According to the Zhito Finance APP, CITIC SEC released a Research Report stating that overall, the US labor market is showing signs of marginal recovery, and the recruitment demand in many industries in the USA is also improving further. However, the number of unemployed people rose in November. Considering the current controllable core inflation pressure in the USA, it is expected that the Federal Reserve will lower interest rates by 25bps in the December meeting, and the room for rate cuts next year may be 50bps. The significant increase in US Treasury bond yields in mid-December may be due to the warming of the market speculation on pausing interest rate cuts. In the short term, the US Treasury bond yield may fluctuate widely above 4.0%, being highly sensitive to interest rate meetings, US economic data, and statements from Trump. In the medium to long term, the central rate of the 10-year US Treasury bond yield may gradually rise.

The main points of the Citic Securities research report are as follows:

As the influence of October's hurricanes gradually diminishes, the US job market showed resilience in November, and the employment data for October and September was slightly revised upward.

Seasonally adjusted for November in the USA.Non-farm employmentAn increase of 0.227 million people, with non-farm employment data for October and September both revised upward. The unemployment rate rose slightly to 4.2%. The current average number of non-farm jobs added over the past three months is 0.173 million, which is a significant improvement compared to the previous three-month average from August to October (0.123 million), and the three-month average is gradually moving away from the dangerous threshold of 0.1 million.

From the Employment Diffusion Index perspective, the employment market in the USA is showing signs of marginal recovery.

Since 2022, the Employment Diffusion Index for all private sectors in the USA has continued to decline, but recently this index has shown signs of recovery, including an upward trend in the Manufacturing Employment Diffusion Index following an increase in the USA Manufacturing PMI. Although the current Employment Diffusion Index remains at historically low levels, recent signs of an increase have been observed.

At the same time, many industries are showing improving expectations for future recruitment needs, with noticeable improvement in employment demand expectations in the service, manufacturing, and construction industries. If employment demand gradually recovers in the future, the upward trend in unemployment rates may be limited.

Results from the USA Census Bureau survey indicate that since October, many industries have been gradually improving their recruitment expectations, particularly in the education services, Medical Care, Leisure and hospitality, as well as finance and Insurance sectors. The recruiting expectations for USA enterprises are warming up, which is expected to support healthy development in the employment market. Additionally, the inverse relationship between the number of job vacancies and the number of unemployed remains significant. If employment demand gradually recovers in the future, the upward trend in unemployment rates may be limited.

Currently, inflationary pressures in the USA are manageable; however, after Trump's potential return to power next year, the implementation of various policies may heighten inflationary pressures.

Although the resilience of USA Consumer has increased, and the month-on-month growth rate of core Commodities has risen, the inflationary pressure from core Commodities is manageable given the significant easing of supply and demand pressures. The month-on-month growth rate of core services inflation has stabilized around 0.3%, showing a noticeable decrease from previous highs. Despite occasional disruptions in food item inflation, the risks of upward disturbances in Energy prices are limited. Looking ahead to 2025, it is expected that the growth rate of salaries in the USA will gradually stabilize, and the supply and demand of the employment market will further balance, allowing for manageable wage pressures in the future.

The month-on-month growth rate of housing item inflation has also significantly decreased from a high point, thus it is expected that the month-on-month growth rate of core services inflation will stabilize at a healthy level. However, if Trump quickly tightens immigration policies after taking office, it may exert pressure on core services inflation. The inflation pressure from core Commodities in the USA is similar; currently, the pressure is manageable, but if Trump imposes tariffs on other countries after taking office, the implementation of these tariff policies could quickly lead to a resurgence of inflationary pressure on core Commodities.

It is expected that the Federal Reserve will lower interest rates by 25bps at the December monetary policy meeting, and there may be a space for a 50bps interest rate cut next year.

In November, with the USA unemployment rate and the number of permanent unemployed rising further, and the inflation data in line with expectations, this bank maintains the view that there is a high probability of a 25bps rate cut by the Fed in December. Attention should be paid to the economic forecasts and the dot plot to be disclosed by the Fed at the monetary policy meeting in December (to be announced at 3 AM Beijing time on December 19), as well as Powell's comments on the dot plot and the path of interest rate cuts. There is a possibility that the upcoming December Fed dot plot will show a significantly lower rate cut next year compared to the 100bps level disclosed at the September meeting. Based on the neutral interest rate calculated by the Taylor rule, this bank expects the Fed's rate cut space next year to be around 50bps.

The 10-year US Treasury yield is expected to continue to fluctuate at a high level, with the US Treasury yield curve expected to continue to steepen.

The significant rise in the 10-year US Treasury yield in mid-December may be due to the warming of the rate cut discussions in the USA. Some foreign institutions recently indicated that the Fed may not cut rates next year, combined with the unexpected increase in the USA PPI growth and lower than average demand at the 30-year US Treasury auction, resulting in a rapid rise in the 10-year US Treasury yield to 4.391% (as of December 15). In the short term, US Treasury yields may fluctuate widely above 4.0%, being highly sensitive to the monetary policy meeting, USA economic data, and Trump's statements related to the economy and policies. In the medium to long term, as signs of economic recovery in the USA gradually become evident, the 10-year US Treasury yield center may gradually rise, and the US Treasury yield curve is expected to continue to steepen in the context of further rate cuts next year.

Risk factors: Policies implemented by Trump after taking office exceed expectations; fluctuations in the USA economy exceed expectations; fluctuations in USA inflation exceed expectations; fluctuations in USA monetary policy exceed expectations; pressures from USA deficits exceed expectations; geopolitical risks exceed expectations, etc.