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The American economy is heading for trouble, and it may go into recession next year. If that happens, it would be bad news for the rest of us, including the UK. That old adage still applies: when the US sneezes, Europe catches a cold.

At first sight, that might seem an overly pessimistic outlook. US shares are still close to their all-time highs, with the S&P 500 index up 16 per cent this year. Unemployment, at 4.4 per cent, is the highest since 2021, but is only creeping upwards. And while consumer confidence fell sharply last month, that was probably associated with the government shutdown, which is now over.

But there are several powerful reasons to expect things to slow down sharply in the coming months. One is that the stock market boom has been driven by its technology giants, with the top 10 companies accounting for more than one-third of the total capitalisation, up from 18 per cent 10 years ago. Another is that US house prices have weakened. They are not facing an overall collapse, though in some regions, notably Florida, they are very soft. But the big rises of recent years have come to an end and prices overall are expected to run behind pay increases. The greatest concern, however, is what artificial intelligence will do to the job market.

In the long-run it is clear that AI will give a huge boost to the overall efficiency of the world economy, and since the US is in the forefront of its development, it should in theory at least be the principal beneficiary. But........

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