The American economy’s report card for 2025 is confusing. On paper, things look brilliant. In reality, most Americans reckon they’re struggling. And both sides aren’t wrong.
The Numbers Look Good
The U.S. economy expanded 4.3 per cent from July through September. That’s the strongest it has been in two years and well ahead of other wealthy nations. The eurozone managed just 2.3%. The UK got 1.3%. Japan’s economy actually shrank.
So yeah, America is doing better than its peers. But here’s the thing. Almost half of that growth is being fueled by just a few tech giants investing billions in artificial intelligence. Microsoft, Amazon, Alphabet. They are throwing money at AI like it’s going out of style.
That’s risky. Because AI hasn’t actually delivered yet, not really. Everybody’s betting it will change everything, but no one knows for sure. But the year that AI will finally prove itself, according to Campbell Harvey, an economist at Duke University, is 2026. Or doesn’t.
Americans Aren’t Feeling It
Consumer sentiment is close to the lowest on record. The University of Michigan’s index was 53.3 in December. To put that in perspective, it was just 50 back in June of 2022 when inflation reached a 40-year high.
Yet people are still spending. Consumer spending expanded 3.5% in the same July to September period. Spending for Christmas was almost 4 per cent higher than last year, Mastercard found.
What’s going on? In short, rich Americans are the ones doing the spending. Right now, the wealthiest 10% of earners are responsible for about half of all consumer spending. This is the highest level of consumer spending since tracking began in 1989.
Meanwhile, everyone else is tightening their belts. A poll by PBS this month found 70% of Americans think they can’t afford the standard of living where they live. Not difficult. Not expensive. Unaffordable.
The Stock Market’s Flying
The S&P 500 is up nearly 18% this year. That beats the average annual return of about 10.5%. Sounds great, right?
But most of those gains go to wealthy households. About 87% of households earning over $100,000 own stocks. Only 28% of households earning less than $50,000 do.
So when you hear the stock market’s doing well, remember who that actually helps.
Inflation and Jobs
Inflation’s come down to 2.7% in November from its peak of 9.1% back in mid-2022. That’s progress. But prices are still high, and people remember when things cost less.
There’s also worry that Trump’s tariffs, which he’s been slapping on everything, will push prices back up in 2026. Some companies stockpiled imports to avoid the tariffs, but that buffer’s running out.
Jobs are another concern. Official employment stood at 4.6% in November, up from 4% in January when Trump started his second term. That’s a four-year high. About a million more Americans are jobless now compared to the start of the year.
Trump blames Elon Musk’s Department of Government Efficiency, which has cut about 300,000 federal jobs. But that only accounts for about a third of the increase in jobless people.
What’s the Verdict?
Economists are split. Harvey gives the economy a six out of ten. Rolf Langhammer at Germany’s Kiel Institute agrees, noting growth is around 2%, lower than expected.
The problem is the economy is running on AI investment and wealthy people’s spending. If AI doesn’t deliver or rich folks stop splashing cash, things could get dicey fast.
For now, the US economy looks strong on spreadsheets. But for the average American checking their bank balance? Not so much.
And that gap between the numbers and what people actually feel? That’s the story of 2026.
