “troika” did not unite within the framework of one system, they only agreed to coordinate their actions to protect themselves from the negative consequences of the crisis.

But this is, in fact, the first time that it was clearly stated that a new model is needed, since the old one no longer works. No, the understanding that it no longer works has been there for a long time. But for the first time, officials, leaders of not the smallest states, began to act based on the logic that it is no longer possible to stop the crisis.

And this is, of course, the main event of not only the week.

Macroeconomics. Investments in fixed capital in Mexico -6.4% per year, the 10th minus in a row:

German industrial orders -2.9% m/m, 3rd negative in a row:

Japan’s coincident index weakest in 1.5 years:

US job openings have returned from post-Covid peaks to 2018/19 levels:

Moreover, for the first time in 7-8 years (not counting Covid), it fell below the number of unemployed:

US job layoff announcements reached nearly 900,000 in January-August, higher than for 2024 as a whole; ignoring Covid, it’s the worst since 2009:

The most active in laying off workers are the retail, pharmaceutical and financial sectors:

US unemployment hits 8-year high (not counting Covid):

And in Canada – even a 9-year-old:

In the latter, the labor force participation rate in the adult population is at its lowest since 1998:

The inability of the largest European countries to ensure fiscal stability has become apparent in recent times, which has caused a sell-off in long-term government bonds. As a result, the yields on 30-year bonds in these countries have reached multi-year highs: in Germany – since 2011:

in France – since 2009:

in Britain – since 1998:

General flaws in monetary policy around the world have caused a new wave of growth in precious metals, gold has renewed global peaks:

Silver has been making new highs since 2011, with the price gradually approaching the records of 1980 and 2011:

Main conclusions. The world is changing rapidly. Just look at the graphs of China’s exports/imports to the US:

Such changes indicate that the consequences of the crisis have become more and more pronounced in recent months.

Note that interesting processes are taking place in the US with inflation. Here we give the floor to Pavel Ryabov:

“The data is bad, Powell can breathe a little sigh of relief, and Trump will tense up…

According to PCE, price growth was 0.2% m/m in July after 0.29% in June, for 3 months – 0.21%, 6 months – 0.2%, 12 months – 0.23%, 7 months – 0.23% vs. 0.23% for 7 months – 24, with a medium-term norm of 0.14% in 2017-2019 and a long-term norm of 0.12% in 2010-2019 for average monthly price changes.

Core PCE rose by 0.27% m/m after 0.26% in June, for 3 months – 0.25%, 6 months – 0.25%, 12 months – 0.24%, 7 months 25 – 0.26% vs. 0.26% for 7 months 24 with a medium-term norm of 0.14% and a long-term norm of only 0.13%.

I have not given the distribution by periods for nothing. Inflation, cleared of volatile components, has been very smoothly in a narrow range of 0.24-0.26% for the last 12 months, which is twice as high as the norm and corresponds to more than 3% in annual terms.

There has been a clear acceleration since June, although not yet as rapid as in 2022.

How was 0.2% formed for the broad PCE in July?

Goods contributed negatively by 0.042 p.p. in July, with durable goods (-0.012 p.p.) and non-durable goods (-0.029 p.p.)

•  The most significant contribution to inflation was provided by financial and insurance services – 0.097 p.p. in total inflation. Three months ago, I spoke about the inevitability of this category exiting deflation and providing a significant pro-inflationary contribution.

•  Housing and utilities – 0.041 p.p.

•  Medical services – 0.034 p.p.

•  Entertainment and cultural services – 0.014 p.p.

The four categories together provided 78% of the contribution to inflation in the services sector in July and almost 93% of the overall PCE indicator, while representing 47% in the structure of total consumer spending.

Tariffs have been in effect since May, over three months the average monthly price increase was 0.21%, and what contribution did goods and services make?

Goods provided 0.035 p.p. of positive contribution with a medium-term norm of 0.007 p.p., where durable goods are 0.014 p.p. vs. (-0.012 p.p.), and non-durable goods are 0.021 p.p. vs. 0.019 p.p.

In services, the positive contribution was 0.178 p.p. vs. 0.136, formed from:

•  Housing and utilities – 0.052 p.p. vs. 0.045 p.p. at the medium-term norm (deviation of 1.16 times)

•  Medicine – 0.039 p.p. vs. 0.025 p.p. (1.56 times)

•  Financial and insurance services – 0.037 p.p. vs. 0.025 p.p. (1.48 times)

•  Other services – 0.029 p.p. vs. 0.009 p.p. (3.2 times!), which includes education, communications, IT services, household, personal, cosmetic and other types of services.

Where are there no problems yet? Transport, entertainment, sports, cultural services, catering and hotels, which together contributed 0.014 p.p. over three months with the norm being 0.027 p.p., i.e. almost half as much, forming 14.5% of total consumer spending.

The tariffs have not yet begun to have an effect, but will begin to continuously accelerate implementation from August.

Full calculations for the August tariff grid will only be made in September-October due to the specifics of customs clearance, the transfer to prices with a lag of 1-4 months as warehouse stocks are reconfigured and the specifics of production processes.

In the economy, the effect of increased tariffs in August will begin at least from October (these are November data).

