The 4.3% Paradox: AI-Driven Growth Masks US Economic Skepticism in 2025
US GDP growth hit 4.3% in Q3 2025, driven largely by AI investment. However, rising unemployment and low consumer sentiment signal a complex economic outlook for 2026.
Is the US economy actually booming? It's a tale of two Americas as 2025 draws to a close. While high-level data suggests a powerhouse performance, the average citizen is feeling a significant pinch. Despite President Trump's claims of an unprecedented boom, a deep sense of material pessimism persists across the nation.
How AI Fueled the US Economy 2025 Growth
The world's largest economy defied expectations in the July-September quarter, hitting an annualised GDP growth of 4.3%. This lightning-fast expansion left peers in the dust, with the Eurozone and UK managing only 2.3% and 1.3% respectively. Even more starkly, Japan saw its economy contract by 2.3% during the same period.
The secret sauce? Massive spending on Artificial Intelligence (AI). Tech titans like Microsoft, Amazon, and Alphabet poured billions into infrastructure, with AI-related spending accounting for roughly 40% of all US growth this year. It's a heavy bet on a technology that many still worry is overhyped.
A Disconnect Between Spending and Sentiment
On paper, the economy is thriving. The S&P 500 is up 18%, and consumer spending grew 3.5% in Q3. Yet, the University of Michigan's consumer sentiment index sits at a dismal 53.3. This disconnect stems from a widening wealth gap: the top 10% of earners now drive half of all US spending.
Employment Strain and the DOGE Effect
Job numbers are providing a grim reality check. The unemployment rate climbed to 4.6% in November, a significant jump from 4% at the start of the year. While Elon Musk's DOGE cut 300,000 federal jobs, the broader market added another one million people to the unemployed ranks, suggesting deeper structural issues.
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