The US economy continues to surprise on the upside — except when it comes to jobs.
Hot growth, as seen in this week's GDP report, typically corresponds to stronger hiring and personal earnings, which then enable consumers to continue spending. However, this year, the trend has been the opposite. Spending is driving the economy, but the job market is stuck in a "Great Freeze."
As KPMG's chief economist Diane Swonk wrote on Tuesday, "Growth and labor market outcomes have decoupled."
It's shaping up to be the story of 2026. The US has found itself in what some are calling a "jobless boom." Money is flowing in and out of the economy at a healthy clip, but it's not going toward creating a new job for you.
Instead, all eyes are on artificial intelligence, investment in which drove much of the year's economic growth, along with still-strong consumer spending. The big AI investors were larger companies, including those that have led white-collar job cuts. In some cases, their profits have skyrocketed, and "do more with less" has been the mantra of the year.
"Firms are doing more with fewer workers," Swonk wrote. "Many overshot on staffing during the hiring frenzy and are now using attrition or layoffs to bring staffing levels more in line with demand. Others are offsetting the squeeze on profit margins due to tariffs with layoffs and hiring freezes."
Spend on essentials powered growth
Economists are still grappling with how the US ended up in this rare scenario. This year, although overall layoffs have crept up, they remain relatively low. Corporate America and Big Tech were the exceptions, with companies such as Amazon, Microsoft, Meta, Google, and Tesla announcing big cuts.
Business Insider has heard from dozens of white-collar job seekers who said that finding a new role has felt "impossible," and those with jobs have, in many cases, held onto them for dear life.
In addition to a tough job market, consumers had no income growth last quarter. However, spending held strong — despite tariff uncertainty and stubborn inflation still above the Federal Reserve's 2% target. A large percentage of this spending uptick was in healthcare and medical services, as costs for hospital and nursing services climbed. This year marks the most Americans have spent on healthcare services since 2022, when the Omicron wave of COVID-19 spread.
This suggests that, despite strong spending by affluent households, much of this rise in consumer spending wasn't necessarily powered by confidence. In fact, consumer sentiment levels are among the lowest they have ever been, and many Americans have been cautious about spending because of tariff uncertainty.
The tough job market isn't helping. Unemployment is at 4.6%, the highest since 2021. Total job growth has stayed slow.
Dozens of job seekers across generations told Business Insider this year that they were frustrated about suspected ageism, cumbersome hiring processes, competition with hundreds of others for a single role, and the suspected role of AI in screening out their applications. Some told reporters they've applied for thousands of roles with no interviews, while others said it took well over a year to get a single offer, often at a lower pay than their previous job.
2026 could be the year we see AI payoff — which may fuel an even bigger jobless boom
In his 2026 wish list for the business world, Business Insider's Dan DeFrancesco asked for "ROI for AI."
"I just want to see some noticeable returns on all these massive AI projects," he wrote, referring to the eye-popping AI spending from Big Tech — and their plans for even more next year.
If that does come, the jobless boom may only grow. Companies want to use AI to boost productivity without hiring more people, which would only exacerbate a sluggish job market.
Although it's difficult to determine if this year's investments in AI have yielded results, the GDP's spike to 4.3% in the third quarter is an encouraging sign overall. The largest growth since the third quarter of 2023 prompted President Donald Trump to say that the "Trump Economic Golden Age is FULL steam ahead."
Still, many Americans may worry about what this means for their jobs. Some companies have cited the need to be efficient in an AI-driven future as justification for layoffs. The US already operates with fewer jobs than it had pre-COVID, and Federal Reserve Chair Jerome Powell has recently said that the grim jobs data may be overstating this year's deflated gains.
