The United States is facing a growing fiscal challenge: substantial government borrowing has continued despite an unemployment trend that has remained relatively contained. Data presented by The Kobeissi Letter show cumulative federal deficits since 2020 rising to approximately $14.18 trillion, while the seven-year average unemployment rate declined to 4.7%. The divergence highlights the importance of examining fiscal policy, government spending and debt-servicing costs independently of headline labor-market conditions.

Fiscal Deficits Continue to Accumulate Despite Labor-Market Resilience

The chart illustrates a sustained increase in cumulative U.S. fiscal deficits from 2020 through 2026. Over the same period, the seven-year average unemployment rate initially rose, subsequently declined, and then edged higher toward the end of the period shown. The reported decline of 0.4 percentage points to 4.7% suggests that the accumulation of federal deficits has not coincided with a sustained deterioration in this long-term labor-market measure.

However, the two series measure different economic conditions. Unemployment reflects the share of the labor force without work but actively seeking employment, while the fiscal deficit measures the gap between government spending and revenue over a specified period. A falling unemployment rate therefore does not necessarily imply that government finances are improving, nor does a rising deficit automatically indicate economic weakness.

Borrowing Costs Add to the Long-Term Fiscal Challenge

The scale and persistence of federal borrowing matter because deficits add to the government’s financing requirements. As outstanding debt increases, the cost of servicing it becomes increasingly important, particularly when maturing securities must be refinanced at prevailing market rates. Higher interest expenses can reduce the flexibility available to policymakers for infrastructure, defense, social programs and other priorities.

The Congressional Budget Office’s February 2026 baseline projected a federal deficit of approximately $1.9 trillion for fiscal year 2026, equivalent to 5.8% of gross domestic product. It also projected that debt held by the public would rise to 120% of GDP by 2036 under the laws incorporated into that baseline. These are projections rather than final fiscal-year results, but they underline the structural pressures associated with persistent deficits and rising debt-service costs.

Implications for Treasury Markets and Global Investors

U.S. fiscal developments can influence Treasury yields, the dollar and global financing conditions. If investors demand greater compensation for holding longer-dated government debt, Treasury yields could rise, increasing borrowing costs across parts of the financial system. Higher U.S. yields can also affect international capital flows and exchange rates, with implications for governments and companies that depend on dollar funding.

For Israel and other internationally connected markets, changes in U.S. Treasury yields are particularly relevant because they help shape global interest-rate benchmarks and influence the relative attractiveness of assets across currencies and regions. The eventual market impact will depend not only on the size of the deficit, but also on inflation, Federal Reserve policy, investor demand for government securities and expectations for future fiscal decisions.

Going forward, investors and policymakers will be watching official Treasury deficit reports, federal revenue and spending trends, interest expenses and labor-market data. The central question is whether economic growth and government revenues can keep pace with spending commitments and debt-service costs. A resilient labor market can support tax receipts, but durable fiscal improvement will depend on the broader relationship between revenues, expenditures and the cost of financing the national debt.