Patrick Collison, chief executive of digital payments company Stripe, recently polled his 1.5 million followers on X about their economic outlook.
Some 13,000 took the survey. On average, they expect economic growth to double over the next five years, to an average of 4.3%, and employment to fall by around 8%.
Think of this as the "AI-optimist" scenario, in which AI vastly increases economic output while making tens of millions of workers redundant.
The odds of this forecast coming true are close to nil; employment almost never collapses by that much, and never when output is skyrocketing. But the magnitudes aren't what matters, it's the direction. And if a jobless boom once seemed far-fetched, it no longer does, because we seem to be in one right now.
Admittedly, our main growth measure doesn't look boom-y. Real (inflation-adjusted) gross domestic product growth averaged 2.1% over the last year, in line with the previous year; and a lousy 1.5%, annualized, in the second quarter.
But the stock market delivers a completely different picture. It has bulldozed its way through tariffs, war, higher oil prices and disappointing GDP to rise 13% so far this year. Just last week, stocks jumped to a record after Treasury Secretary Scott Bessent said the U.S. and Iran could strike a deal to open the Strait of Hormuz in a day or two. The strait is still closed, but stocks have held on to their records.
There are several potential explanations for why the stock market has disconnected from GDP. One is that it's a bubble. Another is that it tells us something about the future, namely that growth is going to accelerate.
In a bubble, stock prices typically go up faster than earnings, inflating valuations (i.e. the price-earnings multiple). But in the last year, earnings have risen faster than prices. Exclude Amazon.com and Alphabet, whose results were inflated by investment gains, and earnings were up a stunning 32% in the second quarter so far, according to FactSet. The multiple has thus declined.
Much of this, of course, is because of AI, which is driving demand for cloud storage and computer chips. AI itself may well be in a bubble. But the boom isn't just a tech or AI story. The median earnings growth of S&P 500 companies has accelerated to 13% from 8% two years ago, according to Bank of America. The bank calculates that total revenue for the index excluding energy and financial companies, and adjusted for inflation and currency changes, is up around 8%, much more than GDP.
A handful of AI-linked stocks were once driving the market. Not any more: Banks and small stocks, which are both sensitive to the state of the business cycle, are up much more than big tech's "Magnificent Seven" this year.
Deutsche Bank recently found the phrase "broad-based" cropping up repeatedly in earnings calls. "While I appreciate the impact AI is having on GDP, that can't be the only driver of the loan growth that we're seeing given the industry dispersion and the geographic dispersion, " Bill Demchak, chief executive of PNC Financial Services, said.
The big picture, then, is that companies across the economy, not just those exposed to AI, are seeing solid demand, and that is translating into extraordinary profit and revenue.
But not hiring, which brings us to the jobless part of the jobless boom. We learned last week that total payrolls shrank in July, the fifth time in the past 12 months. Private payroll growth has averaged a little over 50,000 per month for the last year. These sorts of trends are virtually unprecedented outside recessions.
The slide in job growth hasn't pushed up the unemployment rate, which hovers just above 4%. The reason is that the labor force is shrinking as baby boomers continue to retire and immigration dries up.
Demographic factors may be holding down unemployment, yet demand for labor is also tepid. Job openings are mired at postpandemic lows, according to Indeed. If employers were competing for talent, we'd see it in pay, yet annual earnings growth is just 3.2%, the lowest since before the pandemic.
Lots could interfere with the economy unfolding the way the stock market seems to hope. Consumer demand has remained solid despite weak wages because so many households have been saving less. And private investment depends on the issuance of hundreds of billions of dollars of debt to finance data centers. Neither of those things can go on forever.
But they can keep going for now. Especially if AI accomplishes even a fraction of what the optimists think.