Economy Expands Rapidly, But Job Growth Flatlines in 'Jobless Boom'

Unprecedented divergence between GDP and employment raises concerns about productivity gains and labor market stagnation.

Published on Feb. 21, 2026

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The U.S. economy expanded at a solid 2.7% pace in 2025, but employment growth flatlined, drawing comparisons to the 'jobless recovery' of the early 2000s. This 'jobless boom' is happening without a recession, marking a first in the postwar era. The divergence between GDP and job growth is attributed to factors like overhiring, robust productivity growth, technological advancements like AI, and increased policy uncertainty. The impact is being felt across industries, with white-collar workers bearing the brunt of the slowdown even as jobless rates decline for non-college workers.

Why it matters

The 'jobless boom' raises concerns about the sustainability of economic growth if productivity gains are not passed on to workers in the form of higher wages. It also highlights the potential disruptive impact of AI and other technologies on the labor market, especially for office and administrative support roles. The situation could leave the economy vulnerable to shocks if the labor market is not a strong 'firewall' against a potential recession.

The details

Forecasters expect the economy to have expanded 2.7% in 2025, supported by resilience in consumer spending, rising stock prices, and a pickup in business investment driven by the AI boom. However, employment barely grew, with a broad-based pullback in hiring across industries. This divergence between GDP and job growth is drawing comparisons to the 'jobless recovery' of the early 2000s, which was characterized by losses in manufacturing and office/administrative support roles. This time, the pain is being felt more by college-educated workers on the front lines of the battle to expand AI in white-collar workplaces.

  • The economy expanded 2.7% in 2025.
  • Employment growth flatlined in 2025, marking the first 'jobless boom' in the postwar era.
  • The latest monthly jobs report showed hiring picked up in January 2026, but was concentrated in healthcare and construction.

The players

Donald Trump

The former U.S. president who will likely tout the strong GDP numbers during his first year back in the White House at his annual State of the Union address.

Jerome Powell

The current Federal Reserve chair who argued that the current wave of rising productivity started five or six years ago, before the mass rollout of large language models.

Crystal Mason

A 45-year-old resident of Holly Ridge, North Carolina who was laid off from her job as a contractor at a call center and is now struggling to find similar work, concerned about the impact of AI on such positions.

Danielle Williams

A 40-year-old senior lead recruiter from Miami who was laid off in November after five months in the role and has only been able to find a six-month contract position since then, describing the labor market as 'really crazy, unlike anything I've ever seen.'

Mickey Levy

An economist and visiting fellow at the Hoover Institution who is not optimistic that rising productivity can continue to carry the economy if it's not passed on in the form of higher wages.

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What they’re saying

“We have never seen anything later in an expansion like what we are seeing today, and that's what makes it so unusual and hard to judge about where we are going.”

— Diane Swonk, Chief Economist, KPMG (Los Angeles Times)

“Conditions that led to the jobless recovery in the early 2000s are aligning, such as overhiring, robust productivity growth, technological advancements, and increased policy uncertainty. This leaves the economy vulnerable to shocks, because the labor market is the main firewall against a recession.”

— Michael Pearce, Chief U.S. Economist, Oxford Economics (Los Angeles Times)

“AI could bring productivity gains over the next few years, and it could be quite significant, which of course means that we may see less job growth than you would ordinarily. But I would be surprised if that is making a huge impact just yet.”

— Stephen Stanley, Chief U.S. Economist, Santander Capital Markets (Los Angeles Times)

“I've noticed other companies I've worked at, or where friends work, are already using AI and reducing roles for people who do what I do. The sad part is, from my years of experience in customer service and health care, I've learned that almost everyone I interact with prefers talking to a real, empathetic, professional person.”

— Crystal Mason (Los Angeles Times)

“I'm very familiar with the labor market and market trends because I have been in the recruiting industry for the past 12 years. This market has been really crazy, unlike anything I've ever seen.”

— Danielle Williams (Los Angeles Times)

What’s next

The latest monthly jobs report showed hiring picked up in January 2026, but was concentrated in healthcare and construction, raising questions about the sustainability of the economic growth if productivity gains are not passed on to workers in the form of higher wages.

The takeaway

The 'jobless boom' highlights the potential disruptive impact of AI and other technologies on the labor market, especially for white-collar workers, and raises concerns about the long-term viability of an economy that is creating plenty of wealth but not many jobs.