The Labor Market’s Slow Rebalancing: Wage Disinflation Meets a Normalizing Yield Curve
The multi-asset snapshot now points to a cooler but resilient growth backdrop with disinflation traction and a yield curve that has turned positively sloped. As of Friday’s close, SPY was 643.44 and QQQ 577.34, with DIA at 449.53 and IWM at 227.13; developed ex-U.S. (EFA) sat at 92.19 and EM (EEM) at 49.94, according to Yahoo Finance. Treasury yields reflect a normalized curve: 2Y 3.75%, 5Y 3.85%, 10Y 4.33%, and 30Y 4.92% (U.S. Treasury, 2025-08-15), leaving 2s10s at +58 bps and 2s30s at +117 bps. Market-based inflation expectations remain anchored with 5y breakeven at ~2.42%, 10y at ~2.38%, and 5y5y forward near ~2.34% (FRED). Headline PCE inflation was ~2.6% YoY in June, with core PCE ~2.8% YoY, and CPI in July at ~2.7% (core ~3.0%) (FRED/BEA). The unemployment rate is near 4.2% with prime-age employment still elevated and wage growth easing toward high-3%s (BLS/FRED). Volatility is subdued in equities (VIX ~15–16) but episodic in rates (MOVE recently eased after spikes) per Yahoo Finance and FRED. The July FOMC statement emphasized balanced risks and data dependence; the SEP medians still show disinflation progressing toward 2% and the policy rate drifting toward the mid-3s over the next two years (Federal Reserve/FOMC).