Data center/AI Bubble is the main reason we aren't already in recession

One thing that's become clear to me is that the Bubble in data center construction is one of the few areas of actual growth in our economy. While our overall economy has been flagging, including in the construction sector, data centers keep getting built in increasing amounts.

Data centers have replaced other forms of office construction, and kept that part of construction from suffering a significant collapse over the last 2 years.

As Menzie Chinn notes at Econbrowser, data centers have accounted for nearly all of the non-residential construction sector growth in the last few quarters, and I'll add that new information processing equipment has masked a significant falloff in growth in the underlying US economy.

In addition to the unsustainable amount of construction with these data centers, we are starting to see reports like this on how this Bubbly AI stuff is affecting the jobs market.

You gotta feel for new college graduates. 😞 B of A says “AI adoption is starting to deflate US labor market .. Unemployment rate spikes to 8.1% - was 4.0% in Dec'23 ..”

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— Carl Quintanilla (@carlquintanilla.bsky.social) August 8, 2025 at 7:25 AM

Goldman has been watching this, too.

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— Carl Quintanilla (@carlquintanilla.bsky.social) August 8, 2025 at 7:27 AM

I take this as yet another indication that things are more likely to go down than go up in the coming months, and what's going to pull us out of these doldrums in 2026?

CPI and retail sales info comes out in the next few days, and I think that'll go a long way to telling us if I'm right about that downtrend.