U.S. Adds a Whopping 162,000 Jobs in a Bright Spot for the Economy Unemployment rate stayed at a historically low level of 4.1%
(…) Economists polled by The Wall Street Journal had forecast the report would show the economy gained just 53,000 jobs. (…)
The jump in jobs came in part from rebounds in restaurant and in local-education employment that many economists viewed as one-off factors. But the U.S. has added an average of 80,000 jobs a month so far this year, which compares with monthly growth of 10,000 jobs in 2025. (…)
The jobs counts for both June and July were revised higher. The Labor Department now says that the economy added 21,000 jobs in July, rather than losing 23,000 jobs. June’s jobs gain was revised up to 31,000 from 20,000.
Average hourly earnings rose 3.1% from a year earlier, indicating that pay continues to struggle to keep up with inflation. Consumer prices were up 3.4% from a year earlier in July. (…)
Goldman Sachs:
The increase in payrolls largely reflected a rebound in leisure and hospitality (+62k) and local government education (+42k), after the two had declined by 75k and 52k over the previous two months, respectively. As we noted, both series experience large swings in employment in summer months on a not-seasonally-adjusted basis, making it difficult to seasonally adjust them well and contributing to outsized volatility in their monthly seasonally adjusted readings.
The three-month average of payroll growth stands at 71k and our estimate of the underlying pace of job growth based on the payroll and household surveys now stands at 53k.
Average hourly earnings increased 0.3% month over month in August, in line with consensus expectations. The year-over-year rate declined 0.15pp to 3.09%. Wages for production and non-supervisory workers increased by 0.34% month over month or 3.30% from a year ago. Our wage tracker stands at 2.8% annualized and 3.6% year-over-year in Q2, and our wage survey leading indicator stood at 3.5% in August.
Quite a challenge to find a trend. Even the recent 3-m change of +71k (red line) looks iffy.
But the trend in labor income (black: employment x hours x wages) is clearer, stabilized just above 4% YoY but increasingly eroded by inflation. The unusual gap between growth in labor income and spending illustrates how dissaving has contributed to the US economy in 2026.
When growth in real disposable income slipped below 2% in the spring 2025, Americans used their savings (or increased borrowings) to keep spending growth above 2%.
The savings rate has rarely touched or stayed at 3% or less in the past. In 2005-08, Americans over borrowed to create the housing crisis. This time, Americans are also spending beyond their means but using their new riches from equities. Time will tell how sustainable this is.
The August jump in employment will focus the Fed on inflation. There also, it ain’t easy to see a clear trend, at least at the consumer level.
Corporations seem to be able to deal with inflation on their physical inputs (PPI black), finding a welcome offset from quickly slowing wages while sales growth accelerated from 3-4% to nearly 10% in Q2, thanks to exploding AI spending and the war with Iran, both boosting revenues for American commodity producers.
This chart plots US exports of goods and PPI-Commodities. Both series jumped spectacularly this year, boosted by demand from AI but even more so by the war.
Year-to-date US exports growth rates (Jan-July):
1- AI & war related:
- crude oil: +47%
- fuel oil: +43%
- natural gas: +22%
- natural gas liquids: +12%
- Other petroleum products: +30%
- Fertilizers: +10%
- Aluminum: +33%
- Other non-ferrous metals: +20%
- Steel making materials: +17%
- computers: +63%
- Electricals: +13%
- computer accessories: +51%
- Telecom equipment: +13%
- semiconductors: +24%
2- Other exports:
- Automotive vehicles, parts and engines: -6%
- Consumer Goods: -2%
- Capital goods ex-AI,ex-aircrafts: -2%
- Industrial materials ex-commodities & precious metals: -6%
- Foods, feeds & beverages: +10%
- ex-soybeans: +5%
All US exports for first 7 months: +10%
- #1 group (53% of total): +20.5%
- directly war-related (21% of total): +32.3%
- directly AI-related (32% of total): +14.0%
- #2 group (36% of total: –2.4%
So:
The US economy, corporate revenues, margins and profits are strongly benefitting from AI and the war, both pushing prices up while wage growth has slowed below inflation.
