How AI spending is impacting the U.S. economy
Earlier this year, I gave an informal briefing on the macroeconomic effect of AI-related spending. It focused largely on claims that AI spending was the only thing standing between the U.S. economy and a recession, as well as concerns that AI spending was supported by fragile financing structures that could collapse and threaten near-term growth.
AI-related spending is providing much of the growth in the U.S. economy today. Business investments in structures and equipment (capex) that are driven by AI firms have accelerated noticeably in the past year. How much of this investment consists of imports rather than U.S.-based production is an open and important question. Even more important is the wealth effect on consumption from the AI stock boom, which seems to have firmly entered bubble territory. Combined, the capex spending and the consumption spending spurred by the stock market bubble are adding over a percentage point to GDP growth.
Worse, both types of spending seem fragile as medium-term sources of growth. The stock market bubble could deflate at any time, and when it does, it will almost certainly pull down much of the capex spending as well. After all, the entire reason for the frenzied capex build-out is the expectation of future profits. If these expectations radically change, the capex spending will evaporate.
If AI spending growth slows and the economy falls into a recession, policymakers should follow the typical recession-fighting playbook and use monetary and fiscal policy to boost the demand that was erased. The Federal Reserve should cut interest rates, and Congress and the president should direct fiscal aid to struggling families.
I then point to a couple of long-run observations about AI and its effect on labor markets, mostly echoing our arguments made in this report. One key finding: Despite widespread concern that AI will be strongly capital-biased, the profit share in the non-financial corporate sector has actually declined markedly since 2022.
For those interested, the PowerPoint and notes from the briefing are below.
A more diverse workforce isn’t ‘DEI-motivated discrimination’—it’s just demographic change: How Trump is weaponizing the EEOC against the workers it was built to protect
Key takeaways:
- Trump has weaponized the EEOC to go after employers with diversity, equity, and inclusion (DEI) programs, accusing them of “reverse racism” against white workers—but nothing in the EEOC’s own data points to evidence of systemic discrimination against white workers.
- People of color have made up a growing share of the U.S. working-age population since 1989, while the share of the white working-age population has fallen from 76.9% in 1989 to 55.4% in 2025.
- According to data submitted to the EEOC by large employers, workers of color make up more than 40% of the workforce but hold only 1 in 5 executive or senior-level positions—a pattern that contradicts the administration’s narrative of bias against white workers.
Trump’s Equal Employment Opportunity Commission (EEOC) recently opened a federal investigation into Nike and its diversity, equity, and inclusion (DEI) initiatives—alleging systemic discrimination against white workers. This is the first time the EEOC has targeted a large private employer with a federal investigation and subpoena explicitly linked to their DEI initiatives and hiring goals. Shortly thereafter, the EEOC sued a Coca-Cola bottling company for sex discrimination following a networking event it held for female employees. The EEOC chair closed a busy February with a letter to Fortune 500 companies, warning them about “unlawful discrimination” related to their use of DEI initiatives.
These recent EEOC actions reflect Trump’s undue control over the agency and his administration’s effective weaponization of the EEOC to fight against DEI, a broad set of programs and initiatives designed to remedy the long and well-documented history of systemic injustices against people of color and women in the labor market. Established by the Civil Rights Act of 1964, the EEOC has operated as an independent federal agency throughout its 60-year history enforcing employment nondiscrimination laws—until last year.Read more
U.S. economy lost an alarming 92,000 jobs in February: Private sector experienced vast majority of losses, one-third were due to temporary strikes
Below, EPI senior economist Elise Gould offers her insights on the jobs report released this morning. Read the full thread here.
EPI’s updated Family Budget Calculator shows that higher minimum wages are needed in states like Oklahoma to afford the cost of living
Key takeaways
- EPI’s updated Family Budget Calculator shows how much income it takes to afford basic expenses in every metro area and county across the United States in 2025.
- The Family Budget Calculator can be used to assess a living-wage level and shows that states like Oklahoma need a higher minimum wage. The state’s minimum wage falls short by over $12 an hour in meeting a one-person budget in the state’s lowest cost county.
- Voters in Oklahoma will have the chance to raise their state’s minimum wage this summer, which will help low-wage workers better achieve a decent standard of living.
- As of 2025, there is no county or metro area in the country where a minimum-wage worker is paid enough to meet the requirements of their local family budget on their wages alone.
Now updated with 2025 data, EPI’s widely cited Family Budget Calculator (FBC) shows what it takes to make ends meet for different family types in all counties and metro areas in the United States. For more than 20 years, we have calculated family budgets for basic expenses like housing, food, health care, child care, transportation, other necessities, and taxes. In doing so, we create a more location-specific and realistic assessment of cost of living than traditional poverty thresholds.
