Beneath the surface, the data suggests the U.S. economy is far weaker than the headlines imply. Massive revisions to labor statistics show the U.S. may have entered a recession as early as April 2024, with payroll growth averaging just 71k per month vs. 147k reported, and even negative in August and October last year. Bloomberg’s chief economist now concedes the cycle likely peaked in spring 2024, with the economy either still in contraction or only at the very start of a new cycle. That helps explain why broad consumption looks soft despite booming GDP — the strength is narrowly tied to AI capex and upper-income spending.
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The latest payroll reports reinforce the picture. August saw just 22,000 jobs added, far below expectations, while June was revised into a net loss — the first monthly decline since 2020. Full-time jobs are shrinking, replaced by part-time roles and multiple jobholders, a sign households are stretching to make ends meet. Employers are cutting postings and pulling back on expansion, not because they can’t find workers, but because demand is weakening.
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According to Moody’s and Bank of America, the top 10% of earners now account for nearly half of all U.S. consumption, and their spending has surged 58% since 2020. By contrast, middle- and working-class households have seen flat expenditures, squeezed by inflation, credit costs, and stagnant wage growth. According to the Executive Branch, the good news is that the wages of hourly workers and blue collar jobs have seen their largest increase under any administration in nearly 60 years.
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While headline S&P 500 results looked strong in Q2, nearly all the growth came from mega-cap tech and large banks. Broader sectors — from retail to cyclical industrials — are struggling as pricing power erodes and margins compress. If labor softness continues, the earnings slowdown will widen, leaving today’s elevated valuations on shakier ground.

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Market Impact

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• Rate Cuts This Week
  • Utilities (XLU): Gain from lower borrowing costs and steady dividends.
  • Gold & Silver (GLD, SLV, WPM, KGC): Hedge beneficiaries as investors look for safety.
  • Healthcare (UNH, HUM, CNC): Defensive winners as investors shift toward stable, non-cyclical sectors.

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• AI Spending Driving GDP
  • Nvidia (NVDA), Broadcom (AVGO), Oracle (ORCL): Core beneficiaries of massive data center and cloud buildout.
  • Symbotic (SYM): Warehouse automation leader replacing labor with robotics.
  • Automatic Data Processing (ADP): Leveraging AI to streamline HR and payroll functions.
  • ServiceNow (NOW): Expanding enterprise automation with AI-driven workflow solutions.
  • Fluor (FLR), Quanta Services (PWR), Eaton (ETN): Infrastructure plays tied to power demand and grid upgrades.

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• Jobs Revisions & Wealth Gaps
  • Retailers (WMT, TGT, DG): Pressured by weaker middle-class spending.
  • Luxury Brands (LVMH, RH, TIF): Supported by high-income households driving consumption.
  • Credit & Finance (DFS, COF, UPST, AFRM): Exposed to rising risk if job weakness leads to missed payments.