Rosenberg warns: Unemployment wave approaching may force the Federal Reserve to cut interest rates 5 times

At the beginning of this month, renowned economist David Rosenberg once again made a bold prediction: the US labor market is facing a sharp deterioration risk, which could force the Federal Reserve to implement significant rate cuts within the year. Once this view was circulated, it immediately stirred quite a stir in the financial circle—because it is completely contrary to the mainstream economic outlook on Wall Street.

Unemployment Data Continues to Worsen, Shocking

According to the latest statistics, the US unemployment rate has risen from 4% at the beginning of 2025 to 4.6% in November 2025, showing a clear upward trend. This number may not sound alarming enough, but Rosenberg’s forecast is even more aggressive.

He believes that the unemployment rate will not only continue to climb but will soon break through the 5% threshold, “possibly reaching 6% by the end of the year.” According to his logic, the deterioration of the labor market could far exceed market expectations, which would have a noticeable impact on the economy.

David Rosenberg’s Radical Prediction

As a professional who previously worked at Merrill Lynch and later founded Rosenberg Research, Rosenberg’s forecast carries a distinct personal viewpoint. He states that once the employment market collapses and triggers a recession, the Federal Reserve will be forced to respond with large-scale rate cuts.

His specific plan is: the Fed needs to cut interest rates from the current level to 2.25% before the end of the year, which means a 125 basis point reduction—equivalent to five consecutive 25 basis point rate cuts. Such a move is considered aggressive in the current market expectations.

Wall Street Mainstream Views Are Completely Different

Interestingly, Rosenberg’s view is far from the general consensus among Wall Street economists. The latter generally expect the US labor market to remain relatively stable in 2026, with the Fed only making one or two rate cuts at most. The median forecast from Fed officials is even more conservative—only one rate cut this year.

This huge divergence in opinions reflects the market’s uncertainty about the economic outlook. On one side are the warnings from seasoned economists, and on the other side is the broad market consensus. The opposition between the two leaves people somewhat at a loss.

The Downside Risks Hint from the Fed

It is worth noting that although the Fed appears calm on its official stance, subtle clues are revealed in its latest staff forecasts. The central bank explicitly states that, “Weak labor market conditions and rising economic uncertainty increase the risk of a more-than-expected slowdown.”

This statement is essentially a covert acknowledgment of downside risks in the employment market, which aligns with Rosenberg’s concerns. The Fed’s words imply that they are not entirely ignoring potential dangers, but are still in the assessment stage without taking aggressive action.

If Rosenberg’s prediction ultimately comes true, the Fed’s current conservative stance may face the need to adjust. At that point, we will see whether this economist’s prophecy is a lone cry or a true prophet.