US Economy: Weekly Commentary – December 9, 2025

US Market Review

Treasury yields rose as U.S.–Japan spreads narrowed. U.S. stocks gained, tech up and utilities down. The dollar weakened, oil climbed, while gold and Bitcoin fell overall.

Treasury yields moved higher over the week, with the 10-year Treasury note recording its largest increase since the Liberation Day pause in April. The key risk for the United States is not a rise in Japanese yields per se, but rather the narrowing of the yield differential between the two countries. The 30-year Treasury spread has fallen to levels last seen in March 2022, when Japanese government bonds offered close to 0%. Now that Japanese bonds are significantly more attractive relative to U.S. Treasuries, substantial yen-denominated capital is being drawn back to Japan, a trend intensified by ongoing U.S. rate cuts.

U.S. equity markets ended the week higher. Micro-cap and small-cap stocks advanced 1.85% and 0.80%, respectively, while large-cap equities gained 0.30%. The “Magnificent 7” rose 1.18%. Sector performance was mixed: technology rebounded strongly with a 2.45% increase, while utilities declined 4.40%.

In currency markets, the U.S. dollar weakened by 0.40% against the euro. WTI crude oil rose 2.84%, reaching a two-week high, driven largely by expectations of an upcoming Federal Reserve rate cut, which would support economic growth and energy demand, alongside geopolitical tensions that could constrain supply from Russia and Venezuela. Limited progress in negotiations over Ukraine, the potential tightening of restrictions on Russian crude, and the risk of U.S. military involvement in Venezuela contributed to supply concerns, while stable OPEC+ production provided a partial offset. Overall, bullish forces prevailed in the oil market. Gold declined 0.67%, and Bitcoin fell 2.20%.

US Market Views Synopsis

U.S. private-sector jobs fell in November, wage growth slowed, industrial production stagnated, and consumer sentiment improved slightly amid persistent inflation, cautious spending, and uneven hiring.

U.S. private-sector employment declined by 32,000 in November 2025, well below expectations of a 10,000-job gain and following a revised 47,000 increase in October, marking the largest monthly drop since March 2023. The decline was broad-based, led by small businesses, particularly in manufacturing, professional and business services, information, and construction, while medium and large firms added jobs. Goods-producing sectors experienced their largest losses since COVID-19, with regional variations: the Northeast lost 100,000 jobs, the South 43,000, and the Midwest and West gained 45,000 and 67,000, respectively. Wage growth slowed, with job-stayer pay rising 4.4% year-over-year and job-changer pay up 6.3%. Hiring remains uneven amid cautious consumer behaviour and macroeconomic uncertainty, supporting a dovish tilt in monetary policy, although a Fed rate cut is not expected. Industrial production rose 0.1% in September, reflecting stagnant manufacturing, low capacity utilization, and ongoing supply chain constraints. Consumer sentiment improved modestly in December, with younger respondents driving gains, expectations for personal finances up 13%, and inflation expectations easing slightly, though they remain elevated.

Labour Market

U.S. private-sector employment fell in November, driven by small businesses and broad industry weakness, while pay growth slowed and hiring remained uneven amid economic uncertainty.

U.S. private-sector employers shed 32,000 jobs in November 2025, far below expectations of a 10,000-job gain and down from October’s revised increase of 47,000, marking the largest monthly decline since March 2023. Job creation has been flat in the second half of 2025, and pay growth has slowed. November’s decline was broad-based but led by small businesses, particularly affecting manufacturing, professional and business services, information, and construction. Goods-producing sectors suffered their biggest losses since COVID-19, while regional shifts were mixed: the Northeast lost 100,000 jobs, the South 43,000, and the Midwest and West gained 45,000 and 67,000, respectively. By firm size, small establishments (1–49 employees) cut 120,000 jobs, while medium (50–499 employees) and large firms (500+) added 51,000 and 39,000 jobs. Year-over-year pay for job-stayers rose 4.4%, down from 4.5% in October, while pay for job-changers increased 6.3%, slowing from 6.7%. Across industries, median pay for job-stayers ranged from 4.0% in other services to 5.2% in financial activities, and by firm size, from 2.5% in the smallest firms to 4.9% in the largest. Hiring has been uneven recently as employers face cautious consumers and an uncertain macroeconomic environment, and the recent weakness may support a dovish tilt in upcoming policy decisions.

We expect the labour market to remain weak, as U.S. companies face a challenging economic environment; despite this, we do not anticipate the Fed will cut rates at the next meeting.

Industrial Production

US industrial production rose 0.1% in September. Utilities led gains. Manufacturing stagnated. Vehicle and wood-product output fell. Supply chain issues persisted. Capacity utilization remained low.

US industrial production in September rose a modest 0.1% following a revised 0.3% decline in August, marking a 1.6% YoY increase—its strongest annual gain since November 2022—but highlighting a largely stagnant manufacturing sector. Factory output, which accounts for roughly three-quarters of total industrial production, remained flat, held back by a 2.2% drop in motor vehicle and parts production, a 3.5% decline in wood products amid weak housing demand, and ongoing supply chain disruptions; excluding autos, factory output rose 0.2%. Durable goods edged up 0.1%, nondurable goods fell 0.1%, mining and energy extraction were flat, while utilities rebounded 1.1% after August’s 3% decline. Capacity utilization stayed at 75.9% overall and 75.5% in manufacturing, well below long-term averages, reflecting persistent slack and underused resources. The sector continues to face headwinds from elevated tariffs, softer capital investment, rising input costs, and employment losses—manufacturing jobs have contracted by 54,000 year-to-date through September—while the ISM manufacturing PMI has contracted for nine consecutive months. On a quarterly basis, industrial output grew at a 1.1% annualized rate in Q3, with manufacturing up 1.3%, underscoring that despite modest annual gains, US industrial activity remains constrained and supportive of potential policy easing, including interest rate cuts, in the near term.

We expect US industrial production to remain subdued. Manufacturing headwinds, low capacity utilization, and supply chain constraints are likely to persist, keeping growth modest in the near term.

Consumer Sentiment

Consumer sentiment improved slightly in December, driven by better expectations despite persistent price concerns, while short- and long-term inflation expectations eased but remained elevated amid uncertainty.

Consumer sentiment rose 2.3 index points in early December, remaining within the margin of error, with gains concentrated primarily among younger respondents. Although assessments of current economic conditions were largely unchanged, expectations improved meaningfully, supported by a 13% increase in anticipated personal finances. Despite this improvement, expected personal finances remain nearly 12% below their level at the start of the year, although gains were evident across age, income, education, and political groups. Labour-market expectations also firmed modestly but continue to reflect a generally pessimistic outlook. Overall, consumers report incremental improvements from November, yet sentiment remains subdued as elevated prices continue to weigh on perceptions. Looking ahead, year-ahead inflation expectations declined from 4.5% to 4.1%, the lowest level since January 2025 and the fourth consecutive monthly decrease, though they remain above January’s 3.3%. Long-run inflation expectations eased from 3.4% to 3.2%, aligning with the January 2025 reading and within the 2024 range of 2.8% to 3.2%, but still above the sub-2.8% levels recorded in 2019 and 2020. Inflation uncertainty across both horizons remains elevated relative to January.

We expect consumer sentiment to remain subdued in the near term, as persistent price pressures and weakening household finances continue to limit confidence.