AI will continue to contribute strongly but the economy, corporate revenues, margins and profits are vulnerable whether the war ends or not.
- If the war ends, commodity prices will decline, negatively impacting nominal exports. The volume of US exports will also decline as US exports will cease to fill the war-induced gaps (e.g. crude oil, fuel, LNG, etc.).
- If the war endures, commodity shortages and prices could rise enough to choke world economies, potentially leading to recessions and financial strains.
Your guesses on these non-exhaustive scenarios is as good as mine.
About AI:
Two meaningful risks to growth beyond 2026:
-
data center construction amid protests:
- More likely: power supply.
Canada sheds 42,000 jobs in August
(…) The unemployment rate held steady at 6.4 per cent. (…)
The three-month average for employment growth, a metric that economists use to smooth out volatility in the month-to-month numbers, fell from more than 60,000 in July to around 17,000 in August. (…)
The weak jobs report suggests the job market could have been struggling before the latest tariff hit, said Royce Mendes, head of macro strategy at Desjardins Securities, in a client note. “That said, the headline underperformance could just be a normalization after a period of outsized hiring,” he added. (…)
Despite a challenging trade environment, manufacturing led the gains among industries in August with a net 22,000 new jobs. Hours worked were also stronger in manufacturing, which could be evidence of efforts by some companies ramping up production before U.S. tariffs took effect, said Andrew Grantham, senior economist at CIBC Capital Markets, in a note to clients. (…)
Average hourly wages grew 2 per cent year-over-year in August, down from 2.8 per cent in July. (…)
Time Is No Longer on Iran’s Side in the Battle of the Blockades The U.S. is helping Gulf states move significant amounts of oil out of the region while thwarting Tehran’s shipments
Featured WSJ piece, but unfortunately not completely accurate and thorough. (Note that parts of what follows blends from several sources, including David’s own research, with some AI contribution which I verify as much as possible)
The WSJ long article is totally based on this little paragraph:
TankerTrackers.com estimated earlier this week that on average about 5 million barrels a day of crude oil, almost none of it Iranian, exited the Persian Gulf via the Strait of Hormuz over the previous 28 days, along with roughly 2.5 million barrels via oil ports on the Gulf of Oman, such as Fujairah in the United Arab Emirates. These exports represent more than 40% of the region’s prewar flow of oil.
- TankerTrackers numbers are accurate but they contradict the claims made by the US administration. Here’s how the various numbers compare:
Recent Windward daily logs recorded 9 vessel transits per day (e.g., 4 inbound and 5 outbound on September 2–3). This confirms Al Jazeera’s observation that vessel movements are depressed by nearly 90% compared to prewar levels (roughly 10 ships daily vs. the historic 100 ships daily), even as larger supertankers under military escort manage to move ~5 million barrels per day through the waterway.
(Windward through Sep. 7)
- “almost none of it Iranian” may be officially correct but actually inaccurate. Data from TankerTrackers.com, Kpler, and Vortexa confirm that Iran has gone roughly seven weeks without officially moving crude out of the Persian Gulf through the strait to its primary buyer, China.
But a portion of Iraqi crude transiting the Strait is actually mislabeled or blended Iranian oil. Extensive “dark fleet” tracking and enforcement actions demonstrate that illicit blending takes place to bypass the US naval blockade. Iraqi export volumes jumped to over 2.3 million b/d in August 2026. Reuters reported in May 2026 that Treasury alleged that an Iran-affiliated smuggler mixed Iranian with Iraqi oil and used false documentation to sell the combined cargo as Iraqi.
Recent Chinese import data supports the view that China is still receiving Iranian-origin oil. Kpler’s provisional estimates put China’s Iranian-oil arrivals at 785,000 b/d in June, 823,000 b/d in July, and 534,000 b/d so far in August (Aug. 24), 55% of the 1.4 million b/d average of 2025.
