US Economic Growth Is Up — So Why Is Sentiment Down?

Sarah Holder (0:02)

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Matt Boesler (0:09)

If you have a job right now, you're doing fine and that's reflected in the low unemployment rate, the low layoff rate. If you don't have a job right now, you're kind of locked out because the hiring rate is also extremely low. The housing market, similar sort of thing. If you have a house or if you had one before 2020, 2021, you're doing great, you're seeing a lot of house price appreciation. But as we know, if you don't have a house right now, you probably are struggling to get into that market because interest rates are so high and house prices are so high. So we kind of have this situation where we do have a large group of people who are doing fine and we also have a large group of people who are kind of locked out of these basic elements of the American dream. You get a job, you get a house, you get a car and I think it helps explain why growth can be strong but sentiment can be weak.

Sarah Holder (1:04)

I'm Sarah Holder and this is the Big Take from Bloomberg News. Today on the show, Bloomberg's Matt Boesler and Cristina Lindblad join me to unpack what the data says is happening in the US economy, and whether consumer sentiment tells another story.

So on the face of it, there are lots of positive things happening in the economy, right? But there are also some not so good signals, including but not limited to the inflation data we got on Wednesday, which showed that the CPI is up 3.7 percent from last year, mostly driven by energy costs. Cristina, you edit global economic coverage for Business Week. What's flashing green and what's flashing red for you in the economy right now?

Cristina Lindblad (1:54)

Well, flashing green is we still have a lot of momentum from this huge investment way we're seeing in artificial intelligence. And consumers have been more resilient for years now than people have expected them to be.

What's flashing red is money is getting more expensive for different actors, so the US faces higher financing costs. It's also affecting some of the hyperscalers and the companies that want to build all these data centers.

Definitely prices. So the cost of living, which was something that Donald Trump ran on as being able to, or trying to control is going higher. And we can tell from polls that that's making people upset. And I think we were expecting maybe by this time this year that we were going to be seeing the housing market kind of unfreeze a bit. And that's definitely not going in the right direction either.

Sarah Holder (2:48)

Okay. I'm hearing on balance a bit more red flashing lights than green ones for you. What about Matt, from your perch covering the US economy and the Fed, what are you seeing?

Matt Boesler (2:58)

Yeah, I think I would agree with a lot of what Cristina said. I think for me, it kind of all comes down to this AI data center build out. So as long as that continues, things can keep going the way they're going, in a pretty self-sustaining fashion. Consumer spending has been pretty strong, and we think a lot of that is upper-income consumers who are benefiting from these stock market gains that are of course being driven by the AI boom.

So it's a narrow source of growth, but it's a pretty good source of growth for now.

The question is, how long does that continue? Just this week now, we're seeing a little bit of turmoil in the stock market. The question when that happens is always, is this just a temporary breather or is this investors really pulling forward the timeline for how long they think this can continue? I think a lot of economists would say they see this continuing through maybe 2027 or 2028 But of course, that's something that's just impossible to forecast, and so for me, it really all comes down to that.

Sarah Holder (4:04)

Well, so let's dig into some of the economic data we got this week and last week. So we got inflation data, the CPI up 3.7 percent, but we also got data on wage gains. So the Trump administration has been talking up some encouraging recent wage growth numbers for Americans in blue collar jobs, like manufacturing and construction. What about the rest of the workforce? What do we know?

Matt Boesler (4:24)

Yeah, I mean, a lot of the job growth and the wage growth we are seeing is on that sort of goods producing side right now, and I think a lot of us presume that that is really also being driven by the AI build out, right? You have a ton of data center construction right now. You have a lot of manufacturing for equipment that is going into those data centers, and that's really keeping things afloat at a time when, as Cristina said, the housing market is doing terrible. That's typically the source of job growth for those sectors. Those sectors are sailing through that housing weakness because of the data center story.