Trump's Second Term: 18 Months In... AI and Stock Market Steady, but 'K-Shaped Stagnation' Deepens

[Mexico City = Shim Young-jae, Correspondent] During the first 18 months of Donald Trump's second term as President of the United States, the American economy has withstood a series of shocks from tariff increases, immigration crackdowns, and the Iran war better than expected. However, key promises such as price stability, a manufacturing revival, and improvements in middle-class living standards have yet to yield clear results.

On the 27th (local time), Reuters analyzed that while the U.S. economy has maintained overall resilience since President Trump's inauguration, various indicators such as the labor market, manufacturing, real income, and housing costs have either stagnated or even regressed.

Decline in Workforce and Employment

According to the U.S. Bureau of Labor Statistics' household survey, both the workforce and employment numbers have decreased since President Trump's re-election.

With the demographic standards changing in early 2026, there are limitations to year-on-year comparisons in official statistics. However, experimental statistics recalculated by the Bureau of Labor Statistics, reflecting the new population estimates since April 2020, also show a decline in the workforce and employment.

This is interpreted as a result of policies limiting immigration inflow and expanding the deportation of undocumented immigrants. Coupled with the aging U.S. population, the pool of people available to fill jobs is decreasing.

President Trump has claimed that tariffs and immigration policies would lead to a revival of U.S. manufacturing. However, non-farm employment statistics show that manufacturing jobs have decreased compared to when former President Biden left office.

On the other hand, investments in artificial intelligence data centers have significantly increased. While the expansion of data center construction has boosted employment in the construction sector, it remains uncertain how much AI investments will enhance productivity and employment in the future.

The decline in government sector employment reflects President Trump's policy direction. However, overall employment has been more significantly influenced by population structure and consumer demand in sectors such as restaurants, hospitality, and healthcare.

Inflation Slowdown Stalls... Exceeds Fed Targets

President Trump has pledged to lower living costs during the 2024 election campaign. However, it is assessed that actual deflation, which indicates a decline in overall price levels in the U.S., typically occurs during severe economic recessions, making it a goal with low feasibility from the outset.

While it is possible to reduce the inflation rate, recent improvements have been limited. Major price indicators still exceed the Federal Reserve's (Fed) target of 2%.

Import tariffs have raised prices on some goods. Additionally, following the Middle Eastern war, international oil prices have surged to around $100 per barrel, increasing price pressures. This level is about 50% higher than before the war.

The expansion of AI infrastructure has also been cited as a factor driving up costs due to increased demand for power, materials, and data center construction.

Within the Fed, concerns have been raised that rising prices for individual goods could spread cyclically, leading to widespread inflation.

Stagnation of Real Disposable Income

Consumer spending has remained relatively steady despite shocks from tariffs, wars, and high interest rates. However, real disposable income, which reflects households' actual purchasing power, has recently stagnated or decreased.

Disposable income is the income available to households for spending on housing, groceries, and services after taxes. It includes not only wages but also transfer income such as social security pensions.

The so-called 'K-shaped economy' continues, where the income of high-income earners and asset holders increases while the situation for low-income and middle-class individuals does not improve, raising uncertainty about how long consumer spending can endure.

The burden of home purchases remains significant. During the pandemic, ultra-low interest rates and supply shortages caused home prices to skyrocket, and subsequent rate hikes by the Fed have raised mortgage rates.

With high levels of home prices, insurance premiums, and borrowing costs, the proportion of housing costs in household income has also increased.

President Trump recently evaluated a housing purchase improvement bill pushed by Congress as "not very meaningful" and refused to sign it.

However, housing supply is more significantly affected by local government land use and zoning regulations than by federal government policies. It is analyzed that federal policies such as tax deductions alone cannot resolve the issue.

Stock Market Up 25%... Average Historical Level

President Donald Trump emphasizes the record highs of the U.S. stock market as a success of his economic policies.

The S&P 500 index has risen about 25% since January of last year. The average mid-term increase for the first 18 months of presidential terms since the Reagan administration in 1981 is about 24%.

Therefore, the stock market performance during President Trump's term is analyzed to be at a median level historically. During the same period, the long-term compound annual growth rate of the U.S. stock market was about 9.5%.

AI Drives Investment and Bond Markets

The strongest growth driver for the U.S. economy and financial markets has been the artificial intelligence industry.

Investments in AI data centers, semiconductors, and power infrastructure have become key corporate investments supporting U.S. GDP growth.

Companies have significantly increased bond issuance to fund AI facility investments.

As of the end of June this year, U.S. corporate bond issuance was recorded at $1.52 trillion. If the current trend continues, it is likely to surpass the record set in 2020 when companies raised large amounts of capital after COVID-19.

Despite the large supply of bonds, the spread of corporate bond yields remains low, and investment demand has been steady. This is interpreted as an indicator of market confidence in the resilience of the U.S. economy and corporate financial structures.

However, the excessive reliance of the U.S. economy on AI investments poses a risk factor. If the profitability of AI investments falls short of expectations, growth, the stock market, and the corporate bond market could all be shaken simultaneously.

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