{"id":487255,"date":"2025-10-10T02:52:19","date_gmt":"2025-10-10T02:52:19","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/487255\/"},"modified":"2025-10-10T02:52:19","modified_gmt":"2025-10-10T02:52:19","slug":"why-arent-americans-partying-like-its-1999-inside-story","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/487255\/","title":{"rendered":"Why aren\u2019t Americans partying like it\u2019s 1999? \u2022 Inside Story"},"content":{"rendered":"

Economic reality has a habit of throwing you curveballs \u2014 events you didn\u2019t anticipate when making your predictions. Specifically, most economists, myself included, expected tariffs to be the big economic story of 2025. After all, in just a few months Donald Trump has reversed ninety years of pro-trade US policy, sending average tariffs to their highest level since 1934<\/a>. Predictably, supply chains have been disrupted, consumers face higher inflation, and farmers can\u2019t sell their crops abroad.<\/p>\n

Yet the economic consequences of the radically self-destructive turn in US trade policy have been matched, perhaps even overshadowed, by a development that has nothing to do with policy: an enormous surge in spending on \u201cAI.\u201d Scare quotes because ChatGPT and its rivals aren\u2019t really artificial intelligence. But they are impressive, routinely doing things that would have seemed impossible just a few years ago.<\/p>\n

And the surge in AI investment \u2014 a tech boom the likes of which we haven\u2019t seen since the 1990s \u2014 has buoyed the economy in the short run, offsetting the drag from Trump\u2019s tariffs. Without the data-centre boom, we\u2019d probably be in a recession. But hundreds of billions in spending on data centres have boosted investment, while soaring stock prices have supported consumer spending by the wealthy even as demand from lower and middle-income Americans weakens.<\/p>\n

Unlike the tech boom of the 1990s, however, the current AI boom isn\u2019t translating into widespread economic optimism. In fact, Americans are remarkably downbeat about the economy and the future in general. And I think it\u2019s worth trying to understand why.<\/p>\n

<\/p>\n

This article isn\u2019t about the long-run consequences of AI for things like jobs and economic growth, as well as whether we\u2019ll soon create superintelligences that decide to kill us all. I want to focus for now on how hopes about profits to be made from AI \u2014 and fear of missing out, or FOMO \u2014 have led to huge business outlays, largely on those data centres. By the second quarter of this year spending on information-processing equipment and software, as a percentage of GDP, had already matched its peak in 1999, the height of the internet bubble. There\u2019s every indication that it\u2019s going to go even higher, maybe much higher.<\/p>\n

<\/p>\n

Source: St Louis Federal Reserve. Note: Ignore the numbers for the early 2020s, which, like so many other things, were greatly distorted by Covid.<\/p>\n

The current AI boom resembles the 1990s tech boom in other ways besides the tidal wave of spending. To those of us of a certain age, the hype \u2014 This will change everything! \u2014 is distinctly familiar. Now, as then, the feverishness is a good reason to suspect that we\u2019re in the midst of a huge speculative bubble. Reinforcing this suspicion is the fact that big tech companies, which generate billions in cash flow, are spending more on AI than their gushers of dollars can support. So now they\u2019re taking on lots of debt<\/a>.<\/p>\n

While the 1990s and today are alike in their bubble mentality, however, they differ in an important way: today we lack the pervasive optimism of the late 1990s. It\u2019s hard to convey to people under the age of fifty just how upbeat Americans in the late 1990s were feeling about the economy and the future in general. In fact, I believe the Bill Clinton\u2013era boom led Americans to take prosperity for granted, resulting in their willingness to switch their presidential votes to a Republican \u2014 the ill-fated George W. Bush.<\/p>\n

Today corporations are, once again, pouring vast sums into technology, but they\u2019re doing it against a background of extraordinary pessimism. And the question I want to ask is why we\u2019re seeing 90s-type hype without a return of 90s-type hope. Why aren\u2019t we partying like it\u2019s 1999?<\/p>\n

You can see the difference in how people feel about the economy by looking at consumer sentiment, which was very high at the end of the 1990s but is now about where it was during the depths of the global financial crisis:<\/p>\n

