The Fed Says the Economy Is Strong but the Data Tell a Different Story.

The economy may look strong on the surface, but a closer look at the numbers reveals a much narrower and weaker expansion. In his first Jackson Hole speech, Fed Chair Kevin Warsh pointed to a 4.1% unemployment rate, strong business investment and rising corporate profits as signs of a resilient economy. But much of that growth is being driven by the massive AI buildout, while housing, construction and other parts of the economy continue to struggle.

PhD economist Orphe Divounguy explains why the U.S. economy is increasingly operating at two speeds, why roughly 80% of second-quarter GDP growth came from equipment and intellectual property spending tied to the AI boom, and why the labor market may be weaker than the headline unemployment rate suggests. With hiring near its lowest level since the aftermath of the Great Recession and the labor force shrinking, the Fed faces a difficult decision over whether to raise interest rates or wait for more data.

Everyday Economics is hosted by Chris Krug and PhD economist Orphe Divounguy and is brought to you by The Center Square.