China’s official July customs figures reportedly recorded no direct crude imports from Iran, while imports attributed to Malaysia, a recognized transshipment hub for sanctioned Iranian oil, were about 350,000 b/d.
Chinese customs data also showed about 24,000 b/d from Iraq in July. But September-loading activity points to a rebound: market sources told Reuters that Chinese refiners had bought at least 16 million barrels of Basrah crude for September arrival. Iraq’s total August crude exports were estimated at 2.17 Mb/d by Kpler and 2.30 Mb/d by Vortexa.
(Windward)
China released its August trade data yesterday: crude oil imports, which dropped 41% between March and June 2026 (driving oil prices down), rose 22% MoM in July and another 6.1% in August. Chinese oil imports thus rose by 63 million barrels in July and August. Much came from Russia but also from Malaysia.
(ICIS)
In all, while we don’t know the exact amount, “zero Iran” seems highly unlikely. Also unlikely is the US claim that Middle Eastern crude shipments have almost completely recovered. WTI was $74 in early August, $94 today. The December futures went from $74 to $87 meanwhile.
Brent crude could surge above $120 a barrel because of intensified attacks on shipping in the Strait of Hormuz and Red Sea, Goldman Sachs warned in a new oil price forecast.
“Markets are increasingly pricing a prolonged Mideast conflict,” the bank’s analysts said in a research note Monday evening. (WSJ)
My good friend Huber Marleau:
This escalation [in oil prices] represents a fast return of the pre-existing geopolitical premium of a Middle East war that won’t end because the players are unable to find a way out of the conflict. On the one hand, Iran is in no mood to capitulate and on the other, the US midterm elections have not broken the stint. In this regard, the flaring tensions between the U.S. and Iran exacerbated inflation concerns, which, in turn, acted as the catalyst that drove 10-year bond yields up sharply to 4.80% because of the strong bond/oil correlation.
But this is not the fundamental reason.
The media has attributed this upward move to inflation and soaring term premium – a gauge that measures the extra yield investors demand to hold long-dated bonds. I disagree with their views because they are not true.
Firstly, investors’ expectations of average annual inflation over a 10-year period have gone nowhere since the Iran war began, hovering steadily around 2.3%.
Secondly, the term premium has moved sideways over the past twelve months, suggesting that worries about fiscal sustainability and Fed credibility are not warranted.
The point is that the rise in bond yields is hardly a crisis, for it reflects the restoration of the historically usual 2-3% real interest rates on top of 2-3% inflation, making 4-6% nominal interest rates perfectly normal.
This reappearance is related to a structural shift in the supply and demand for capital. Fundamentally, the US government’s insatiable demand for capital to fund large fiscal deficit spending is facing fierce competition from an unusually large supply of high-grade corporate bonds stemming from the AI capex boom, as well as the growing attraction of foreign bonds and the sell-off of overseas holdings by Japanese investors to protect the yen against the rising cost of energy.
All this is happening at a time when price-sensitive hedge funds, individuals, and investment funds have replaced the central banks as the major buying force.
Ed Yardeni neatly paints the US pickle before telling us not to worry:
The question is whether the [debt] crisis is imminent. Even more important is whether a policy response could stop the crisis from turning into a death spiral. If so, the crisis will be a buying opportunity.
Servicing the national debt is becoming a growing fiscal challenge. Treasury net interest outlays has climbed above $1 trillion on a 12-month basis, putting it on par with national defense spending. The recent rise in the yield curve, along with mounting debt, will push net interest outlays higher. There is no way to put lipstick on this pig.
Federal spending continues to rise relentlessly. CBO projections show total outlays exceeding $11 trillion over the next 10 years, driven primarily by mandatory spending and rising interest costs.
CBO projections also show annual budget deficits widening from about $1.8 trillion today to more than $3 trillion towards the end of the 2030s.
The federal budget deficit is currently running at around 6% of GDP, a level more commonly associated with recessions than economic expansions. CBO projections suggest deficits will remain above 6% of GDP for years.
