The United States economy is delivering surprisingly strong growth, as reflected by recent gross domestic product (GDP) reports showing healthy expansion rates. However, this upward trajectory in economic output is not mirrored in the labor market, which remains notably tepid. Traditionally, rapid economic growth aligns with more aggressive hiring and increased personal incomes that encourage consumer spending, fueling further economic momentum. Contrarily, current trends suggest a divergence with healthy spending supporting growth, while the job market is largely in a state of inertia, leading economists to describe this phenomenon as a "Great Freeze." Diane Swonk, chief economist at KPMG, succinctly highlighted this divergence by stating on Tuesday that "Growth and labor market outcomes have decoupled."
This emerging pattern looks set to define 2026, where the United States experiences what is increasingly being characterized as a "jobless boom." Capital circulates robustly through the economy, yet this influx does not translate into widespread job creation for many workers. A significant driver behind this growth has been investment in artificial intelligence (AI), predominantly by larger enterprises. These corporations often engage in white-collar workforce reductions, proving that while profits have sometimes surged, employment growth has remained constrained. The operational mantra seems to be "do more with less," underscoring the tension between increasing productivity and static or shrinking personnel counts.
Swonk pointed out that many companies initially over-hired during a previous hiring frenzy. To recalibrate workforce numbers more closely with current demand, firms are employing natural attrition and layoffs. Additionally, some businesses are relying on staff reductions and hiring freezes to counteract compressed profit margins resulting from tariffs and other cost pressures.
Economists continue to analyze this atypical situation where overall layoffs have inched upward but remain generally limited outside specific sectors. Corporate America and major technology firms stand as exceptions, with prominent companies such as Amazon, Microsoft, Meta, Google, and Tesla publicizing substantial workforce cuts. Anecdotal evidence gathered by Business Insider from multiple white-collar job seekers reflects the difficulty many encounter securing new roles, further reinforcing the rigidity of the job market. Those currently employed often hold on tightly to their positions amid prevailing uncertainty.
Despite the challenging labor market, personal income growth stalled last quarter. Nonetheless, consumer spending remained resilient. Notably, this spending spiked in sectors like healthcare and medical services, where rising costs for hospital and nursing care contributed significantly. The volume of Americans' healthcare-related expenditures this year reached its highest point since 2022, coinciding with the period of the Omicron COVID-19 wave. This suggests that while affluent households continue to spend robustly, much of the overall increase in consumer outlays is not necessarily reflective of growing consumer confidence. Supporting this, consumer sentiment indices rank among their lowest historical readings, with tariff uncertainties further contributing to restrained optimism.
The job market's sluggishness compounds these concerns. Unemployment rose to 4.6%, marking the highest level since 2021. Aggregate job growth remains subdued, intensifying competition for available roles. Numerous applicants across age groups have conveyed frustrations about issues such as perceived age discrimination, prolonged and complicated hiring procedures, fierce competition where hundreds vie for a single opening, and the use of AI technologies potentially filtering out candidates prematurely. Some individuals reported submitting thousands of applications without landing interviews, while others endured more than a year before receiving job offers, often at reduced compensation compared to previous employment.
Looking ahead to 2026, some in the business community anticipate a clearer return on investment in AI technologies, which currently represent a substantial portion of expenditures by major tech companies. As Business Insider’s Dan DeFrancesco noted in his wishes for the upcoming year, a tangible payoff from AI implementations would be welcome after significant capital outlays. Such returns might intensify the "jobless boom" phenomenon, as firms use AI solutions to enhance productivity without expanding their workforce, perpetuating sluggish employment gains.
While it remains challenging to precisely assess the direct outcomes of AI investments over the past year, the marked GDP increase of 4.3% in the third quarter—the strongest since late 2023—provides a positive economic signal. This surge prompted former President Donald Trump to declare the arrival of a "Trump Economic Golden Age." However, for many Americans, this economic vigor does not translate into job security or growth opportunities. Some companies have explicitly pointed to the need for AI-driven efficiency as reasoning behind layoffs. Presently, the US job count remains below pre-COVID levels, and Federal Reserve Chair Jerome Powell has suggested recent employment statistics may exaggerate the true softness of this year's labor market gains.
In summary, the US economy stands at a crossroads where robust growth, underpinned by AI investment and steady consumer spending—especially on essential services—contrasts sharply with a labor market failing to expand correspondingly. As this dynamic evolves into 2026, the country faces complex questions about the nature of employment, productivity, and economic progress in an increasingly AI-influenced future.