Is higher unemployment coming to the US?
US consumers' perception of the labor market has weakened to the second-lowest level since 2021.
The difference between the share of Americans saying that jobs are plentiful minus those saying they are hard to get fell to 13.2%, marking… pic.twitter.com/gv045S3LhL
— The Kobeissi Letter (@KobeissiLetter) May 28, 2025
If we hit a recession with this much fiscal fuel already burning, the engine might just seize. We’re not sitting on a stockpile of untouched ammunition. We’re running hot—record deficits, massive pandemic-era stimulus still echoing through the system, and debt service costs climbing toward a trillion dollars annually. If growth stalls now, there’s no big lever left to pull.
This isn’t 2008. Back then, the Fed could cut rates 500 basis points. Congress could inject fresh stimulus and still look responsible. Now? Rates are already high, and inflation anxiety keeps any new spending politically radioactive. The fiscal impulse has been used. The room is already flooded with water. Turning the hose back on won’t help.
If the floor drops, it could look more like the 2001 to 2005 market than anything we’ve seen recently. Long, flat, brutal. Not a sharp crash followed by a euphoric rebound. Just a drag. No real leadership. Multiple contraction. Consumers pulling back. Companies hoarding cash. Valuations slowly bleeding out.
And tariffs? That’s a tax on everything. A blanket 10 percent tariff under Trump’s proposed plan might look fine on a spreadsheet. The deficit doesn’t necessarily explode. But GDP growth slows. Trade shrinks. Supply chains strain again. Marginal relief from personal tax cuts doesn’t show up fast enough to offset it. And by the time it does, the average household has already made the hard decisions.
Maybe businesses benefit earlier. Maybe they accelerate capital investments to grab those tax breaks—new R&D, maybe a few new domestic factories. That might plug some holes. But the consumer drives 70 percent of the economy. If they retreat, it doesn’t matter what incentives corporations see on paper. Spending dries up, and everything else slows down.
If you want to know what that looks like, go study the S&P between 2001 and 2005. The index clawed through four years just to return to where it started. That’s what happens when you run out of tools and the system just grinds.
There’s still a narrow window. A soft landing is not impossible. But if it fails to materialize and the floor collapses under this overloaded structure, there’s not much left to cushion the fall.