Federal debt held by the public is already near 100% of GDP and, according to the CBO, is projected to exceed 150% by the mid-2050s.
Importantly, today’s debt challenge is largely a government debt problem. Household and business debt relative to GDP remains well below its pre-GFC peak, while Treasury debt continues to trend higher. The AI buildout could temporarily reverse that trend as businesses increase borrowing to fund AI-related investments. (…)
The US remains on an unsustainable fiscal path. Should investors be worried? Again, we will worry about the deficit and rising debt when the Bond Vigilantes start worrying about them.
The Bond Vigilantes have been stirring lately, but the 10-year Treasury bond yield remains between 4.00% and 5.00%. We’ve contended that this range is the “old normal,” i.e., the same range as in the years from before the Great Financial Crisis to the Great Virus Crisis. This suggests the economy is back to normal and growing at a solid pace.
(…) Bond Vigilantes tend to be on the loose when the 10-year US Treasury bond yield exceeds nominal GDP. The yield is currently well below nominal GDP. (…)
Hmmm… Respectfully Ed:
- Treasury yields went up almost non-stop from 4% in 1965 to 15% in 1982 while constantly below GDP growth. Much of the subsequent decline in yields was when GDP was growing more slowly than yields.
- What is normal? Ed’s “old normal” of 4-5% yields occurred rather rarely since 1950. Was the period 2001-2008 normal?
- Is the US economy really “back to normal”, K-shaped as it is and really only sustained by AI and the US warring Iran? I doubt the average American would consider all this normal.
This chart below plots 3 ways to assess “normality” using inflation-adjusted Treasury yields. The Cleveland Fed’s measure and the 10Y nominal minus actual core CPI inflation measure are pretty much in sync over time. The 10-Y Breakeven Inflation Rate uses expected inflation.
All three measures are at 2.5% currently, the high end of the 2001-2026 range of 0-2.5%, … but the low end of the 1980-2001 range of 2.5-5%.
I asked an AI friend why the shift?
The Pattern Itself
Your stylized fact holds up well against the data. Over 1985–2001, nominal 10-year yields ranged from 11.4% down to 4.7%, while inflation expectations were mostly 2.5–4%, leaving ex ante real yields of roughly 2.5–5%. Since 2003, market-based real yields on 10-year TIPS have averaged about 1.0%, with a floor around −1% (2012–13 and 2021–22) and a recent recovery to only 1.8–2.4% in 2024–26. The break around 2001 is real, and it’s a global phenomenon, not a US-specific one.
The Framework
A 10-year real yield decomposes into two parts: the expected average path of short-term real rates (the natural rate, r*) plus a term/risk premium. The CBO, IMF, and academic literature all conclude that the post-2000 decline reflects both a falling r* and compressed premia, driven by global saving and investment forces. So the question becomes: why was r* high before 2001 and low after?
Why Real Rates Were High, 1985–2001?
Disinflation with credibility still being built. Volcker and early Greenspan held real policy rates high to break entrenched inflation; markets demanded a premium for lingering inflation uncertainty.
Strong growth and investment demand. Trend productivity accelerated in the late 1990s IT boom, raising the return on capital and the demand for loanable funds.
Structural fiscal deficits. Federal deficits of 3–5% of GDP through the 1980s and early 1990s kept Treasury supply heavy.
Demographics. Baby boomers were in prime borrowing and working years, supporting demand for credit and capital.
Why Real Rates Fell After 2001?
The global saving glut. Bernanke’s famous 2005 argument: after the 1997–98 Asian crisis, emerging markets and China built precautionary reserves, and oil exporters recycled commodity windfalls into US Treasuries, pushing down world real rates. The IMF estimates this EM saving surge was the largest single driver of the early-2000s decline.
Safe-asset shortage. Global demand for safe, liquid assets is concentrated in US Treasuries, which compresses their real yields relative to other assets.
