As the new year unfolds, the release of American economic data has ignited suspicion across the globe. The December non-farm payroll report was particularly startling, showcasing an increase in jobs that significantly surpassed expectations, while the unemployment rate showed a marked decline. This data usually would invigorate market sentiment, but unexpectedly, the reaction was quite the opposite: U.S. stock markets plummeted, and bond yields soared. The phenomenon reveals the lurking dangers within the U.S. economy and has prompted a recalibration of global capital.

The non-farm payroll data has raised questions. According to recent figures, the U.S. economy added an impressive 256,000 jobs in December, well beyond the anticipated 160,000. At the same time, the unemployment rate dropped to 4.1%. However, skepticism surrounds the validity of these figures.

In stark contrast, the ‘small non-farm’ data revealed only 122,000 new jobs for December, highlighting a significant discrepancy with the major non-farm report. This discrepancy raises flags about the reliability of the reported figures.

To compound matters, the U.S. manufacturing index has lingered below 50 for over two years, a classic indicator of recession. There are signs of job cuts within the manufacturing sector, and both physical goods consumption and dining experiences are declining. This raises a critical question: where is this employment growth coming from? It’s also noteworthy that data integrity issues are not new; in 2024, the U.S. had to revise its employment figures downward by 30%-50% for the period from April 2023 to March 2024.

Robust non-farm data usually inspires confidence in economic growth. However, the market's apprehension that the Federal Reserve might continue or even amplify its interest rate hikes because of the strong employment figures led to widespread concern, causing the stock market to fall and resulting in escalating bond yields.

Bond yields surged dramatically, particularly the 30-year Treasury yield which climbed to 5%. This spike signals not only expectations for future rate increases but also mounting anxiety regarding the current economic landscape.

Rising bond yields generally reflect intensifying worries among investors about the economic outlook, especially entailing fears of persistent inflation and continuous rate hikes. As interest rates rise rapidly, stocks often face pressures, prompting investors to shift funds from the riskier stock market into the relatively safer bond market, leading to a wave of sell-offs in the stock market. Furthermore, these high yields can increase corporate borrowing costs, potentially hampering profitability and future growth.

In light of this, the international financial community has begun reassessing and rearranging its capital investments. The uncertainty surrounding the U.S. economy has heightened investment risks. Allies of the U.S. like Japan, the UK, and Canada have started divesting from U.S. Treasury bonds.

Although the Governor of the Bank of Japan has not overtly signaled an inclination to raise interest rates, Japan’s inflation trends, along with the yen nearing 160 against the U.S. dollar, suggest that a rate increase is on the horizon. Such a move could send shockwaves through American financial markets, possibly leading investors to offload U.S. stocks or bonds and accelerating a historic default on American debt.

Additionally, on January 1, the head of a British financial institution attended the fourth UK-China Financial Services Summit in Beijing, which illustrates a trend of aligning more closely with China.

China’s central bank, responding to the heightened hostility from the U.S., has also accelerated its reduction of U.S. Treasury holdings. In the first ten months of 2024, China trimmed its U.S. bond reserves a total of eight times, netting a reduction of $56.2 billion.

Moreover, the People’s Bank of China has notably increased its gold reserves in November and December of 2024, strategically reshaping its foreign reserve structure. On January 15, 2025, the PBoC plans to issue the first batch of central bank notes for 2025 through the Hong Kong Monetary Authority’s debt instruments settlement system, amounting to 60 billion yuan, signaling its commitment to maintaining the resilience of the yuan against currency fluctuations.

Amidst these developments, the relationship between the U.S. and Chinese economies shows subtle shifts. On January 7, He Lifeng engaged in a video call with U.S. Treasury Secretary Janet Yellen.

During the call, Yellen appeared to employ similar tactics, threatening China over production surplus and its support for Russia. However, the current landscape suggests that the U.S. may require cooperation from China more than ever. Should the U.S. persist with its threatening approach, the anticipated outcomes are likely to be elusive.

In summary, while the December non-farm payroll data ostensibly reflects a vigorous labor market, it conceals allegations of data manipulation and hints at the risk of an economic downturn. The ongoing reallocation of global capital, particularly as nations offload U.S. Treasuries, underscores a collective anxiety surrounding the state of the American economy.