<\/p>\n

You can also see the difference between now and then in more general polling. In 1999 around 60 per cent of Americans<\/a> were satisfied with the way things were going in the country; these days it\u2019s half that. You can see it in presidential approval ratings: In March 1999, 78 per cent<\/a> (!) of Americans said they approved of Bill Clinton\u2019s handling of the economy. Polls show Trump with less than half that much approval for his economic policies, with those disapproving exceeding those approving by around fifteen points<\/a>.<\/p>\n

So why are we all feeling so grim even as businesses place huge bets on an impressive and possibly transformative new technology? I\u2019d give three answers.<\/p>\n

First, the US economy under Trump is doing worse than the standard measures indicate. It\u2019s true that we haven\u2019t had a recession \u2014 largely because that huge spending on data centres has compensated for the economic drag caused by tariffs. It\u2019s also true that unemployment remains fairly low \u2014 in fact, the current unemployment rate<\/a> is similar to the unemployment rate in 1999.<\/p>\n

But while we haven\u2019t (yet?) seen mass layoffs, the labour market is weirdly frozen, probably because of uncertainty created by Trump\u2019s erratic policies. The hiring rate<\/a> \u2014 the rate at which employers are taking on new workers \u2014 is very low by historical standards. So is the quit rate, the rate at which workers are voluntarily leaving jobs, normally an indication that workers fear they won\u2019t be able to get a new job if they leave their current employment.<\/p>\n

Unfortunately, these data don\u2019t go all the way back to 1999. But here\u2019s a striking comparison. The Conference Board [a business-oriented think tank] conducts a monthly survey of consumer confidence that among other things asks whether respondents consider jobs \u201cplentiful\u201d or \u201chard to get\u201d. In April 1999 people were very upbeat<\/a> about job-finding: 47.4 per cent said jobs were plentiful, while only 12.5 per cent said they were hard to get. In August 2025<\/a> those numbers were 26.9 per cent and 19.1 per cent respectively, a far more pessimistic view. In other words, not many Americans have been laid off, but many of them are very worried about what will happen if they do lose their job.<\/p>\n

Which brings me to my second point. As best I can remember, people were excited about the rise of the internet but not, for the most part, frightened. They saw new possibilities opening up, but few Americans saw these new possibilities putting their jobs or their society at risk. In retrospect we should have been worried: social media in particular have done an immense amount of social and psychological damage. But we weren\u2019t thinking about those risks.<\/p>\n

By contrast, it\u2019s hard to find people who aren\u2019t worried about AI. It\u2019s common to hear warnings that AI will eliminate large categories of jobs, and maybe even lead to mass unemployment. I take the first prospect seriously \u2014 past technological change has taken away most of the jobs in major occupations, from coal-miners to longshoremen. As a card-carrying economist, I\u2019m sceptical about the second: people have been predicting mass unemployment caused by automation since the 1930s, and it keeps not happening. But the point is that AI is creating widespread anxiety even as it boosts GDP in the short run.<\/p>\n

Finally, although this is hard to prove, I believe the political situation is bleeding into economic perceptions. People like me see a terrifying autocratic power grab in progress. While Trump and his minions claim that this is the BEST ECONOMY EVER, they also claim that our major cities are war zones overrun by dangerous leftists, which kind of interferes with the attempt to project sunny optimism.<\/p>\n

My guess is that the current tech boom, like the 90s boom, will end in a painful bust. While Trump keeps insisting that the economy is great, his minions have taken to promising that it will get much better next year<\/a>. Given how bad people are feeling about an economy currently propped up by an unsustainable tech boom, I wouldn\u2019t bet on it. \u2022<\/p>\n","protected":false},"excerpt":{"rendered":"Economic reality has a habit of throwing you curveballs \u2014 events you didn\u2019t anticipate when making your predictions.…\n","protected":false},"author":2,"featured_media":487256,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5311],"tags":[49,978,659],"class_list":{"0":"post-487255","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"tag-united-states","9":"tag-us","10":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115347610508722000","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/487255","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=487255"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/487255\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/487256"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=487255"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=487255"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=487255"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}