Inflation has outpaced workers’ pay in recent months, as AI investment lifts corporate profits, stock prices and borrowing needs ahead of Friday’s September jobs report. Economists surveyed by Bloomberg estimated payrolls rose by about 90,000, while the unemployment rate held at 4.1 percent.
Who Gains From the Boom
AI investment is supporting U.S. economic growth, but workers’ pay has lost ground to rising prices. Price increases accelerated after the war with Iran began, and the Labor Department’s report includes a monthly update on average hourly earnings.
Mark Zandi, chief economist at Moody’s Analytics, estimated AI accounted directly or indirectly for 0.6 to 0.7 percentage points—perhaps 30 percent—of inflation-adjusted growth this year. The latest government report put real gross domestic product growth at an annual rate of 2.3 percent in the second quarter.
The stock gains have centered on technology. The iShares U.S. Technology ETF, a rough proxy for AI-led technology stocks, returned 33.7 percent for the calendar year through Thursday, compared with 4.1 percent for the ProShares S&P 500 Ex-Technology ETF. In May, 10 technology companies made up more than 40 percent of the S&P 500’s market capitalization.
Corporate profits remain high. Wall Street analysts estimated S&P 500 earnings grew more than 29 percent in the three months through September, even as stocks fell close to their early-June price levels. A major decline in AI stocks could also hit people who hold them in retirement funds.
Zandi said rising wealth had helped the richest 20 percent of consumers drive spending this year despite declining overall consumer sentiment. In February, he estimated that “for every $1 increase in net worth, consumer spending ultimately increases by 2 cents.” He said the wealth effect added a full percentage point to consumer spending growth and more than 0.7 percent to GDP growth in 2025. A market crash, he said, would reverse that effect, and “the economy would take a hit.”
Workers, Jobs and Prices
The job market has stayed strong and unemployment low through shocks from the pandemic, inflation, wars and tariffs, but hiring rates have slowed. Baby boomers have retired at a notable pace, while immigration restrictions under the Trump administration have limited workforce entrants. Labor force participation among midcareer workers remains strong.
Employment gains have clustered in education, health care and social assistance. Manufacturing, finance and technology have lagged or lost jobs. Building data centers that power AI is generating jobs, though measuring AI-related job losses is difficult.
Data center construction and other AI infrastructure have helped drive growth expectations. Investors expect the Federal Reserve may need to keep interest rates elevated to prevent the economy from overheating. Higher bond rates also make AI projects more expensive.
Debt, Rates and Public Budgets
Goldman Sachs estimated in August that corporate spending on data centers, power supplies and infrastructure would total $1 trillion worldwide in 2026. Stijn Van Nieuwerburgh, a Columbia University business professor, estimated U.S. AI companies’ total capital expenditures could reach $10.3 trillion by 2032. He projected the spending could average 3.63 percent of GDP each year and become the biggest infrastructure project in U.S. history.
The spending requires substantial debt. The 10-year U.S. Treasury yield reached 5.34 percent on Thursday before easing to about 5.24 percent, its highest level since 2002; it ended the day at its highest level since 2007. Analysts and investors have linked rising yields to AI-driven growth expectations, inflation pressure and concerns about government debt.
Brent crude stood above $100 a barrel, up roughly 40 percent since the conflict in the Middle East began in late February. Mahmood Pradhan, a nonresident fellow at Bruegel and former deputy director of the European department at the International Monetary Fund, said, “The Middle East war has really turned everything around.” He said central banks were again raising rates, increasing government costs and leaving less money available to support the economy if conditions worsened.
Last month, the Federal Reserve, European Central Bank and Bank of Japan increased rates, and traders expected further increases this year. The Bank of England signaled it could raise rates, too. France is trying to pass a budget that would slightly reduce its deficit, but repeated difficulties and a presidential election set for April have made investors skeptical about the country’s near-term fiscal prospects.
AI companies’ expansion has prompted discussion of “guardrails,” while leaders of AI companies have called for slowing development until human safety can be assured. The article reports no labor organizing or union response to the boom. It records the scale of planned investment, the concentration of stock gains, and the pressure on workers’ pay and public borrowing costs.