A recent interesting phenomenon: the US unemployment rate is rising, but the stock market is actually going up. This is quite uncommon in history.

Generally speaking, an increasing unemployment rate is a bad signal—it indicates economic weakness, and investors should be cautious. But things are different these past two years. While the S&P 500 index hits new highs, the unemployment rate is also climbing. This divergence has a significant impact on the crypto market.

**The Real Dilemma in the Labor Market**

Looking at the latest data, the proportion of formal employment in the US has fallen to 59.6%, a considerable drop from the peak in 1999. Why is this happening? An important reason is the rise of the digital economy. New models like the internet, freelancing, and remote work have changed traditional employment statistics. This means that the old indicator of unemployment rate may have less reference value in today’s economic environment.

But here’s the problem. The labor market pressure index has recently turned positive, and the Kansas City Fed’s labor market conditions index is also worsening. History shows that when these two indicators simultaneously show problems, it often signals an upcoming recession. Once a recession hits, markets tend to enter a long-term bear phase.

**The Disconnect Between Equity Markets and Employment**

Why is the stock market still rising? Essentially, the entire market now heavily depends on the performance of the AI sector. The gains in the S&P 500 are largely driven by AI-related companies. The problem is, the AI industry has limited capacity to absorb employment. Look at tech companies—they frequently lay off workers, yet their stock prices keep hitting new highs. This creates a contradiction: the equity market is thriving, but real economic employment is deteriorating.

What does this disconnect mean for the crypto market?

**Three Key Impacts**

First is liquidity. If the labor market continues to worsen, the Fed may be forced to adopt easing policies, which would benefit crypto assets—capital will seek higher-yield investments, and crypto could be one of them. Conversely, if the Fed sticks to tightening policies, crypto markets will face capital pressure.

Second is risk appetite. Around 2026, the AI bubble might burst. If that happens, a sharp sell-off in equities could trigger a chain reaction in the crypto space, potentially causing crypto assets to oversell. But there’s an opportunity here: crypto projects with real technological applications and practical scenarios will have stronger resilience and might stand out.

The third point is crucial—restructuring industry logic. Both crypto and AI are core tracks of the digital economy, with close capital linkages. Sometimes, funds flow between these two fields. If the AI bubble bursts, the market’s valuation of crypto technology will be reshuffled. Investors need to rethink: which crypto projects truly have long-term value, and which are just riding the wave of hype.

**Practical Action Suggestions**

Instead of passively waiting, it’s better to take proactive steps. Establish a monthly labor market monitoring system, regularly check the growth rate of unemployment and the changes in the two core indices. With this data, you can more accurately grasp when the market might shift from a bull to a bear, and when risks are at their peak. This way, you can avoid being hit by sudden systemic risks.

Overall, the current market is at a crossroads. Unemployment pressures, the AI bubble, liquidity shifts—these factors intertwine, making the crypto market’s trajectory more complex. Doing your homework and tracking data are essential to survive longer in this wave of market movements.