Key Takeaways
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- US growth continues despite tariffs, weaker hiring, and falling consumer confidence.
- High-income consumers and AI data-center investment are driving the bulk of economic expansion.
- Spending strength masks growing fragilities: flat real incomes, falling savings, and a cooling labor market.
- The economy resembles a “jobless expansion,” leaving it vulnerable to future shocks.
What Happened?
The US economy continued to grow through 2025, defying widespread predictions of recession following trade shocks, immigration curbs, and aggressive tariff policies. Consumer spending remained resilient even as sentiment deteriorated and job growth slowed. At the same time, massive investment in AI infrastructure—particularly data centers—provided a powerful boost. Together, consumer spending and AI investment accounted for nearly 70% of third-quarter GDP growth, according to economists.
Why It Matters?
This expansion is unusually narrow. Growth is increasingly concentrated among the top 10% of earners, who now account for nearly half of total consumer spending, buoyed by strong equity markets and wealth effects. Meanwhile, lower- and middle-income consumers are showing signs of strain, and real disposable income has stagnated. The divergence highlights rising inequality in economic momentum and explains why strong GDP data coexists with widespread pessimism. For investors, AI infrastructure spending has become a key macro stabilizer, offsetting policy uncertainty and softening labor conditions.
What’s Next?
The durability of growth hinges on whether wealthy consumers continue spending and whether AI investment remains elevated. Risks are mounting: savings rates have fallen to multi-year lows, job growth is weakening, and any correction in equity or housing markets could quickly slow consumption. Economists will closely watch labor-market data, consumer credit trends, and the pace of AI capital spending to assess whether this resilience represents a sustainable expansion—or a late-cycle pause before broader slowdown.
