Jerome Powell warns against the signs of an AI bubble and an economy that looks too much at the rich

On Wednesday, they obtained the validation of an improbable source: the president of the federal reserve.

Jerome Powell said the United States saw “unusual quantities of economic activity through the construction of AI”, a rare recognition of the Central Bank that the push is not only disproportionate, but also biased towards the rich.

This imbalance extends beyond the markets. About 70% of American economic growth comes from consumer spending, but most households live the pay check at the payroll. This photo of demand has taken a form that analysts call in K: while many families reduce essential elements, richer households continue to spend on travel, technology and luxury products – and they continued to do so in August. For the moment, the recovery of inflation depends strongly on this dynamic remaining in a fragile stasis. It is a corrective that works well until it is not, if it could be described as functioning.

“(Expenses) may well be biased towards higher consumers,” Powell told journalists after the last political meeting of the Fed. “There is a lot of anecdotal evidence that suggests this.”

This bias has become more and more obvious on the markets. Only seven companies – Microsoft, Nvidia, Apple, Alphabet, Meta, Amazon and Tesla – now represent more than 30% of the value of the S&P 500. Their relentless AI Capex maintains positive commercial investments, even if the overall growth of employment has slowed down. Goldman Sachs believes that IA expenses have represented almost every 7% gain from year to year in Corporate Capex this spring.

Comments highlight an expanded concern to the Fed: that even if GDP growth is greater than 1.5%, the composition of this growth is uneven, unlike previous booms in housing or manufacturing.

Powell pointed out that “children who came out of college and young people, minorities” fought to find a job on the job market today, even if wealthy households continue to spend freely and that companies make money in cutting -edge technologies.

The imbalance reflects what Powell has described as “a low shot and low shot environment”, where layoffs remain rare, but the creation of jobs has slowed down. This dynamic, combined with the concentration of economic gains in AI and among the rich, risks deepening inequalities and complicates the Fed’s attempt to balance its inflation and employment mandates.

Which disconnects the risks expanding the gap between Wall Street and Main Street. While wealthy households continue to spend freely and technological titans pour billions into data centers and chips, revised employment data show that the economy has only added 22,000 positions in August, unemployment extended to 4.3%.

The investment of AI “unusually significant” can support high-level growth, suggested Powell, but it does not do much to lift the wide labor market.

“The overall rate of job search is very, very low,” he said. “If the layoffs start to increase, there will not be much hiring.”

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