For nearly a decade, the U.S. economy has outperformed the expectations of economists who study what drives employment, productivity and GDP growth.

During the first Trump and Biden Administrations, the economy grew at 2.5% and added 141,000 jobs a month—that’s a lot better than the 2% experts think is sustainable.

In 2025, the economy overcame the disruptions imposed by President Trump’s tariffs and crackdown on both legal and illegal immigration and continued to grow at a 2.5% pace by adding only 49,000 jobs a month.

Artificial Intelligence is spreading through workplaces and rapidly elevating labor productivity.

Last year, JP Morgan and Goldman Sachs predicted an annual boost to growth between 0.8% and 1.5% that could go on for several years.

Rapidly advancing labor productivity should herald rising real wages and moderate inflation — but all of this faces headwinds from a mismatch between the skills of the unemployed and abruptly changing needs of business, uncertainty imposed by legal challenges to the tariffs and this year’s reevaluation of the free trade deal with Canada and Mexico.

AI is profitable even if OpenAI isn’t.

Rival Anthropic appears on track for profitability by 2028 and businesses that make hardware like Nvidia and design agents to boost businesses performance, like Adobe and Sintra AI, are profitable now.

This should be the year productivity really takes off and profitability spreads broadly among large cap stocks.

At a December gathering of CEOs sponsored by the Yale School of Management two thirds said they expect to lower or not add to their staffs. Yet according to FactSet, analysts believe earnings growth among the S&P 500 will accelerate this year.

Whereas the Magnificent 7 dominated equity appreciation over the last several years, the focus will shift to the other 453 companies in the S&P 500. Their profits are forecasted to grow by 12.5%, up from 9.4% in 2025.

This is the leading edge of a broader bull market.

As with the transcontinental railroad, AI will enable vast new fortunes, but it could herald a second Gilded Age with mean times for ordinary workers.

AI is displacing so many lower- and mid-level white collar positions that it leaves those remaining employed with little leverage in wage negotiations.

During the early post-COVID recovery, lower-income workers made larger after-tax wage gains than middle-income workers who in turn outperformed the top third.

In 2025, that flipped, and the lower half of those still employed are not outrunning inflation.

Holiday shoppers flocked to buy-now pay later services and increasingly purchased second hand goods for gifts.

The largest overall income gains are going to established households who have jobs secure from AI, low-interest mortgages obtained before the Federal Reserve pushed up interest rates and large stock portfolios and tax-sheltered retirement accounts.

In 2025, American publicly traded companies added nearly $11 trillion in value, and the wealth effect should add $375 billion to $535 billion to consumer spending.

The top 25% of earners now accounts for two-thirds and a growing share of household spending.

Also, those stock gains help Big Tech underwrite primary AI research and data centers and provide capital for startups writing agents.

A virtuous cycle of accelerated productivity growth, new wealth and reinvestment in innovation is emerging — but with benefits precariously concentrated among the few.

Nervousness about OpenAI and data centers overbuilding could give rise to a stock market panic and a good deal of support for consumer spending and broader investment in AI throughout the economy could evaporate.

During the internet boom, businesses like WorldCom and Global Crossing borrowed to overspend on fiber-optic networks. Their bankruptcies didn’t keep Amazon, Google, Meta and others from emerging as powerful technology companies that today are at the center of American innovation.

Other real dangers include erratic regulations and difficult compliance costs.

A tragic example includes Trump stopping wind and solar projects when the country and AI need more electricity.

Certainly, make green energy compete with traditional sources on a level playing field but don’t terminate it with a White House laser gun.

Peter Navarro’s vision of tariffs precisely fine-tuned to promote industrialization is creating a regulatory quagmire at the border—for example, try to track down the steel and aluminum content of many complex products.

Often, products small businesses need are not available in the United States, and their imports are getting held up and sometimes destroyed by customs agents.

In 2025, bigger firms added to headcount.

Those with fewer than 500 employ nearly half the workforce but struggled with many shedding employees to compensate for tariff compliance costs and regulations.

Too much government: Trump, didn’t you campaign against that?

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Peter Morici is an economist and emeritus business professor at the University of Maryland, and a national columnist.