US Economy Grows, Jobs Stagnate: The Widening Divide

In 2025, the United States economy demonstrated a 2.2% growth, a respectable pace that was nonetheless impacted by events like a prolonged government shutdown and evolving trade policies. However, this economic expansion was not mirrored in job creation, which saw the fewest additions since 2003 outside of recessionary periods. This divergence is contributing to a "K-shaped economy," a term describing a scenario where the wealthy experience increasing financial gains and spending power, while the broader population faces economic stagnation.

Experts like Atsi Sheth of Moody's Ratings note that consumers are burdened by price increases and a worsening job outlook, leading to concerns about wage growth and job security. Mohamed El-Erian highlighted this "decoupling of job growth from economic growth" as unusual, especially outside of recessionary recoveries. Gregory Daco of EY described the situation as a "growing bifurcation," anticipating its persistence due to ongoing supply shocks and demographic changes.

While some economists like Rick Gardner and Nicole Bachaud express optimism for 2026, anticipating growth driven by business investment and consumer spending, the benefits of the current economic strength are unevenly distributed. Wealthier consumers benefit from accumulated wealth and faster wage growth, whereas lower-income families experience reduced wage growth and limited wealth appreciation. Diane Swonk points out that productivity gains since the turn of the century have primarily accrued to capital owners, worsening income inequality.

Inflation remains a significant concern, disproportionately impacting lower-income households who must allocate a larger percentage of their earnings to necessities. This is evident in consumer spending data, with high-income households seeing increased inflation-adjusted spending since 2023, while low-income households have experienced a decline. Wage growth for lower earners has cooled considerably since its peak in late 2022, with hourly workers facing particular vulnerability.

The increasing integration of AI is also a factor influencing the economic landscape, with AI-related investments contributing to GDP growth. However, the precise impact on hiring remains uncertain, with some experts suggesting AI could enable economic growth without a corresponding increase in jobs. This, combined with slower population growth, suggests that the current trend of low job growth may persist without a quick resolution.