Slower trend growth. The post-1995 productivity boom faded; slower potential growth is one of the most widely cited explanations for a lower r*.
Weak investment demand. Advanced-economy investment rates fell sharply and persistently after the 2008 financial crisis.
Demographics and secular stagnation. Aging populations saved more for longer retirements while investment opportunities weakened.
Monetary policy and portfolio shifts. The 2001 recession easing, then ZIRP/QE after 2008 and 2020, anchored expected short rates near zero, while the tech-bubble bust shifted portfolios toward bonds and the “Great Moderation” lowered perceived risk.
A skeptical note for completeness: some researchers argue the savings glut is overstated — global saving rates weren’t rising robustly — and attribute the fall more to asset bubbles, risk misperception, and reserve accumulation in fixed income.
Is the Regime Changing Again?
Possibly. Real 10-year yields have climbed from −1% in 2021 to roughly 2.4% by mid-2026, driven by large fiscal deficits, sticky services inflation, deglobalization, and heavy AI-infrastructure capex — forces that could push r* back toward the old regime’s lower bound.
Even so, real yields remain well below the 3.5–4% mid-range that was routine in 1985–2001, which is why the debate over whether the low-rate era is truly over remains unsettled.
Even AI can’t decide!
But Ed can:
Here are a couple of reasons why we expect the 10-year yield to remain between 4.00% and 5.00%:
(1) US Treasury Secretary Scott Bessent has taken some actions recently to stop bond yields from rising. He has stated that the Treasury can do much more if necessary. If the 10-year Treasury yield rises to 5.00%, we expect he will announce that the Treasury intends to issue more Treasury bills and use some of the proceeds to buy back Treasury bonds. His predecessor, Janet Yellen, did that in 2023, and it worked.
Remember, Bessent worked with Stanley Druckenmiller for Soros Fund Management in the early 1990s. Together, they shorted the British pound in September 1992, netting the hedge fund over $1 billion. They “broke the Bank of England.” Bessent’s recent actions are a signal to his friends in the hedge fund community that he will break them if they short his bonds!
(2) Fed Chair Kevin Warsh has stated that the Fed is committed to restoring price stability. If inflation remains stubborn, the FOMC will probably raise the federal funds rate in September. That should restore the Fed’s credibility as an inflation fighter and ease pressure on long-term yields. We told the Fed to do that in July, but they just won’t listen.
Credibility is the word.
- Is Bessent credible saying he can break the Bond Vigilantes? I have my doubts.
- Is Warsh credible saying he means business on inflation? He said it so clearly and so often now that he has no choice. The Bond Vigilantes will see to it.
But at what cost to the economy?
As Bloomberg pointed out last week:
(…) the US economy has become increasingly insensitive to interest rate increases by the Federal Reserve. To combat inflation and tame yields on long-dated debt, more aggressive hikes will be needed. That means bonds will keep losing value as yields have yet to peak. (…)
The single largest structural change is the dominance of long-term fixed-rate mortgages. In the 1980s, adjustable-rate mortgages were far more prevalent. That meant Fed hikes transmitted almost immediately to household budgets. Today, the vast majority of US homeowners hold 30-year fixed-rate mortgages. And since many of those were refinanced at historically low rates during 2020 and 2021, debt-servicing costs remained around 10% of income despite the 2022–2023 hiking cycle.
On the corporate side, it’s similar. In the 1980s, corporate America carried more floating-rate bank debt and had less access to deep, long-duration bond markets. Investment-grade and high-yield bond markets since then have allowed companies to lock in long-term fixed-rate financing, reducing their immediate exposure to rate moves. (…)
Add urgent AI spending, urgent military spending, urgent green spending, urgent supply chain spending, all cost/price insensitive.
Who said investing was easy?
And who said “trade wars are good, and easy to win“? The same man who said Iran would quickly fold in a “small potatoes” war.
