INSIGHTS

On March 23, 2026

AAM Viewpoints — The “Almost” Economy

Authored by: Ryan Severino, CFA, Chief Economist

In an economy where many things are almost what they appear to be, we thought it would be appropriate to discuss several things in the economy that feel “almost” but not exactly. What follows is not an exhaustive list, but an informative one.

1. An Expansion with Almost No Job Growth

The current expansion looks healthy in terms of output. GDP growth has been steady and consumer spending has remained resilient. Yet employment growth has been unusually muted. Historically, economic expansions are accompanied by sustained job creation. Strong growth typically pulls more workers into employment as firms expand payrolls to meet rising demand. In this cycle, however, job growth has been relatively tepid even while the unemployment rate remains low. In other words, the economy looks strong, but the labor market behaves as though it is already mature. The result is an expansion that almost resembles past recoveries, but without the employment dynamism that usually defines them.

2. Low Unemployment with Almost No Hiring

The unemployment rate remains near historical lows, which would normally imply a tight labor market and strong hiring activity. But hiring rates and job openings have cooled substantially compared to the boom years of the pandemic recovery. This creates a peculiar equilibrium: workers are not losing jobs in large numbers, but firms are also not adding many. Labor markets therefore feel stable but stagnant, a condition that resembles neither recession nor boom. The labor market looks tight on paper, but in practice the dynamism that usually accompanies tight labor markets is largely absent.

3. Productivity That Is Almost Too Strong

Recent data suggest unusually strong productivity growth. In theory, that should be welcome news: higher productivity allows the economy to grow faster without generating inflation. But the magnitude and persistence of the gains raise questions. If productivity really is accelerating structurally, as appears to be the case, then the economy may require fewer workers to produce the same output. That could help explain why output continues to grow even as job creation slows. The economy therefore looks strong on the surface, but the underlying drivers may be shifting in ways that are not yet fully understood.

4. A Strong Economy with Almost No Cyclicality

Economic expansions normally have a clear cyclical rhythm: strong job growth, rising investment, and accelerating credit creation. Growth builds momentum early in the cycle before gradually slowing as the expansion matures. This expansion has instead felt structurally stable but cyclically muted. Growth persists, but without the strong accelerations and decelerations typical of past cycles. The economy feels strong, but it almost behaves as though it is permanently late cycle.

5. Deglobalization That Is Almost Invisible in Trade Data

There is widespread discussion about reshoring, friend-shoring, onshoring, and the fragmentation of global supply chains. Yet global trade volumes remain near historic heights and supply chains continue to function across borders. Production networks have adjusted more gradually than the rhetoric surrounding deglobalization might suggest. The global economy may indeed be restructuring, but the data still looks surprisingly globalized.

6. High Interest Rates with Almost No Credit Stress

Policy rates rose dramatically over the past several years. Historically, such rapid tightening cycles trigger clear signs of stress somewhere in the financial system. Yet broad credit markets have held up relatively well. Default rates have risen somewhat but remain manageable, and financial institutions appear stable. Rates on some instruments remain high, but the usual financial stress associated with aggressive monetary tightening has been limited.

7. Large Fiscal Deficits with Almost No Fiscal Crisis

Government deficits in many advanced economies are unusually large outside of recession. In earlier decades, deficits of this magnitude might have triggered bond market instability or forced governments into rapid fiscal consolidation. Instead, sovereign borrowing has continued with relatively little disruption. Public finances appear stretched, yet financial markets continue to absorb large quantities of government debt with surprisingly little drama.

8. Housing Shortages with Almost No Construction Boom

Many countries face severe housing shortages and rising home prices. Under normal circumstances, such shortages would trigger large construction booms as developers respond to strong demand. Yet home building has remained constrained by financing costs, regulatory barriers, and labor shortages. Demand for housing remains strong, but supply has not responded in the way basic economics would predict.  

9. A Consumer That Is Almost Lying

Consumer surveys consistently show households expressing pessimism about the economy and frustration about rising prices. Measures of consumer confidence remain subdued despite steady economic growth. Yet actual consumer behavior tells a very different story. Retail sales continue to expand, service consumption remains strong, and household spending has remained the primary engine of economic growth. This creates a peculiar disconnect between what consumers say and what they do. In surveys, households report financial stress and economic pessimism. But in the real economy, their spending behavior suggests continued resilience. Consumers are not literally lying, but the gap between sentiment and behavior can make it appear that way. What consumers say about the economy and how they behave within it are almost two different stories.

CRN: 2026-0305-13289 R