US Economy Accelerates, But Not Everyone Is Gaining as AI Drives Growth

what happened

The US economy is gaining speed on the back of the artificial intelligence boom and steady consumer spending. Based on the Commerce Department's GDP report, output grew at a 3.4% annual rate in the third quarter, while a closely watched measure of private demand rose 4.9%, according to WSJ. Spending on data centers and computing equipment led the gains, while housing construction has largely stalled.

Incomes, however, are trailing inflation. According to the Labor Department, average hourly earnings have risen 5.5% since January 2025, while consumer prices are up 5.4% over the same period, so nearly all wage gains have been absorbed. The saving rate fell from 5.1% to 3.8%, near its lowest level in the survey's history.

WSJ economists note that the labor market looks more resilient than public sentiment suggests: unemployment is 4.2%, but hiring has slowed.

why it matters

For markets, the concentration of growth matters: AI investment is pushing equities higher, while weak real incomes and a 7.24% mortgage rate could limit consumer spending ahead. That raises the economy's sensitivity to stock market moves.

market impact

US stocks and AI sector: strong capital spending supports the market, weak household incomes are a risk for consumption

• ↔S&P 500 mixed — AI investment supports stocks, but weak real incomes limit consumer spending
• ↔US dollar mixed — fast growth and high rates pull against a widening trade deficit

tags

instruments