United States’ $39 trillion national debt will mean fewer jobs at lower wages for Gen Z, according to think tank

EY analysis commissioned by the Peter G. Peterson Foundation projects U.S. jobs could fall by 1.2 million by 2035 (vs. a debt-stabilized baseline) and by 2.7 million by 2055, with total losses reaching 3.6 million by 2075. It also estimates take-home pay declines of 0.6% by 2035, 3% by 2055, and 5.3% by 2075 if policymakers don’t slow debt growth, while CBO data put FY net interest on public debt at $857B (~$23.8B/week). The piece highlights rising interest-cost crowd-out risk and warns of a potential bond-market crisis—an outcome JPMorgan’s Jamie Dimon calls the “wrong way” to handle the debt issue.

Analysis

This is less a near-term bankruptcy story than a slow repricing of the cost of capital. If the market starts demanding a higher term premium, the relative winners are balance-sheet-heavy financials with sticky deposits and short asset duration; the losers are sectors that depend on cheap refinancing and long-horizon cash flows, especially small caps, housing, and rate-sensitive growth. For JPM, the first-order effect is a lift to net interest income, but the second-order effect is weaker loan demand and a higher probability that the firm’s credit book becomes the market’s proxy for late-cycle stress.

The sequencing matters: over the next 1-3 months, fiscal headlines can move the long end without an immediate recession signal, which tends to help large banks relative to regionals. JPM should outperform KRE if deposit competition stays rational, because regional funding costs and uninsured deposit sensitivity make them more exposed to any rate-volatility spike. But if long rates rise because of supply rather than growth, bank equity multiples can compress even as NII improves; if credit spreads widen alongside yields, the NII tailwind gets offset quickly by lower loan growth and higher provisioning.

The contrarian miss is that this may not be a pure “higher yields = bank bull case” setup. Persistent deficits can crowd out private lending, which may actually support private credit managers and reduce commercial bank growth over 6-18 months while pushing the Fed back toward easing if activity softens. In that regime, duration-sensitive equity indices could underperform, but the better expression is likely relative quality within financials rather than a blanket long on banks.

Key Decisions for Investors

• Long JPM / short KRE for 1-3 months as a relative-quality trade. Entry on any 2-3% JPM pullback or if 10Y yields re-test higher levels on Treasury supply concern. Thesis works if funding volatility rises; stop if credit spreads tighten and the curve bull-steepens on clear growth slowdown.
• Buy a TLT put spread or short IEF as a rates hedge over the next 4-8 weeks. This is a cleaner expression of term-premium risk than a directional equity short. Falsify if the 10Y yield falls back decisively below prior range support or Treasury auctions stop tailing.
• Maintain JPM as a defensive financial long only if high-yield OAS and bank CDS stay contained. If HY spreads widen more than ~50-75 bp from here, reduce exposure because the market will start discounting credit losses faster than NII benefits.
• If you need an equity pair outside financials, consider long XLF / short IWM for 1-3 months. Large-money-center banks should hold up better than small caps if fiscal concern pushes up funding costs and tightens financial conditions.