Here’s where the economy is starting to show ‘K-shaped’ bifurcation

 Americans are splitting into two groups when it comes to spending. Higher-income shoppers are still buying, while many lower-income families are cutting back. You can see it in food and drink, cars, and even airline seats. Coke says premium items like Topo Chico and Fairlife are selling well, and McDonald’s is pushing value menus because traffic from lower-income diners is down. Chipotle says some customers feel squeezed, and Procter & Gamble sees wealthier shoppers buying big packs while others stretch what they have at home. The same split shows up in big purchases. The average new car now costs over $50,000, defaults are rising for buyers with weaker credit, and airlines say premium seats are outpacing coach. A cooler inflation report came out after a shutdown delay, showing prices up 0.3% on the month and 3% over the year, and Social Security’s cost-of-living adjustment for 2026 will be 2.8%.

Hotels also show a mixed picture. Hilton’s budget brands saw softer revenue, but luxury did great. Their CEO thinks the gap may narrow if inflation and rates ease, with the middle and low end improving rather than the high end falling. To me, this “K-shaped” economy is simple to read on the ground. Households paying more for groceries and gas are trimming meals out and skipping upgrades, while wealthier households keep spending on premium drinks, bigger cars, and roomier seats. If the Fed cuts rates next week and inflation keeps cooling, we will see whether that helps the lower and middle tiers catch up.

source : https://www.cnbc.com/2025/10/23/k-shaped-spending-sectors-showing-bifurcation.html

Politics Trump administration must pay SNAP benefits despite government shutdown, judge rules

 During the ongoing U.S. government shutdown, a federal judge in Rhode Island temporarily blocked the Trump administration from halting Supplemental Nutrition Assistance Program (SNAP) benefits that feed 42 million Americans. Judge Jack McConnell ruled that the administration must use emergency contingency funds to continue providing food aid, calling the potential harm to families “irreparable.” The decision followed a similar ruling by Judge Indira Talwani in Boston, who said the suspension of SNAP was likely unlawful. In response, former President Trump said his administration was seeking legal clarification on how to fund the program. Senate Minority Leader Chuck Schumer accused him of using hunger as political leverage. The ruling argued that no administration should use food access as a bargaining chip during political disputes.

Trump admin must pay SNAP benefits despite shutdown: judge

Race to the Top: AI Spending

Consumer spending and hiring may be in a slow period in the broad economy, but the big US tech companies are going the opposite way, due to their large investment spending in artificial intelligence. In the latest earnings reports from large tech companies, namely Microsoft, Amazon, Alphabet, and Meta all showed massive increases in capital expenditures mostly toward AI spending. Most of this AI spending is aimed at new data centers, advanced chips and cloud capacity for larger models. Microsoft spent almost $35 billion last quarter, more than 70% from a year ago, while Amazon spent almost $34 billion. Alphabet clocks its full year spending in at roughly $90 billion, and Meta enlarged its spending over $70 billion, showing no sign in this AI spending race. 

Even with good revenue and solid earnings growth, investors aren't jumping for joy quite yet. Shares of Meta and Microsoft dropped after their reports came out due to worrying that the AI investment would squeeze the profit margins for these companies. Even though these companies are ensuring these investors that this spending is necessary to meet the large demand for AI development to secure the top spot in the race, the investors still aren't fully convinced if, or when the investment will start to pay off. 

The difference between investor skepticism and corporate optimism is shared in its likeness in Silicon Valley. Where executives of tech companies are rather optimistic about the surge of Ai and all of the demand that comes with it. They believe in the transformation that AI will bring upon the economy. Markets however do not reflect that; they are more so reflecting the billions in spending on infrastructure and massive energy costs that may not pay near term. As of now it is just a game of risk, although the future seems to be in AI the question seems to be how soon that future will be.

