The hidden recession: Job cuts, housing freeze, and fear grip US economy behind the AI boom and surging Wall Street

US economy recession under Trump: While on the surface, America looks like it’s riding high, with tech giant Nvidia just smashing records by becoming the first company worth over $4 trillion, more than Germany’s entire economy, stock markets are near all-time highs, and the economy showed a solid 3% growth last quarter. Even US president Donald Trump proudly calls the US “the hottest country anywhere in the world,” as per The Telegraph report.

America’s AI Boom Masks Economic Trouble

But if you ask millions of everyday Americans, especially those outside the tech and finance worlds, the reality is very different. Behind the glamour of Wall Street’s success, a quiet struggle is unfolding in the US as jobs are disappearing in manufacturing, construction, and transportation, while small businesses are squeezed by tariffs and uncertainty, according to The Telegraph. The housing market is stuck, with home sales dropping sharply, and worry is creeping in as people wonder if the country is heading toward a recession, as per the report.

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Economists Warn: US Recession Risk Over 50% in Next Year

Economists say about a third of the economy is already slipping into recession, and the hardest hit are the working-class communities that have been the backbone of Trump’s support, as per The Telegraph report. Instead of the strong job market people hoped for, recent data showed far fewer new jobs than expected, and revisions revealed even more job losses than first thought, according to the report.

Gbenga Ajilore, the chief economist at the Center on Budget and Policy Priorities, said that “The biggest alarm bells are in the labour market,” and highlighted that the probability of a US recession in the next 12 months at 55%, saying “It would be 100pc self-inflicted,” as quoted in The Telegraph report.

According to The Telegraph report, the US president has split the US economy in two, with Wall Street and Silicon Valley booming, while the rest of the country is suffering a redneck recession.

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Small Businesses Feel the Squeeze from Tariffs and Uncertainty

Much of the pain comes from the trade war and tariffs that have raised costs for American manufacturers who rely on imported materials like steel and aluminum, as per the report. This isn’t just a small issue as factories have been cutting jobs since the start of the year, and small businesses, which don’t have big financial cushions, are really feeling the pinch, according to The Telegraph.

John Arensmeyer, the chief executive of the Small Business Majority, an industry group, explained that, “Small businesses are just being hammered by these tariffs. The tariffs themselves are cutting into their profit margins, but also it’s the uncertainty,” as quoted in the report.

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US Housing Market Stalls as Home Sales Take a Sharp Dive

On top of that, the housing market has taken a hit, with new home sales falling in May, and while consumer confidence rebounded a bit in June, it’s still nowhere near where it was before Trump took office, as per the report.

US Wage Growth Slows Down for Lower-Income Workers

Even wage growth for low-income workers has slowed, making it harder for many families to make ends meet, according to The Telegraph. The data from the Atlanta Fed found that the wage growth for the poorest quarter of earners has slowed to 3.7%, down from 4.8% just before Trump won the election, as reported by The Telegraph.

AI Investment Buoys Economic Growth But Creates Risky Dependence

While the Federal Reserve has projected that the US economy will expand by 1.4% in 2025, experts point out that it may be driven by AI investment, according to the report. Jens Nordvig, the founder of Exante Data, has calculated that the current AI boom could grow the US economy by 0.7% in 2025, as reported by The Telegraph.

So, as per Nordvig’s numbers, the US economy's outlook would be gloomy without the AI surge, making the foundations of the US economy shaky and dependent on just one sector for much of its growth, according to the report.

US Stock Market Faces Possible Correction Outside Tech Boom

Mark Zandi, chief economist at Moody’s Analytics, highlighted that “There are signs of investors getting ahead of themselves. I worry that the non-tech part of the market is vulnerable to a significant correction,” as quoted in The Telegraph report.

He warned that, “Once investors start to see proof of the ill effects of tariffs and immigration policy, the risk is that we do see them kind of run for the hills. Markets are only OK until they’re not,” as quoted in the report.

FAQs

How has Trump’s policy affected the economy?
Tariffs and immigration policies have divided growth, boosting tech but hurting many working-class jobs.

Is the US heading toward a recession?
Many economists say there’s over a 50% chance of a recession in the next year, largely due to policy decisions.