Analysis: Contraction in the job market will force the Fed to cut rates by a total of 125 basis points to 2.25%.

BlockBeats News, January 5th — Former Merrill Lynch analyst David Rosenberg stated that the U.S. economy will face severe challenges in 2026, with the job market likely to contract sharply, weakening the economy and forcing the Fed to respond with significant rate cuts. The biggest surprise will be people realizing that the labor market is not cooling down but shrinking.

David Rosenberg believes that the U.S. unemployment rate will soon surpass 5% and "likely probe 6% by year-end." 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 2026, which means 5 rate cuts of 25 basis points each.