China Export Growth Rebounds as Trade Surplus Nears $806 Billion
Exports jumped 25% in August from a year earlier, slightly undershooting forecasts after an increase of nearly 24% in the previous month. Imports rose 28.2%, data released by China’s General Administration of Customs showed on Tuesday. (…)
China’s trade surplus with the US surged almost 44% from a year earlier to more than $29 billion — the widest gap since Donald Trump returned to the White House in January 2025. While exports to the US jumped 34.4% in August, China’s shipments to the European Union climbed only 6.7% — the slowest increase in 10 months.
Exports to the Southeast Asian nations in the Asean group slowed slightly but still soared just over 30% from a year earlier. Shipments to Latin America accelerated to 17.5% and climbed more than 31% to Africa. (…)
The boom in exports helped mask disruptions to shipping caused by extreme weather in August. Major ports in east China suspended operations as typhoons approached.
Cargo throughput at China’s ports fell every week last month from the prior seven days, according to official figures.
While trade volumes are on the rise, price gains are dramatically inflating the value of exports this year. With trillions of dollars pouring into AI, a shortage for semiconductors and other electronics has sent some chip prices soaring as much as 700% over the past year.
Bloomberg Economics estimates high-tech shipments contributed to more than half of China’s headline export growth in August.
Sales of integrated circuits abroad surged almost 130% in August, with exports of high-tech products up nearly 57%. Shipments of vehicles slowed. (…)
“AI demand is offsetting the impact of adverse weather, boosting export numbers higher,” Xing said. “The tariff uncertainty continues to frontload US import demand.”
Retail sales in the world’s biggest auto market slumped 24% to 1.54 million units, the China Passenger Car Association said Tuesday. Year-to-date sales are down more than a fifth as a persistent real estate crisis weighs on big-ticket spending.
Automakers in the country are looking to grow elsewhere to escape the pain. Their exports jumped 78% to 888,000 vehicles last month, with overseas sales now accounting for 38% of the total, up from a fifth a year ago. (…)
BYD just lifted its target for overseas sales this year to as much as 2 million units, from 1.5 million previously. The maker of the Dolphin sedan was the biggest exporter of new-energy vehicles from China in August, with over 184,000 sales abroad, PCA said. Of the roughly 86,000 fully electric models Tesla Inc. shipped from its Shanghai factory, some 36,000 went overseas. (…)
While on China’s exports:
Some Chinese rare earth suppliers are declining to ship to the U.S. for fear of repercussions from Beijing, three sources said, underscoring how access to the materials remains an issue for the U.S. weeks before President Xi Jinping visits Washington.
U.S. officials have repeatedly asked China to stick to commitments made in Busan and Beijing over the past year to ensure the smooth flow of rare earth export licences. The persistence of the problem has put it on the U.S. planning agenda ahead of Xi’s September 24 visit, a source familiar with the work said.
A handful of Chinese suppliers have refused to ship rare earths to U.S. companies since early August when China imposed sanctions on the Responsible Business Alliance (RBA), a U.S. supply chain monitor, a separate source with direct knowledge of the situation said.
With China deploying its own trade compliance weapons, the companies were wary of punishment from Beijing for complying with the due diligence framework of the Responsible Minerals Initiative (RMI), a global mineral supply chain audit programme connected with the RBA, the source said.
Other Chinese rare earths companies had already stopped shipments to the U.S. to avoid entanglement in geopolitics in recent months, two other sources familiar with the trade said. One cited four instances where Chinese firms declined to send material for fear it could be resold to banned users.
Exports to the U.S. of yttrium have risen this year but are still only about half 2024 levels despite large shipments to other countries, Chinese customs data shows. Some U.S. companies have been waiting more than six months for mineral licences, said two of the sources, declining to identify them. (…)
Beijing said its August decision to sanction the RBA and other U.S. auditing firms was a response to a series of FCC restrictions since December targeting Chinese electronics testing labs, drones, consumer routers, submarine cables, advanced robotics equipment and power inverters.
When U.S. officials have raised the rare earths issue in meetings, Chinese officials countered by saying the FCC actions were a violation of the Busan truce, said one of the sources who was briefed on the interaction.
