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The U.S. economy grew at a 4.3% annual rate in the third quarter, President Donald Trump and his team wasted no time celebrating.
Well, slow down, those dour economists replied. There’s something missing in this boom: the jobs. Hiring this year, at best, has stalled, and at worst has collapsed: unemployment has climbed to 4.6%, and even Fed Chair Jerome Powell has warned recent data may be overstating job gains.
In a typical recovery, strong GDP growth shows up first in hiring, then in paychecks, and finally in consumer spending. But in this quarter, it’s reversed: spending is here without jobs. “I’ve never seen anything like it,” KPMG’s chief economist Diane Swonk told Fortune. “To have this stagflation in the inflation and unemployment rate, and to not have it in growth is highly unusual, and something’s got to give.”
Real disposable income was essentially flat in the third quarter—literally 0% growth. Americans did not gain purchasing power. Yet, they made up the difference through savings drawdowns, credit, or by absorbing costs they cannot avoid. The GDP report itself points to where that pressure is concentrated: mostly in services, and within services, healthcare was a leading driver.
Americans spent the most on healthcare last quarter since the Omicron wave of 2022, Swonk said. This was not a classic discretionary splurge, It was spending families had little ability to defer. That distinction matters, spending driven by necessity behaves very differently from spending driven by rising paychecks.
The second part of the story is that this economy is no longer moving as a single system. It is splitting into a “K-shape,” and what looks like resilience at the top increasingly masks fragility underneath. “When you divorce growth from employment gains, you’ve got a problem,” Swonk said. “And this is before the real effects of AI have even set in.”
https://fortune.com/2025/12/24/k-shaped-economy-2026-stagflation-diane-swonk/
Well, slow down, those dour economists replied. There’s something missing in this boom: the jobs. Hiring this year, at best, has stalled, and at worst has collapsed: unemployment has climbed to 4.6%, and even Fed Chair Jerome Powell has warned recent data may be overstating job gains.
In a typical recovery, strong GDP growth shows up first in hiring, then in paychecks, and finally in consumer spending. But in this quarter, it’s reversed: spending is here without jobs. “I’ve never seen anything like it,” KPMG’s chief economist Diane Swonk told Fortune. “To have this stagflation in the inflation and unemployment rate, and to not have it in growth is highly unusual, and something’s got to give.”
Real disposable income was essentially flat in the third quarter—literally 0% growth. Americans did not gain purchasing power. Yet, they made up the difference through savings drawdowns, credit, or by absorbing costs they cannot avoid. The GDP report itself points to where that pressure is concentrated: mostly in services, and within services, healthcare was a leading driver.
Americans spent the most on healthcare last quarter since the Omicron wave of 2022, Swonk said. This was not a classic discretionary splurge, It was spending families had little ability to defer. That distinction matters, spending driven by necessity behaves very differently from spending driven by rising paychecks.
The second part of the story is that this economy is no longer moving as a single system. It is splitting into a “K-shape,” and what looks like resilience at the top increasingly masks fragility underneath. “When you divorce growth from employment gains, you’ve got a problem,” Swonk said. “And this is before the real effects of AI have even set in.”
https://fortune.com/2025/12/24/k-shaped-economy-2026-stagflation-diane-swonk/