How much Google, Meta, Amazon and Microsoft are spending on AI

Mortgage rates jump 20 basis points following Fed cut

This week the Fed cut the interest rate which caused mortgage rates to go up. The 30 year mortgage rate jumped 20 points to 6.3% after Jerome Powell spoke. The bond market had already expected the rate to cut, but didn’t like Powell’s comments, which caused rates to rise. The same thing happened after the last cut in September when mortgage rates also jumped.

Experts say the market was too confident that the Fed would make more rate cuts in 2025 and Powell’s comments made investors less sure. Even though lower rates had led to a surge in refinance applications, they haven’t encouraged more people to buy homes. The housing market is still slow as high prices and borrowing costs make it difficult for home buyers.

https://www.cnbc.com/2025/10/30/mortgage-rates-fed-cut.html 

Is Gen Z Screwed?

 A recent article by Futurism discusses a Goldman Sachs report warning that Generation Z could face a future shaped by automation and artificial intelligence. The report suggests that while AI will likely boost productivity and economic growth, it may also replace many entry-level jobs, the very positions younger workers depend on to start their careers.

This creates a major challenge for both workers and policymakers. If the economy grows because of AI but doesn’t create enough jobs, we could experience what economists call “jobless growth.” In theory, output rises, but employment stagnates. That disconnect has serious implications for income distribution, consumer demand, and long-term stability.

From a macroeconomic perspective, this situation highlights the tension between technological progress and labor market adjustment. Innovation boosts efficiency, but it can also make certain skills or roles obsolete faster than new ones appear. It also connects to structural change, where economies shift toward sectors that rely more on capital and technology than on human labor.

For students and young professionals, this raises real questions about how to prepare for a future shaped by automation. Should we focus on developing technical skills to work with AI, or on creative and interpersonal skills that machines can’t replace? And for policymakers, how do you support growth while also protecting opportunities for new workers?

https://futurism.com/artificial-intelligence/goldman-sachs-genz-automation

The Long-Term Sustainability of AI Investment

    The ongoing debate over artificial intelligence (AI) investment focuses on whether current spending represents a lasting technological shift or an unsustainable bubble. Major tech firms such as Microsoft, Amazon, Alphabet, and Meta Platforms are leading the charge, supported by strong, profitable businesses outside of AI. Their established revenue streams make their AI investments more secure and less speculative than past technology booms that were fueled by hype rather than real economic strength.

    At the center of this surge is Nvidia, whose graphics processing units (GPUs) power the vast majority of AI systems. The company projects that global spending on AI data centers will reach $600 billion this year and could climb to as much as $4 trillion by 2030. While some view these numbers as overly ambitious, Nvidia’s insight into future demand is unmatched. Because AI hyperscalers plan their hardware purchases years in advance, Nvidia has a clearer understanding of where the market is heading, suggesting that AI expansion may have far more room to grow than many investors assume.

    Concerns about an AI bubble largely stem from the financing structure surrounding OpenAI, the creator of ChatGPT. Some analysts warn that companies may be funding each other’s purchases in a way reminiscent of the dot-com bubble. However, unlike that era, the current leaders in AI, such as Meta, Alphabet, Microsoft, and Amazon, generate substantial cash flow from other successful ventures, reducing the risk of circular financing. The key indicator to watch will be whether these firms begin scaling back their AI investments. For now, all four are planning record capital expenditures through at least 2026, signaling that AI growth remains strong and likely sustainable in the years ahead. 

https://finance.yahoo.com/news/ai-rally-sustainable-just-another-103000211.html

Too much money in the bank could cost you big — here’s how to tell

Too much money in the bank could cost you big — here’s how to tell

 You might think having a lot of cash in your bank account is the safest thing you can do. After all, cash is secure, easy to access, and gives you peace of mind. But right now, with inflation running and bank account interest rates tiny, keeping too much money in your checking or savings account could quietly drain your wealth.

