So which is it? Is the US economy doing extremely well and we are about to have a “great” year in 2026? Or are there signs of serious problems in the economy, especially for middle – class and working class people who are not in the top ten, five or one percent of the population in terms of income and wealth?
As always, it depends on who is talking and what they are emphasizing.
So let’s start with the stock market. So far this year, the main index (the S and P 500) has produced a 15% rate of return. That means that if you owned $1 million worth of stock on January 1 of this year, you would have an extra $150,000 of wealth after December 31.Though lots of people own some stock (I owned some in my retirement account for most of my working life) very few people own enough stock for the proceeds to be a significant part of their income:10% of Americans own 93% of all stocks, while the bottom half owns only about 1-2%. So, no matter how you slice it, claiming that a booming stock market means we are “all” doing well is garbage. In fact, the success of the stock market is part of what is being called a “K – shaped” economy. The top part of the letter “K” represents the tremendous successes of the billionaires and others who are heavily invested in the stock market (that top ten percent).The lower part represents the difficulty that the middle class and working class has keeping their heads above water. So, if you are claiming “the economy” is doing great because you are focused on the top ten percent, you are right. To understand what is happening for the rest of us, we need much more information about many different trends.
[For details on stock ownership see:https://finance.yahoo.com/news/wealthiest-10-americans-own-93-033623827.htmlOr consider this set of facts: On Christmas Eve, MSNBC’s Ron Asana pointed out that the top 20% of the households account for 63% of consumption spending; the bottom 80% for 37%. ]
What about national statistics --- Gross Domestic Product, Investment, Incomes of full-time workers? The growth rate in GDP was lower in 2025 than in 2024. Now it is true in moments of candor members of the Trump Administration refrain from asserting the blatant falsehood that the economy is the “hottest” it’s ever been, etc. etc. Some even spent most of 2025 assuring us that 2026 will be a “boom” year --- which of course it could be --- As Yogi Berra once said --- “It’s difficult to make predictions, especially about the future!”
But so far, there is no indication that the US economy as a whole is booming. In the following diagram it is clear that the US economy WAS “booming” --- but that was 2024 when Joe Biden was President.In 2025, there has been a slowdown which is not surprising --- the uncertainties created by Trump’s tariffs, the mass deportations which in some industries is reducing the labor force, the meat-axe approach to cutting government activities all have slowed growth.No recession --- but a definite slowdown in growth.[For the actual numbers in visual form, see https://tradingeconomics.com/united-states/gdp-growth-annual]
The behavior of investment during 2025 doesn’t give us any clues. It went up in the first quarter of 2025 only to fall in the next two quarters. In other words, Trump’s rhetoric about how rotten the economy was in 2024 is false and his rhetoric that 2025 was the “hottest” economy is also false.
[The following data is presented by the Federal Reserve Bank of St. Louis --- abbreviated FRED. Folks can click on the link and then restrict the data to the last five years to see the trend. Investment did not “boom” in 2025.https://fred.stlouisfed.org/series/A006RE1Q156NBEA]
But to move from “the economy” to the people living in it, I consider the real income of full-time workers a very important measure of well-being.(“Real” income takes the actually numbers in your paycheck and relates them to the ability of that paycheck to actually buy goods and services.“Median” is the best way to judge the wage of the TYPICAL worker.If you take an average, it can be tilted because of the very small number of super-rich individuals.If Bill Gates walked into a room of 99 people all making $50,000 a year, the “average” income would suddenly shoot up but $50,000 would still be the typical income. The numbers that follow relate to a base year which is why they seem rather low --- the important thing is not the absolute number but whether we can see any trend.)
The weekly real median wage averaged $370 for 2024 (reaching a high point of $375 at the end of the year.)In the first quarter of 2025 it fell back to $373 and inched upwards to $376 in the second and third quarters ---- virtually no growth at all.[For details see.
https://www.bls.gov/news.release/wkyeng.t01.html
But the most worrisome aspect of the current economy is what Yahoo.com called the frozen labor market.In this situation there are no mass layoffs and jumps in unemployment.Instead, businesses have cut back on hiring which means new entrants into the labor force (recent college graduates for example) as well as people looking to change jobs are facing few job opportunities.
[For details see “The US labor market ground to a halt in 2025.The risk in 2026 is that it ‘cracks’.It was a tough year to be looking for work — and the job market is not expected to get much better,” available at https://finance.yahoo.com/news/the-us-labor-market-ground-to-a-halt-in-2025-the-risk-in-2026-is-that-it-cracks-140026614.html]
What’s going on?
First, the high tech sector has invested heavily in developing Artificial Intelligence (AI) capabilities. Many businesses believe that increased use of AI will permit the replacement of many workers.
We can actually hear that happening when we call doctors’ offices and a voice that identifies itself as a “virtual assistant” (clearly an AI system) asks how “she” can direct your call. A human being used to be the person who answered that phone call and then directed the call --- now It’s a machine. With the “promise” of AI, many businesses are reluctant to increase their labor force when they might not need that many people in the not-so-distant future.
In one particular area that was supposed to improve as President Trump’s tariffs took hold, there is nothing good to report. If you are a voter who wanted more factory jobs, you must be disappointed. If you promised the voters that there would be many more factory positions, you failed. This year [2025] factory jobs are down by 58,000. Nothing new. In Trump’s first term they fell by about 200,000 between January of 2017 and January of 2021. Seems like there is a lesson in here somewhere.
And look at the long-term trends. Although the non-farm labor force has grown by more than 20,000,000 since January of 2014, the total number of jobs in the manufacturing sector has not moved much. In 143 months beginning in January of 2014, total jobs in the factory sector have always been between 12,000,000 and 13,000,000 except for five months in the spring and summer of 2020 when they fell below 12,000,000 for a while. Overall, no long-term increases even though the economy is much bigger today.
“Amazon Plans to Replace More Than a Half Million Jobs with Robots.” (Karen Weise, New York Times, October 21, 2025)
[For more details see https://www.dollarsandsense.org/jobs-factories-and-inequalities/?ref=dollarsandsense-newsletter]
Thus, Trump’s tariffs have not created a surge in manufacturing jobs. Instead, they have created a great deal of uncertainty within the business sector. So far, American importers have been able to “eat” the tariffs because they built up significant inventories in anticipation that these tariffs will increase their costs. However, it is unlikely that they will be able to sustain this into 2026 and therefore, the tariffs will probably start to push prices up.
On top of all this, there is a very important intangible.The uncertainties created by those Trump tariffs and the failure of the Trump Administration to knock inflation down dramatically has dealt a blow to consumer confidence.--- and this is despite the fact that the average rate of inflation for 2025 has fallen from 2.9 percent in 2024 to 2.7 percent.
Consumer confidence as measured by the Conference Board reached a low point in early 2025, rose a bit through July and has been falling ever since. This may cause a cutback on consumer spending in 2026.
In other words, in answer to the question I posed at the beginning of this broadcast, there remains GREAT UNCERTAINTY. The economy could start chugging along – it could remain in a kind of stasis with slow growth and slowly rising unemployment as inflation remains the same or slows further --- or it could experience a surge in prices and an increase in unemployment.
Most important take-away. So far it has not done what Trump predicted and it is NOT doing what he claims it is.
Michael Meeropol is professor emeritus of Economics at Western New England University. He is the author with Howard and Paul Sherman of the recently published second edition of Principles of Macroeconomics: Activist vs. Austerity Policies.
The views expressed by commentators are solely those of the authors. They do not necessarily reflect the views of this station or its management.
