Unprecedented! Global capital spending surges while employment growth stagnates—the "AI era" has arrived.

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The global economy is presenting an unprecedented picture: corporate capital expenditure is surging at a record pace, while employment growth in developed economies has almost completely stalled.

As previously mentioned by Wallstreetcn, Walmart's CEO recently stated, "AI will change every job." The company plans to maintain its total number of 2.1 million employees over the next three years, but there will be major adjustments in job composition.

According to news from ChaseWind Trading Desk, JPMorgan stated in a recent research report that in the first half of 2025, global capital expenditures achieved an annualized growth of 11%, and this robust momentum has continued into the current quarter. In sharp contrast, labor demand in developed markets is “struggling,” with new jobs in the third quarter likely to increase only 0.4% year over year.

The report shows that regarding this phenomenon, the optimistic view sees it as a sign of successful implementation of new technologies, a substantial improvement in productivity, and the arrival of a “jobless recovery” for the economy; the pessimistic perspective warns that this may simply be a narrow, technology-driven capital expenditure bubble. Once it bursts, combined with generally cautious business confidence, it could lead to weak labor income and ultimately trigger a broad contraction in demand.

JPMorgan’s baseline forecast attempts to blend these two narratives, predicting that global GDP will see trend-level growth, but employment in developed markets will continue to be weak. This contradictory situation will become the core theme that investors must navigate over the coming quarters.

Investment Booming, Employment Freezing

The data before us clearly outlines the “decoupling” between investment and employment.

According to JPMorgan estimates, in terms of corporate equipment spending, global capital expenditure soared to an annualized growth rate of 10.2% in the first half of 2025, following only a mild 4% increase in 2024. This trend is broad-based, and almost all regions have seen a substantial acceleration in corporate equipment spending.

Meanwhile, global hiring has stalled. Recruitment activity across developed markets has universally weakened, with an annualized growth rate in the third quarter of 2025 expected to be only 0.4%. The report particularly points out that, except during the lockdowns of the COVID-19 pandemic, this is the slowest growth rate since the early stages of the post-global-financial-crisis recovery.

Such a situation where accelerated capital spending coexists with stalled employment growth is extremely rare in history.

The report emphasizes that in the 60 years of economic expansion in the United States, there has never been a comparable scene. Weak employment growth is typically a reliable early warning sign of economic recession, which is a main reason for the Federal Reserve to restart an easing cycle.

Optimistic Interpretation: AI Revolution Drives Productivity Boom

For this unusual phenomenon, an optimistic explanation is that the world is entering a new phase driven by technological revolution.

This view considers that robust investment growth and weak hiring may “reflect the successful implementation of new technologies and a response to the slowdown in labor supply.”

At the core of this view, technological advances represented by AI are reshaping the production function. Companies are pouring large amounts of capital into efficiency-boosting equipment and intellectual property products (IPP), rather than traditional labor expansion.

The data shows that the surge in technology capital expenditures related to AI is a key driver of this round of investment boom, particularly in the technology sectors of the US and Asia. In this “AI era” narrative, strong productivity growth can offset the drag from slowing labor supply. As long as the resulting growth in wages and profits remains balanced, the economy can achieve sustainable growth without creating large numbers of new jobs.

JPMorgan’s forecast of a robust 4% annualized productivity growth in the US third quarter also supports this theory with data.

Pessimistic Warning: Companies Worry About Future Uncertainty

However, JPMorgan’s report also presents a more cautious opposing view.

This view considers that the current capital expenditure boom may be unstable at its core, merely “a narrow-based rebound in technology capital spending” and could fade once some of the front-loaded expenditures in the US and Asia end.

Meanwhile, the stagnation in employment growth may reflect “a broad shift toward business caution.” Companies, worried about future uncertainty, are choosing to invest in automation and technology to cut long-term costs instead of expanding staff. If this cautious sentiment spreads, it will present significant risks.

For investors, the main concern is the potential for a negative feedback loop.

The report notes that the momentum for growth in US labor income is weakening, with real labor income expected to contract in the coming months. Although consumers are currently maintaining spending by lowering their savings rate, this trend is unsustainable.

If employment growth continues to be absent, household confidence in future income will be eroded, which could ultimately lead to a pullback in both consumer spending and corporate hiring, pushing the economy into a broader demand downturn.

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The above excellent content comes from ChaseWind Trading Desk.

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