Here’s what we’re seeing: According to a recent report, the average American family holds around $62,410 in their checking account. That sounds solid, but consider this, as of September 2025, checking accounts are paying about 0.08% interest, while inflation is around 2.9%. That means your money is growing slower than prices are rising, so its purchasing power is shrinking. Over time, that means less value in your money than you expect.

From an economist's perspective, this is the classic "opportunity cost" problem. Money that sits idle is money not working for you-money which could have been invested to earn more money, help you keep up with inflation, or grow your future income. Accordingly, holding a large cash balance under these conditions is considered by economists to be a potential drag on the accumulation of wealth.

Of course, this doesn’t mean you should put all your cash into risky assets. You do need liquidity, money you can access when you need it, for emergencies, unexpected costs, or just peace of mind. But the key is balance, enough cash for safety, not so much that it becomes a drag on your long-term financial goals.

For your macroeconomics framework, this situation relates to a number of different themes. One is inflation versus savings, for your real return on savings to beat inflation, you must earn enough from your savings to preserve value. Another is investment, if people hold excess cash instead of investing, then aggregate investment can be lower, and that can slow economic growth. And finally, there's resource allocation: even though cash is safe, it's not the most efficient use of your financial resources in this environment.

In plain terms, if your bank account is filled with money that isn't serving a clear purpose-an emergency fund plus maybe a cushion for the short term-then you're probably losing out on potential growth. On the other hand, over-investing or having no cash buffer is not good either. The best action is one which provides security and at the same time lets your money work. Having cash in the bank is safe, but in today's economic climate, this could silently cost you money. Think about how much one really needs for near-term security; then consider moving the rest into options that may offer higher returns and better keep pace with inflation. That will keep you away from the hidden cost of doing "nothing" with your money.

Read more at:
https://economictimes.indiatimes.com/news/international/us/best-way-to-grow-your-money-in-2025-too-much-money-in-the-bank-could-cost-you-big-heres-how-to-tell/articleshow/124969548.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

Wall Street’s Mood Swings — What the Mixed Market Says About the U.S. Economy

Wall Street’s Mood Swings — What the Mixed Market Says About the U.S. Economy

Today, the U.S. stock market presented a confusing yet interesting picture, the Dow Jones rose about 264 points, by strong performances in stocks such as Goldman Sachs, Disney, and Salesforce, while both the S&P 500 and Nasdaq retreated on the back of declines in major technology stocks like Microsoft and Nvidia. It's not too often that the Dow climbs while tech stocks are declining, and this indicates that investors are still divided over which direction the economy will take. Some are placing their bets in stable, more traditional companies, while others are pulling away from riskier technology bets.

There are a few reasons for this mixed reaction. Strong earnings from companies such as Salesforce and Disney saw confidence in sectors other than technology, while slowing growth and questions about future profitability caused investors to retreat from technology. The Federal Reserve's recent rate cut added to the uncertainty, cheaper borrowing usually helps businesses, but many worry it could also push inflation higher. All of this has made investors cautious, trying to figure out which parts of the economy can withstand slower growth and which might be strained if conditions deteriorate further.

From a macroeconomic perspective, this reflects the tension between growth and stability. While the Dow's rise indicates confidence in old-economy mainstays like finance and manufacturing, the decline in the Nasdaq shows growing doubt about future innovation and consumer spending. This mix of optimism and hesitation often characterizes the economy at a juncture when it is growing, but with potential risks coming from inflation, jobs losses, and trade issues. It is indicative that people think the U.S. economy as a whole remains strong but the path forward will be bumpy.

The stock market is not all about the numbers, it's also about sentiment. And for now, Wall Street seems cautious. Investors are moving toward conservative and away from riskier companies that tend to see bigger swings when the economy accelerates or slows. If that trend holds, it could mean slower investment and hiring in fast-growing parts of the economy, such as technology, and reduced innovation over time. On the other hand, traditional industries' steadiness will help balance the economy and probably help it avoid a severe downturn.

