America’s increasingly ‘K-shaped’ economy is difficult to reconcile |
It’s difficult to reconcile US data that showed the economy was growing at a breakneck speed in the September quarter despite a deteriorating employment market and a survey this week that showed US consumer confidence has fallen, again, for the fifth consecutive month.
The 4.3 per cent increase in America’s gross domestic product in the third quarter – the fastest pace since 2023 – was generated by robust consumer spending, a big rebound in exports and continued heavy spending on artificial intelligence.
Consumer spending helped bolster the US’ GDP numbers this quarter.Credit: Bloomberg
At face value, the economy is booming, which US President Donald Trump naturally attributes to his tariffs, but that sits oddly with the stalling jobs growth, an unemployment rate that has risen from 4.1 per cent at the start of the year to 4.6 per cent and – excluding AI-related spending – falling residential and business investment.
It is possible, given the divergence between the state of the jobs market and the headline GDP number, that what was emerging in that quarter was the much anticipated impact of AI, which is expected to boost productivity while creating relatively few new jobs but destroying a host of them.
From the anecdotal evidence from businesses, however, that process of potentially creative destruction has yet to build any meaningful momentum or visibility. It’s also possible that the data overstates the growth rate.
While the report covers the three months leading up to the 43-day government shutdown that started on October 1, the Bureau of Economic Analysis within the Commerce Department that compiled it noted that the shutdown had resulted in delays in many of the principal source data used to produce estimates of GDP.
Trump has said he would........