Woes mount as dark clouds gather over the US economy

Economic turbulence is brewing in the land of Trump, as dismal jobs numbers, shrinking investment and faltering growth across key sectors raise concern

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What is becoming ever clearer is that the resilience of the Trump-era US economy increasingly rests on just four pillars: a handful of economically powerhouse states, healthcare, artificial intelligence (AI) and the wealthy.

According to Moody's Analytics, only three states — California, Texas and New York — account for one-third of US GDP and remain the most economically robust.

Meanwhile, states that account for another third of GDP - those scattered across the Midwest and the Rust Belt, where manufacturing and agriculture are concentrated are already in or near recession.

Sectoral performance mirrors these regional divides. Moody’s data shows that agriculture, construction and manufacturing have already slipped into recession, hurt by tariffs and ensuing uncertainty. By contrast, healthcare and tech/AI continue to expand, whereas financial services, retail and hospitality are flatlining.

Investment trends underscore just how narrow growth has been in the US economy. Beyond the surge in AI-related spending, private investment elsewhere in the US economy has started to shrink this year.

Overall private fixed investment rose about 3% year on year in the second quarter, but excluding AI-related spending, the figure turns negative, falling roughly 1.5%. Data centre construction is booming, but residential, manufacturing and other commercial investment is in retreat.

Viewed outside the Make America Great Again narrative of US exceptionalism and through the lens of hard economic data, the picture is clear. Whether the National Bureau of Economic Research eventually calls a recession or not is a technicality. The US economy is increasingly reliant on a small number of narrow growth drivers to offset broader structural weakness.

Bad news for Trump