The Labor Market Is Cracking, Stocks Are Living a Lie, and Bitcoin

Author: Przemysław Radomski

Published: December 16, 2025

Overview

The article discusses the alarming state of the U.S. labor market, which is deteriorating rapidly, while the S&P 500 index remains near its all-time highs. This disconnect is attributed to a small number of companies, referred to as the "Magnificent 7," which are masking the underlying economic weaknesses. Bitcoin's recent decline is seen as a precursor to a potential market correction.

Labor Market Data

Recent employment data reveals a troubling trend:

• October's nonfarm payrolls were revised to -105,000, marking the first negative print since the COVID-19 lockdowns.
• November's report showed a headline increase of +227,000, but this was misleading due to significant downward revisions.
• The unemployment rate has risen to 4.2%, with broader measures indicating 4.6%.
• Year-to-date layoff announcements have reached 1.17 million, nearing pandemic levels.

The "Frozen" Labor Market Trap

The article highlights a "frozen" labor market where hiring has stalled, and layoffs are increasing. Key points include:

• The JOLTS hiring rate has dropped to levels that typically precede recessions.
• Workers are hesitant to leave their jobs, indicating a lack of confidence in the job market.

Stock Market Dynamics

Historically, stock markets peak before employment data deteriorates, but the current situation is reversed. The S&P 500 recently reached new highs despite the labor market's decline, primarily due to the performance of the Magnificent 7 companies, which dominate the index.

The Magnificent 7 Illusion

The concentration of market capitalization among the Magnificent 7 has created a misleading perception of market health:

• These companies now represent 35-37% of the S&P 500's total market cap.
• The S&P 500 Equal Weight Index has underperformed the cap-weighted index significantly.

Bitcoin's Role as a Risk Indicator

Bitcoin's recent decline of 32% from its October high is viewed as a warning signal for the broader market. The correlation between Bitcoin and the Nasdaq has increased, suggesting that Bitcoin's movements may foreshadow shifts in risk appetite.

Potential Catalysts for Market Correction

The article identifies three potential catalysts that could trigger a correction in the Magnificent 7:

1. Disappointing AI earnings from major tech companies.
2. Widening credit spreads indicating increased risk in the credit market.
3. Bitcoin's correlation with the stock market catching up, leading to a broader sell-off.

Implications for Precious Metals

The initial phase of a stock market decline may see precious metals fall alongside equities. However, if the Federal Reserve responds with aggressive rate cuts, gold could see a substantial rally. Conversely, persistent inflation could limit gold's response.

Conclusion

The labor market is already in a recession-like state, and the stock market's current highs are misleading due to the dominance of a few companies. Bitcoin's decline signals that a correction may be imminent, and the timing of this correction remains uncertain.

Thank you for reading this analysis.