Jobless boom: AI growth masks middle-class struggles

The United States is experiencing a peculiar economic phenomenon termed a 'jobless boom.' Recent data shows a marginal increase in weekly unemployment benefit applications, indicating the labor market remains steady rather than declining sharply. This trend suggests continued modest job growth in January.

However, this economic expansion is not generating a proportional rise in employment. Gross domestic product grew at a faster pace in the third quarter, propelled by robust consumer spending and significant business investments in artificial intelligence. Despite this growth, hiring remains subdued, leading to concerns about the middle class.

Policy uncertainty and substantial investments in AI are contributing to slower hiring. Many businesses are hesitant about future staffing needs, opting to invest in technology over expanding payrolls. This has created a K-shaped economy where higher-income households and large corporations benefit most, while lower- and middle-income families face challenges from increased prices and limited choices.

Corporate profits have risen, but inflation has also picked up. The price index for gross domestic purchases saw its fastest rise since early 2023. This inflationary pressure, coupled with tariffs impacting prices, puts a strain on middle-class budgets. The long-term outlook questions whether the benefits of the current economic boom will eventually reach middle-class families.