The benchmark 10-year Treasury yield recently climbed above 5.3%, reaching levels not seen since 2002. Even more striking, this surge occurred as evidence was building up of a weakening labor market, not because investors suddenly became convinced that the American economy was entering a new era of extraordinary real growth.

A rising 10-year yield is normally associated with a healthy economy. Strong growth can produce stronger demand for capital, while rising inflation expectations can lead investors to demand higher nominal returns. But when long-term yields continue rising while economic data deteriorate, the interpretation changes.

Instead of "America's economy is getting stronger," the bond market is saying, "America is becoming more expensive to finance."

The Federal Reserve raised its benchmark interest-rate target by another quarter point in September, bringing the federal funds target to 3.75%-4%. The Fed acknowledged that economic activity remained solid, but it also said without ambiguity that inflation remained elevated; something that was already obvious to millions of Americans who see their dollars buying less seemingly every year.

Inflation hasn't returned to the Federal Reserve's 2% objective. The PCE price index was up 3.4% year-over-year in August.

The Fed is backed into a corner by a problem that can't be solved with monetary policy. If it keeps rates high or raises them further, it puts additional pressure on households, businesses, housing and financial markets. If it cuts rates aggressively, it risks allowing inflation to become entrenched. And the 10-year Treasury is increasingly refusing to cooperate with the idea that the Fed can simply dictate the cost of long-term money.

The Federal Reserve controls the overnight policy rate, but can't ultimately control the price at which the government can borrow for ten or thirty years. Those rates are determined in the enormous global bond market, and that bond market is demanding considerably more compensation.

The September employment report showed an increase in unemployment as previous estimates were revised downward. July's payroll figure was revised from a gain of 21,000 to a loss of 10,000, while August was revised from 162,000 to 133,000. The combined revision reduced previously-reported employment by 60,000 jobs. That isn't a healthy labor market, and revisions always show a clearer (and less rosy) picture after the economy has already digested the initial numbers. The first number makes the headlines, and the revision comes later.

Average monthly payroll growth over the previous twelve months was only 45,000 as of September. That isn't the labor-market boom one would expect to see supporting a 5%-plus long-term Treasury yield.