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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
MainFT’s Economics Show is used to big beasts. This week, two of the biggest went head to head again.
Paul Krugman and Martin Wolf are arguably the world’s pre-eminent economics commentators of the three decades. Now, they’re picking up a conversation they started earlier this year, breaking down the effects of Trump’s economic agenda.
In the first of four new podcasts, Krugman and Wolf discussed one of the big questions hanging over the US economy: if the economy is doing well, why don’t people feel that way? Or, to put it another way — are we in a ‘vibecession’?
Krugman puts the health of the US economy at a bang average 5/10:
It’s clearly in worse shape than it was in January . . . The normal indicators — unemployment rate, inflation rate — are worse than they were in 2024. Unemployment is a few tenths of a percentage point higher, inflation — which had been on a downward trajectory — is now up. It’s not a catastrophe, we’re not in a recession.
But then there are weird shadows in the economy that make it, in some ways, considerably worse, probably, in terms of how it’s experienced than these conventional numbers would say.
So what are these “weird shadows?” In the job market, uncertainty over tariffs and the impact of AI are playing a role. Most businesses aren’t hiring, while some are spending a stupendous amount on data centres. Which means the jobs market is in stasis, even as growth looks resilient, Krugman notes.
We have not yet had mass lay-offs, large job losses. But what we have seen is . . . very low hiring. It’s a frozen labour market. Probably, at least in part because of tariffs and general uncertainty. But businesses are not hiring, they’re not firing a lot either. So, if you’re in a job, then you’re reasonably secure, but should you lose your job, or if you’re a young person entering the markets for the first time, it’s actually very grim.
Bad news for young grads. Not only now, but also quite possibly in the long term, as weak job markets tend to retard career development even in the longer run.
So AI is threatening job losses, hoovering up business investment and making the economy seem stronger than it really is. And worst of all, it’s not even fun:
Many people have made the analogy with the late ’90s — both the dotcom, but even more important, the telecom investment boom . . . At that time, that boom bubble, people were giddy. The ordinary person was feeling that they were part of this great adventure of prosperity. Now, it didn’t last, but . . . there’s been none of that now. There’s nobody out there who is thinking: well, you know, Nvidia is doing well, and that means that anybody can make it.
. . . The dotcom stuff was sometimes silly, often silly — people even kind of recognised the silliness — but it was kind of nice. I mean, you know . . . the feeling that there were opportunities.
In contrast, the vibes in 2025 are, well, pretty cruddy.
To hear the full conversation — such as why Americans feel cheated by inflation, the legality of Trump’s tariffs, and the worrying rise of fascism — you can either head to The Economics Show site over at MainFT, or check out its feed on Apple Podcasts, Spotify, Pocket Casts or wherever you listen to podcasts. You can also read the transcript here. Your own thoughts go in the white box below.