The effect of the April tariffs began in June (on average +0.13% of the average monthly growth so far), but the effect is limited to the consolidation of excess warehouse stocks from Dec. 24 to Mar. 25.

Approximately 80% of the stocks formed before Apr. 25 were distributed or will be distributed before the beginning of September, and by the beginning of Q4 24 there will be no more “cheap” stocks left or within the margin of error.

The stock accumulation/distribution cycle will coincide with the production cycle, when more expensive raw materials and intermediate products will affect the cost of the final product, plus logistics lags.

In the economy, the effect of the tariffs will begin from Oct. 25 until mid-2026, due to stocks, the production cycle, logistics specifics and customs clearance features.

Powell knows this and this is exactly what he talked about in Jackson Hole. Retailers know this too, and in their business models they “mark” 4Q25 as the price break point.”

We have repeatedly noted that these official data are in reality greatly understated relative to reality. But they also show that the inflation picture is getting worse. This is also evident from completely unexpected assets. Thus, fattening cattle have another record

Another important point is the purchasing power of the population. And again, data from Pavel Ryabov.

“US consumer demand is growing 4 times lower than normal, incomes are slowing

▪️ Total consumer demand (goods and services for all items) in real terms grew by 0.33% m/m in July after +0.08% in June and (-0.17%) in May, for 3m +0.08%, for 6m +0.15%, while for 7m25 only +0.05% vs. 0.19% with a medium-term norm of 0.21% in 2017-2019 and a long-term norm of 0.20% in 2010-2019 at average monthly rates, i.e. demand is 4 times lower than normal.

▪️ The wage fund in real terms grew by 0.42% m/m after (-0.12%) in June, for 3m +0.17%, 6m +0.22%, for 7m25 +0.18% vs. 0.20% for 7m24 with a medium-term norm of 0.24% and a long-term norm of 0.21%.

A slight downward deviation from the norm, but overall the disposition is neutral (does not exert excessive inflationary pressure, but at the same time does not indicate crisis processes).

▪️ Real disposable income grew by 0.22% m/m in July after 0.0% in June, for 3 months a decrease of 0.15%, 6 months +0.19%, 7 months +0.17% vs 0.20% for 7 months of 2024 with a medium-term rate of 0.25% and a long-term rate of 0.21%.

There are signs of a negative trend forming, especially over the last three months, associated with tax balancing and net government subsidies. The slowdown trend has been forming since mid-2024 and may be worse further mainly due to accelerating inflation.

By the structure of income formation:

•  The wage fund in 2010-2019 formed 62.3% of the increase in nominal income and 63.4% over the last 6 months;

•  Income from entrepreneurial activity in 2010-2019 formed 7.5% of the income growth, now – 3.2%;

•  Income from royalties and leasing of tangible assets – 4.3 vs 1.4%;

•  Income from financial assets (interest and dividends) – 19.6 vs only 2.6%;

•  Net government transfers – 6.2% vs 29.4%.

▪️ Net government support as a % of income was (-5.33%) in July, for 3M (-5.31%), 6M (-5.27%), 7M25 (-5.33%) vs (-5.61%) for 7M24 compared to the medium-term norm (-6.6%) and the long-term norm (-5.88%).

The closer to zero, the higher the state support. Minus means that the total withdrawal from the population (taxes and insurance premiums for all items) is higher than the total targeted (direct) support in the form of pensions, grants, subsidies, health insurance coverage, etc.

For example, before the 2008 crisis, net state support was minus 10% of income, and before the dot-com crash, minus 14%.

This means that now the state subsidizes the population by an average of almost 5% of income compared to 2006-2007. This causes a consistently high budget deficit and, as a result, the accumulation of record public debt, but in turn ensures a high level of consumer spending.

The state compensates for the slowdown in income growth in the private sector – exactly 0.3 p.p. in comparison.

▪️ Real incomes not related to the state grew by only 0.01% in 3M, 6M +0.12%, 7M25 +0.11% vs. 0.13% in 7M24 with a medium-term norm of 0.26%, i.e. the growth rate is more than half that of 2017-2019 and this gap (at least 0.09 p.p.) is covered by the state.

This is the key understanding from the statistics: private sector incomes outside the state are 2.5 times lower than the norm, and expenses are 4 times lower than the norm with the state trying to compensate for the gap.”

It should be noted that all these points were outlined in the very first texts of Mikhail Khazin more than twenty years ago (they can be read, for example, in the book “The Decline of the Dollar Empire and the End of Pax Americana”). But here these effects are clearly manifested in the official figures. In reality, as already noted, they are even stronger.

The decline in production and the rise in inflation have finally led to a significant increase in unemployment and a fall in real demand. Since it is no longer possible to increase government support, one of two events will occur in the very near future. Either the US Federal Reserve will increase emissions, which will lead to an inflation net (Trump’s logic), or in an attempt to stop inflation, the Fed will tighten monetary policy, and then, for example, a “puncture” of the AI ​​bubble is possible (Powell’s logic).

It is impossible to say exactly which scenario will be realized. But it is possible that the situation will become apparent at the next meeting of the Federal Open Market Committee. In the meantime, you can wait a week, and we wish our readers to enjoy the warm September weekend and not be too nervous during the work week.