Economist: US Unemployment Wave Approaching, May Force the Fed to Cut Rates 5 Times This Year

On January 5, David Rosenberg, who previously worked at Merrill Lynch and has been running his own firm Rosenberg Research since 2020, stated that the US economy will face significant difficulties by 2026. The labor market is likely to contract sharply, weakening the economy and forcing the Federal Reserve to respond with substantial rate cuts.
The US unemployment rate has risen from 4% in early 2025 to 4.6% in November 2025. Rosenberg believes that the unemployment rate will soon surpass 5%, and by the end of the year, it is likely to test 6%. Rosenberg stated that the collapse of the labor market and the ensuing recession will compel the Fed to cut rates by 125 basis points to 2.25% before the end of the year (i.e., 5 rate cuts of 25 basis points each).
Notably, Rosenberg's views are quite different from the general consensus among Wall Street economists, who expect the labor market to remain stable in 2026, with the Fed making one or two rate cuts. The median forecast of Federal Reserve officials is for one rate cut this year. However, the central bank emphasizes that it sees downside risks to the labor market. The latest staff projections from the Fed indicate that "softening labor market conditions and rising economic uncertainty increase the risk of a more-than-expected economic slowdown."