Overall, today's market action feels like a snapshot of the U.S. economy itself-strong in some areas, fragile in others. The Dow's rise shows resilience and confidence in parts of the market, while the decline in tech is a signal of concern about the future. A reminder that the economy rarely moves in one clear direction. And to quote Jerome Powell's description of "driving in the fog," investors and policymakers alike have limited visibility. For now, Wall Street's mixed day captures a bigger truth, the economy is still growing, but confidence remains fragile.

https://economictimes.indiatimes.com/news/international/us/u-s-stock-market-shocks-wall-street-today-dow-jones-climbs-as-sp-500-and-nasdaq-fall-salesforce-goldman-sachs-and-disney-rally-while-microsoft-and-nvidia-drag-tech-lower-in-mixed-u-s-market/articleshow/124960368.cms?utm_source=chatgpt.com&from=mdr

Government Shutdown's Impact on Contractors and Small Businesses

    Over the past month, the impact of the ongoing government shutdown has begun to weigh heavily on businesses that work with the federal government. According to a new report released Thursday by the U.S. Chamber of Commerce, government contractors have collectively lost around $12 billion since the shutdown began on October 1.

    The report, which is being sent to members of Congress, highlights that 65,500 small businesses across the country are losing roughly $3 billion each week. These companies provide a range of services — from high-tech manufacturing and office supplies to landscaping — and many rely on government contracts for a large portion of their income.

    Neil Bradley, executive vice president of the Chamber of Commerce, said in a letter that while federal employees are guaranteed back pay once the government reopens, contractors have no such protection. “When the government reopens, rarely are contractors made whole,” Bradley wrote, noting that many purchases are permanently lost during shutdowns.

    In order for the shutdown to end, there needs to be a "bipartisan" short-term spending bill which is all but bipartisan as of now. The Democratic party is pushing for the inclusion of ACA tax credit extensions before they agree on a deal. 

    With pressure continuing to build on getting a deal done, it will be interesting to see how the contractors continue to deal with this with no promise that they will get the pay they once agreed upon with another party. 

Link to Article: https://www.cnbc.com/2025/10/30/government-shutdown-business-chamber.html 

Fed Chair Powell Says Don't Count on a December Rate Cut

 On October 29th, the Fed cut rates by a quarter of a basis point to combat unemployment from surging.  This cut dropped the benchmark lending rate to a range of 3.75% - 4%.  This is the first time that there has been a "dueling dissent" in the decision of what to do with the Fed rates.  There were two opposing views on opposite policies.  One to cut rates by half a basis point and one to leave the rates as they are.  Along with these dueling perspectives, the decisions for the Fed rates are also occurring when there has been no government employment data as a result of the shutdown.  Employment is struggling, and the addition of jobs is at its lowest it has been since 2010.  Powell has said that the decisions are currently being made during a time of blindness for the Fed.  He has made it very clear that it is hard to make decisions about the conditions of the U.S. economy.  Data trends and private sector data that have been released by ADP are incite into the economy but are nothing compared to the government data that is typically used and considered the "gold standard".

Along with concerns about the economy's status and the lack of information due to the government shutdown, there are concerns about inflation rates.  Powell has said that, as of now, we are not seeing significant inflation, but this is mainly due to the tariffs and that businesses are doing a good job in not passing the increased expenses from tariffs onto customers.  He says, though, that because of the time it takes for tariffs to reach consumers, some inflation is going to occur.  Although we aren't seeing high inflation right now, tariff inflation is expected.  The September CPI showed unexpectedly reasonable values; however, this is likely to change as price pressures are apparent with the new tariffs.  With all this being said, the short-term inflation is hoped to be stopped by the tariffs, and this is what drove the most recent Fed rate cut.  The Fed will be in a tricky position if crucial government data is still not released in the near future as a result of the government shutdown.

https://www.cnn.com/2025/10/29/economy/fed-october-rate-decision