We use government-provided data where possible and stay up to date with changes in policy and data availability. Because of this, and due to related changes in methodology, we don’t recommend comparing budgets over time. For more details on the construction of EPI’s family budgets and all of the datasets we use, see the full methodology. For a video tutorial on how to use the FBC, see here. The full dataset is downloadable here.
How Trump’s economic policies are worsening affordability
This op-ed was originally published on MS NOW. Read the full piece here.
President Donald Trump has said some strikingly out-of-touch things about affordability: that it’s a “hoax,” he’s “solved it” and he’s “won affordability.” In his State of the Union address, he even said “prices are plummeting downward.” U.S. families know this is nonsense. But to see how much Trump’s policies will erode affordability in the coming years, you must understand that affordability isn’t just about prices.
Affordability is the outcome of a race between incomes and prices. And for typical families, the Trump agenda is near-guaranteed to harm their incomes far more than it can possibly reduce their prices.
Even judged by the movement of prices alone, Trump’s record on affordability is poor. Inflation fell from 8.0% to 3.0% in the final two years of the Biden administration. This rapid downward movement slowed to a crawl in the first year of Trump’s second term, with inflation falling from 3.0% to just over 2.6%.
There are clear policy reasons why progress in reducing inflation has slowed. Electricity prices have surged as the Trump administration has ended subsidies for renewable generation passed during the Biden administration. The Trump tax cuts passed in the president’s first term were part of a law that gouged loopholes in the tax code, including inviting pharmaceutical companies to offshore their production and import back into the United States. Last year the Trump administration put tariffs on these offshored pharmaceuticals, pushing up their costs. When the administration failed to extend Obamacare subsidies for people buying health insurance through the exchanges, healthier enrollees who could afford to began opting out, driving up prices for everybody left in the Affordable Care Act marketplace.
And these are not the only ways that Trump administration policies have intensified affordability issues for ordinary Americans.
Employer assessment fees are not an adequate solution to low wages and large safety net cuts
Too many U.S. employers are breaking the social contract by paying unfairly and inefficiently low wages. These low wages are one reason why even people who work regularly throughout the year can qualify for income assistance programs like Medicaid and the Supplemental Nutrition Assistance Program (SNAP).
Further, the Republican-led One Big Beautiful Bill (OBBB) that passed last year will sharply cut Medicaid and SNAP over the next decade by well over $1 trillion combined.
The combination of these trends—low-road employers paying insufficient wages and big upcoming cuts to Medicaid and SNAP—has led to a flurry of policy proposals at the state level to address them. One proposal—employer assessment fees (EAFs)—appears at first glance to address both problems by imposing a tax on firms that employ workers who receive Medicaid or SNAP, with the tax often calculated as the number of workers receiving these benefits multiplied by the average cost of those benefits. But EAFs are not the optimal solution to either problem and might cause undesirable collateral damage.
Here’s why:
You can’t starve the public sector to excellence
Most people understand a basic truth: you get what you pay for. Skip maintenance on your roof, and you shouldn’t be surprised when leaks appear.
The same is true of government. If we want a high-functioning public sector—and we should—there is no shortcut. It requires sustained investment in the people and capacity that make government work. Starve it of resources, and its performance will inevitably suffer.
In a recent New York Times essay, academics Nicholas Bagley and Robert Gordon argue otherwise. In their telling, government underperforms because public-sector unions have too much power, driving up costs and resisting efficiencies. Their solution is simple: rein in unions and invest less—largely by cutting pay for public-sector workers. It’s a tidy story that promises an easy fix.
It is also economically incoherent.
The central constraint on public-sector performance is not the power of unions—it is chronic underinvestment. For decades, policymakers have allowed public-sector pay and prestige to fall behind comparable private-sector jobs and have outsourced key functions that should have been performed by skilled civil servants, not profit-maximizing private contractors that are the real source of excess costs for state and local governments. The predictable results have been staffing shortages, uneven service quality, and degraded state capacity—not because we are paying too much, but because we have been trying to get government on the cheap.
Indiana lawmakers are once again trying to weaken child labor laws: Bill sponsored by business owner would enable employers to hide child labor violations
Coordinated, industry-backed campaigns to weaken child labor protections continue to target state legislatures in 2026. Yesterday, the Indiana Senate passed a bill to completely eliminate requirements for businesses to document employment of minor workers, and it is expected to be sent to the governor after House and Senate versions are reconciled. The bill’s Senate sponsor, who owns a golf course that employs teen workers, also spearheaded 2024 legislation to weaken guardrails on work hours for the youngest teens and to lower the age at which teens can serve alcohol. Both of those bills were signed into law.
Child labor violations have been on the rise nationally and in Indiana, and fundamental federal child labor standards have recently come under threat. There is no reason to eliminate Indiana’s simple, easy-to-use system for documenting youth employment, except to make it easier for employers to violate child labor laws and harder for investigators to find out about violations.