However, after two months without yttrium exports, China sent 27 tons of the material to the U.S. in July, the second-highest monthly shipment since January 2025.
Several U.S. firms also report recently receiving multiple licences after long waits, two sources said, with some firms anticipating an increase in approvals around the summit.
Licence approvals are even more limited for Indian and Japanese buyers, two sources familiar with the matter said. Chinese suppliers are overwhelmingly refraining from shipping material to Japanese firms, one of them said.
Japan’s Trade Minister Ryosei Akazawa has previously said Japanese companies have faced delays in permits and prolonged customs inspections for critical minerals including rare earths. (…)
UK and EU Gasoline Is Reaching Russia
Sustained Ukrainian strikes on Russian refining capacity have produced something not seen since the start of the war: Russia importing gasoline and diesel at scale.
Windward’s analysis of shipping data, combined with Vortexa trade-flow data, puts total Russian imports at an estimated 3.85 million barrels across July–August 2026 — roughly 500,000 barrels in July, rising to about 3.4 million in August as the refinery crisis deepened. Gasoline and gasoline-blending components accounted for 3.1 million barrels of that total.
The more consequential finding is where some of that fuel likely originates. The data indicates a meaningful share is UK- and EU-origin product, moved to Russia through blending and storage infrastructure in Morocco.
In parallel, record South Korean volumes are supplying Russia’s east coast, using ship-to-ship (STS) transfers in third-country waters, sanctioned and Russia-flagged tonnage, and opaque terminal blending.
It is the same playbook long used to launder Russian crude and refined product exports, now running in the import direction.
CREDIT CHECKS
- High yield decoupling:
Source: @Lvieweconomics
- Tech vs Banks: a similar divergence is playing out in Tech vs Bank sector CDS. Credit investors are treating tech borrowers with greater scrutiny, while banks are seen as lower risk than usual. This tells us that there are no systemic issues right now (calm on banks), but again, there are pockets of concern. If tech borrowers did start to default you can bet that will ripple across markets.
Source: Topdown Charts Pro
- Hyperscaler Hyperspeed Issuance: speaking of tech sector borrowers, the Hyperscalers are issuing so much debt this year they are nearly outborrowing even the most profligate debtor of all — the US government! As Cembalest remarks: “Looking just at the long duration component in 2026, we estimate $310bn in ten year equivalents. That’s 70% (!!) of new Treasury long duration borrowing this year.” (Callum Thomas)
Source: JP Morgan via Daily Chartbook
The New U.S. Tax on ‘Brilliant People’ An exorbitant fee on H-1B visas may exceed executive authority to tax.
President Trump has largely closed the border to illegal migrants, but immigration restrictionists in the Administration aren’t satisfied. They’re seeking to construct a steep regulatory wall to keep out legal immigrants, recently proposing a $103,265 tax for employers seeking to hire high-skilled foreign workers.
The Department of Homeland Security says this “fee” on H-1B visa applications will fund administration of immigration services. DHS estimates the “fee” would raise $8.8 billion a year, which is significantly more than it costs to administer the program.
The H-1B program lets businesses hire foreign workers with specialized skills if they can’t find Americans for a position. The goal of this tax isn’t to raise revenue as much as to make it much more expensive to hire foreign workers.
H-1B visas by law are capped at 85,000 a year. (…)
Businesses invest heavily in training U.S. workers, but colleges are educating too few graduates with particular skill sets that employers need—e.g., cyber-security and robotics. According to the National Foundation for American Policy, foreigners account for roughly 75% to 80% of full-time graduate students in AI-related fields. (…)
The DHS proposal amounts to a tax on businesses that often bring in brilliant people. It also may exceed executive authority. (…)
Smaller businesses and startups might struggle to afford the tax and would have a harder time competing for foreign talent against Big Tech companies. Many of America’s great companies, including Nvidia, Google, OpenAI and SpaceX, were founded in part by immigrants. Why does the Administration want to keep out the next Elon Musk?