The economy is experiencing jobless growth, while other data Thursday showed gross domestic product rose at a slightly stronger pace in the third quarter than initially expected, driven by strong consumer and business investment in artificial intelligence and a narrowing trade deficit.“The United States is experiencing an unemployment boom in which strong growth is being driven by AI investment and consumption by wealthier families, but there is almost no hiring,” said Heather Long, chief economist at Navy Federal Credit Union. “It’s an uncomfortable situation for many middle-class families. One of the big questions for 2026 is whether the middle class will feel the rebound in economic growth.”
Initial claims for state unemployment benefits rose by 1,000 to a seasonally adjusted 200,000 for the week ending Jan. 17, the Department of Labor said. Economists polled by Reuters had forecast 210,000 claims for the past week.
Economists say President Donald Trump’s aggressive trade and immigration policies have reduced both the demand and supply of workers. Companies are also uncertain about their staffing needs as they invest heavily in AI, limiting hiring.
The claims data covered the period when the government surveyed employers for the nonfarm payroll component of the January employment report. Nonfarm payrolls rose by 50,000 jobs in December, roughly in line with the monthly average for 2025. The annual revision of the Bureau of Labor Statistics’ payroll benchmark, to be released next month along with the January employment report, will likely show that the loss of momentum began in 2024. The BLS estimates that approximately 911,000 fewer jobs were created in the 12 months through March 2025 than previously reported. Blame is being attributed to the birth-death model that BLS uses to estimate how many jobs were gained or lost as businesses opened or closed in a given month. Beginning with the January report, the BLS will change that model by including current sample information each month.
The number of people receiving unemployment benefits after an initial week of relief, a measure of hiring, fell by 26,000 to a seasonally adjusted 1.849 million in the week ended Jan. 10, the claims report showed.
Some of the decline in so-called continuing claims is also likely due to difficulties in seasonal adjustment and some people exhausting their eligibility for benefits, which are limited to 26 weeks in most states. Those who are laid off are finding it difficult to find new jobs, a trend evident in consumer surveys.
US stocks opened higher. The dollar fell against a basket of currencies. Yields on US government bonds were mainly lower.
GROWTH IN THE THIRD QUARTER WAS ROBUST
A separate report from the Commerce Department’s Bureau of Economic Analysis showed GDP rose at an upwardly revised 4.4% annual rate, the fastest pace since the third quarter of 2023. The economy was initially estimated to have grown 4.3% in the July-September quarter. In the second quarter the economy grew by 3.8%.
The slight upward revision to growth in the third quarter reflected upgrades in exports and business investment. Imports, which are subtracted from the GDP calculation, were adjusted upwards. Consumer spending and a narrowing trade deficit were the main drivers of GDP growth in the third quarter.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew 3.5% in the third quarter, although spending on goods was revised down slightly. Economists said activity has taken on what they called a K-shaped pattern, with higher-income households and large businesses doing the heavy lifting, largely because of tariffs that have raised prices.
A stock market boom and still-high home prices have shielded higher-income households from inflation, while lower- and middle-income households have limited ability to replace their purchases, economists said.
Likewise, large companies have sufficient resources to offset the rising cost of import duties, she added. By contrast, small businesses are barely staying afloat and are also struggling with a reduction in the supply of cheap labor amid the crackdown on immigration, economists said. Profits from current production rose by $175.6 billion in the third quarter, an upward revision of $9.5 billion.
Inflation rose in the third quarter. The gross domestic purchases price index, a key measure of inflation in the US economy, rose at an unchanged rate of 3.4%. That was the fastest pace since the first quarter of 2023 and followed a 2.0% increase in the April-June quarter.
The price index for personal consumption expenditure, excluding volatile food and energy components, rose by an unchanged rate of 2.9%. It’s one of the inflation measures the Federal Reserve is tracking toward its 2% target. The expectation is that the US central bank will leave interest rates unchanged next week.
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