Lawmakers in at least five other states have introduced bills to weaken child labor standards this year. Florida, Missouri, and Nebraska lawmakers have proposed allowing employers to pay minors less than the minimum wage, with the Nebraska bill recently being signed into law. Virginia and West Virginia lawmakers proposed bills to weaken hazardous work protections for minors who participate in work-based learning programs. Advocates in Virginia and West Virginia are working to amend both bills to limit their harm and ensure these programs do not come at the expense of youth education and safety.
We’ve been here before, and we know what comes next: White supremacy has always been used to usher in massive economic inequality
We’re a little over a year into the second Trump presidency. That second term began with the establishment of “The Department of Governmental Efficiency” (DOGE), a sustained campaign to discredit and undermine the usefulness and work of federal institutions and employees, and the issuance of multiple executive orders rescinding prior guidance on equity, including those related to federal affirmative action. The dismantling of entire federal agencies, alongside massive cuts in their capacity to make progress toward equity goals, swiftly followed (USAID, HHS, and the Department of Education are some of the most impacted agencies). During the summer of 2025, Republicans passed a spending bill that massively increased the size and scope of Immigration and Customs Enforcement (ICE), while giving huge tax breaks to the wealthiest Americans and making drastic budget cuts to social assistance programs.
Throughout this second term we’ve also seen a steady increase in white supremacist rhetoric and images coming from government officials: Agency-run social media accounts make appeals to the homeland, remigration, and other white nationalist dog-whistle phrases, while the president himself continues to demonize nonwhite immigrants and cities with large minority populations, and to mischaracterize the Civil Rights Movement as harmful to white people.
These actions and rhetoric are not simply poor governance; they follow a historical script that white supremacists in the United States have used for centuries to undermine progress toward equity. Each time, that script sets the stage for policy changes that lead to a massive increase in economic inequality. Here’s the pattern:
A growing number of workers went on strike in 2025
From sanitation workers in Philadelphia to Boeing machinists in Missouri to nurses in California, thousands of workers across the country went on strike last year to demand higher pay, better benefits, and safer working conditions. New data from the Bureau of Labor Statistics (BLS) show that 306,800 workers were involved in 30 major work stoppages in 2025, a 13% increase from 2024. This is likely an undercount of strike activity given data limitations. However, the number of workers involved in major strikes remains elevated compared with the strike activity that occurred in the early 2000s (see Figure A).
Number of workers involved in major work stoppages, 1973–2025
| Year | Number of workers |
|---|---|
| 1973 | 1,400,000 |
| 1974 | 1,796,000 |
| 1975 | 965,000 |
| 1976 | 1,519,000 |
| 1977 | 1,212,000 |
| 1978 | 1,006,000 |
| 1979 | 1,021,000 |
| 1980 | 795,000 |
| 1981 | 728,900 |
| 1982 | 655,800 |
| 1983 | 909,400 |
| 1984 | 376,000 |
| 1985 | 323,900 |
| 1986 | 533,100 |
| 1987 | 174,400 |
| 1988 | 118,300 |
| 1989 | 452,100 |
| 1990 | 184,900 |
| 1991 | 392,000 |
| 1992 | 363,800 |
| 1993 | 181,900 |
| 1994 | 322,200 |
| 1995 | 191,500 |
| 1996 | 272,700 |
| 1997 | 338,600 |
| 1998 | 386,800 |
| 1999 | 72,600 |
| 2000 | 393,700 |
| 2001 | 99,100 |
| 2002 | 45,900 |
| 2003 | 129,200 |
| 2004 | 170,700 |
| 2005 | 99,600 |
| 2006 | 70,100 |
| 2007 | 189,200 |
| 2008 | 72,200 |
| 2009 | 12,500 |
| 2010 | 44,500 |
| 2011 | 112,500 |
| 2012 | 148,100 |
| 2013 | 54,500 |
| 2014 | 34,300 |
| 2015 | 47,300 |
| 2016 | 99,400 |
| 2017 | 25,300 |
| 2018 | 485,200 |
| 2019 | 425,500 |
| 2020 | 27,000 |
| 2021 | 80,700 |
| 2022 | 120,600 |
| 2023 | 458,900 |
| 2024 | 271,500 |
| 2025 | 306,800 |
Notes: The Bureau of Labor Statistics does not distinguish between strikes and lockouts in its work stoppage data. However, lockouts (which are initiated by management) are rare relative to strikes, so it is reasonable to think of the major work stoppage data as a proxy for data on major strikes. Data are for public- and private-sector workers.
Source: Bureau of Labor Statistics, “Work Stoppages Summary” (news release), February 20, 2026, and related table, “Annual Work Stoppages Involving 1,000 or More Workers, 1947–Present.”