The employment landscape in the United States is showing signs of marginal recovery, with a notable improvement in recruitment expectations across various industriesHowever, the unemployment figures for November have seen a slight increaseGiven the current manageable core inflation pressures in the U.S., the Federal Reserve is anticipated to cut interest rates by 25 basis points during its meeting in DecemberLooking ahead to the next year, there may be potential for an additional 50 basis points reductionA significant rise in U.STreasury yields observed in mid-December could be attributed to the heightened speculation surrounding a pause in rate cuts by the FedIn the short term, it seems that U.STreasury yields may oscillate widely above the 4.0% mark, remaining sensitive to interest rate decisions, economic data, and official communicationsIn the medium to long term, the central tendency of the 10-year Treasury yield could begin to rise steadily.

One of the key highlights from recent data is that the labor market's resilience has begun to re-emerge as the impact from hurricanes that affected the employment figures in October recedes

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The revised data for September and October also paint a more optimistic pictureIn November, the U.Seconomy added 227,000 nonfarm jobs after adjusting for seasonal variations, with previous months also experiencing upward revisionsThe unemployment rate has nudged up slightly to 4.2%. The three-month average of new nonfarm job additions now stands at 173,000, a significant improvement compared to the average of 123,000 from the previous three months from August to OctoberThis trend suggests a clear distancing from the critical threshold of 100,000 which often raises concerns about economic stability.

Moreover, the employment diffusion index, which measures the breadth of employment growth across sectors, has shown marginal signs of recoverySince 2022, the index had been on a downward trajectory, but recent indicators show a revival, including the manufacturing employment diffusion index which has risen in tandem with the uptick in the manufacturing PMI

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Despite still being at historically low levels, the latest signs of upward movement in the diffusion index indicate a potential turnaround.

Looking into specific sectors, there is a broader sense of optimism around recruitment needs across various industriesThe demand for employment in service sectors, manufacturing, and construction has reportedly improved significantlyEspecially notable is the positive feedback from the U.SCensus Bureau’s surveys since October, where industries such as educational services, healthcare, leisure, hospitality, finance, and insurance have indicated a sustained rise in hiring expectationsAs such, a recovery in job demand could potentially curb the increase in the unemployment rate.

On the inflation front, the pressures appear to be under control for now, but the implementation of various policies next year could elevate inflationary threats in the U.S

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The resilience of consumer spending has led to a mild uptick in month-on-month growth rates of core goods, though overall inflationary pressure remains manageable as conditions stabilize across supply and demandCore services inflation has shown consistent growth around the 0.3% mark – a notable decrease from previous heightsWhile fluctuations in food item prices occasionally disrupt this trend, the risks associated with rising energy prices remain containedLooking forward to 2025, it is anticipated that wage growth will stabilize, further balancing the dynamics of supply and demand in the labor market, which should keep pressure on wage increases within bounds.

Housing inflation growth has also considerably retreated from previous peaks, and thus it is expected that core services inflation rates will stabilize at healthier levels in the futureHowever, stricter immigration policies could introduce strain in this area, implicating core services inflation

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The situation regarding core goods also mirrors this sentiment, where current inflation pressures remain manageable, but the introduction of new tariffs against foreign nations could rapidly reassert upward pressure on core goods inflation.

In light of November's employment statistics, which indicated a rise in both unemployment rates and the number of individuals facing long-term unemployment, alongside aligned inflation data that met expectations, it is highly likely that the Federal Reserve will enact a 25 basis point rate cut in DecemberDuring the policy meeting, significant attention will be placed on the economic projections released, particularly the dot plot outlining anticipated rate trends, as well as commentary from Chair Jerome Powell regarding the implications of these projectionsThere remains a possibility that the dot plot could reveal a forecast for rate cuts next year that is substantially lower than the previous 100 basis points suggested during the September meeting.

As for 10-year Treasury yields, they are expected to maintain a pattern of high fluctuations, with the yield curve likely to steepen further