The U.S. economy continues to make an astonishing turnaround, with the exception of employment.
As seen in this week's GDP report, high growth typically corresponds to strong employment and personal earnings, which allows consumers to continue spending. But this year, the trend has reversed. Spending is boosting the economy, but the job market is in a “big freeze.”
As KPMG chief economist Diane Swonk wrote on Tuesday, “growth and labor market outcomes are decoupled.”
It's becoming the story of 2026. The United States is in what some are calling an “unemployment boom.”.“Money is flowing in and out of the economy well, but it's not creating new jobs.
Instead, the focus is on investment in artificial intelligence, which has driven much of this year's economic growth, and on consumer spending, which remains strong. Large companies have invested heavily in AI, including those that have led the way in cutting white-collar jobs. In some cases, profits have soared, and “doing more with less” has become this year's mantra.
“Companies are accomplishing more with fewer employees,” Swonk wrote. “Many have become overstaffed during the hiring frenzy and are now using attrition and layoffs to bring staffing levels in line with demand. Some companies are also using layoffs and hiring freezes to offset the pressure on profit margins from tariffs.”
Spending on necessities that drive growth
Economists are still puzzled over how the United States ended up in this rare scenario. Although the number of overall layoffs has gradually increased this year, they remain relatively low. American companies and Big Tech were the exception, with companies such as Amazon, Microsoft, Meta, Google, and Tesla announcing significant cuts.
Business Insider heard from dozens of white-collar job seekers that they found it “impossible” to find a new role, and those who do have jobs often hang on to them for the rest of their lives.
In addition to a tough job market, consumer incomes did not grow last quarter. But spending remained strong despite tariff uncertainty and stubborn inflation that remains above the Federal Reserve's 2% target. Much of this spending increase was in health care and medical services, as costs for hospitals and long-term care services rose. This year will be the year Americans spent the most on health care services since 2022, the year Omicron's coronavirus outbreak began.
This suggests that despite strong spending by wealthy households, much of this increase in consumer spending is not necessarily driven by confidence. In fact, levels of consumer sentiment are at an all-time low, with many Americans becoming cautious with their spending. Due to tariff uncertainty.
tough job market It's not helping. The unemployment rate is 4.6%, the highest since 2021. Growth in total employment remains low.
Dozens of job seekers across generations told Business Insider this year that they're frustrated by alleged age discrimination, cumbersome hiring processes, competing against hundreds of others for a single role, and the alleged role of AI in screening applications. Some told reporters they had applied for thousands of positions without interviews, while others said it took more than a year to get a single offer, which often paid less than their previous job.
2026 could be the year we see AI payoffs, fueling an even bigger unemployment boom
Business Insider's Dan DeFrancesco called for “the ROI of AI” in his 2026 wish list for the business world.
“I just hope we see some notable benefits from all these big AI projects,” he wrote, citing the eye-popping AI spending by Big Tech and plans for even more next year.
If that happens, the unemployment boom could grow even further. Businesses want to use AI to increase productivity without increasing headcount. This will only make the sluggish job market worse.
It's hard to tell whether this year's AI investments have paid off, but the overall positive sign is that GDP soared to 4.3% in the third quarter. With the biggest growth since the third quarter of 2023, President Donald Trump said, “The golden age of the Trump economy is full steam ahead.”
Still, many Americans may be worried about what this means for their jobs. Some companies cite the need to be efficient in an AI-driven future as justification for layoffs. The U.S. already has fewer jobs than before the coronavirus, and Federal Reserve Chairman Jerome Powell recently said grim jobs numbers may be overstating inflation growth this year.
