While the U.S. economy registered a 2.1% annual growth rate in the first quarter of 2026, driven by a surge in business investment, consumer spending, which accounts for around 70% of economic activity, fell sharply. This divergence highlights the ongoing concentration of wealth at the top while the working class faces increasing economic pressure, exacerbated by the war with Iran.
Consumer spending declined significantly from the fourth quarter of 2025 and was revised even lower from previous estimates. Heather Long, chief economist at Navy Federal Credit Union, described this as “unsettling,” noting that consumers are likely cutting back due to higher gasoline prices directly linked to the war with Iran. Long acknowledged that it has been “a tough few months for American consumers,” despite most having “been able to make it through.”
Who Profits from the Crisis
Amidst the decline in consumer purchasing power, business investment surged. Excluding housing, private investment jumped 10.6% from October-December 2025. A significant portion of this capital accumulation was directed towards artificial intelligence, with investment in information-processing equipment soaring at a 39.9% pace as corporations rapidly outfitted their data centers. Michael Reid, head of U.S. economics at RBC Capital Markets, cautioned that this intense pace of data center investment is “not a sustainable path,” suggesting the current boom may be temporary for capital, but it represents a substantial transfer of resources.
The overall expansion of gross domestic product, the nation’s output of goods and services, marked a rebound from a mere 0.5% in the last three months of 2025. This earlier slowdown was attributed to a 43-day federal government shutdown in 2025, demonstrating how state-level disruptions can temporarily impede capital's growth trajectory.
The Cost to Labor
While capital saw significant gains, the working class continued to bear the costs of the current economic order. Residential investment, a key indicator of housing accessibility for many, dropped 7.8% from January through March. This marked the biggest fall since late 2022 and the fifth straight quarterly decline, primarily weighed down by high interest rates. This sustained decline in housing investment further entrenches the housing crisis for those without accumulated wealth.
The “Iran energy shock” and the ongoing war have directly translated into higher gasoline prices, forcing consumers to reduce their spending. Despite the U.S. economy being described as having “continued to chug along,” this resilience is not evenly distributed, with the burden of conflict-driven inflation falling disproportionately on those with limited disposable income.
The State's Role in Capital's Stability
Federal government spending and investment rose at a 9.4% clip in the first quarter of 2026, following a 16.6% drop in October-December 2025 due to the government shutdown. This rapid increase in state expenditure demonstrates the government's function in stabilizing economic conditions for capital after a period of internal disruption. The state's foreign policy, specifically the war with Iran, directly contributes to the “Iran energy shock” and subsequent higher prices that impact domestic consumers, while simultaneously creating conditions for certain sectors of capital to thrive.
The American job market has shown a degree of resilience, with employers adding an average of 188,000 jobs a month from March through May 2026. This contrasts with fewer than 10,000 jobs added per month in 2025, a period marked by uncertainty over President Donald Trump’s trade and immigration policies. However, this job growth occurs within a context where consumer spending is stalling and the cost of living is rising, indicating that increased employment does not necessarily translate to improved living standards for the working class. The U.S. and Iran continue talks toward a resolution of the conflict, a diplomatic effort that follows months of economic strain on consumers due to the conflict's impact on energy prices. The Commerce Department is scheduled to release its first look at second-quarter economic growth on July 30.