Over the past few months, you could put together three different — and somewhat conflicting — pictures of the American economy.
For companies exposed to the AI boom, business has been good — excellent, even. The surge in ongoing capital investment into data centers and electricity has been larger than other recent booms, such as the telecom buildout. Electricity demand is soaring, especially in Texas and the Mid-Atlantic. Technology companies have signed power offtake deals with nuclear and hydroelectricity companies. If anything, companies exposed to artificial intelligence are more afflicted by congested supply chains and shortages than by slack demand — see the yearslong waiting lists to get a new transformer or natural gas turbine.
Outside of the AI economy, though, the economy has been a fair bit colder. You might even say it’s been frozen by indecision. When you talk to business leaders, they confess confusion about where things are heading. President Trump’s constantly changing tariffs — and his administration’s mercurial policy shifts — have made it difficult for non-AI-exposed businesses to plan long-term capital investment.
You could hear this view from clean energy manufacturing and traditional fossil firms alike. When I talked to John Henry Harris, the CEO of the medium-duty truck maker Harbinger Motors, for an episode of Heatmap’s Shift Key podcast in June, he told me that his company was just about to shift a production process to Mexico when a last-minute Trump change made it cheaper to keep it in China. Meanwhile, an oil and gas executive recently told the Dallas Federal Reserve: “The Liberation Day chaos and tariff antics have harmed the domestic energy industry. Drill, baby, drill will not happen with this level of volatility.”
But the data contradicted that tepid view. This was the third picture that we were getting of the economy. Through the summer, federal surveys showed an economy that was performing okay. In May, according to the Bureau of Labor Statistics, the U.S. economy added 139,000 jobs; it gained another 147,000 jobs, apparently, in June. The AI boom was clearly contributing to those robust reports. But how could an economy that business leaders otherwise described as difficult be going so well?
Now we can finally square these disparate pictures.
On Friday, the federal government released its newest tranche of job numbers. The headline number was mediocre — the U.S. added a mere 73,000 jobs in July — but the guts of the report were worse. The government revised down its estimate of the May and June reports by a total of 258,000 jobs. With these new numbers in hand, it’s clear that the labor market has essentially stalled out since Liberation Day in April.
The unemployment rate slightly rose to 4.2%, which was in line with what economists predicted.
These new reports clarify that the broader American economy wasn’t actually thriving. Its summer strength was a mirage the whole time. Outside of AI, things are downright frigid. And as President Trump continues to shuffle tariffs and increase trade uncertainty, we can expect conditions to worsen. Trump seems hellbent even on clouding our ability to understand the underlying economy: on Friday afternoon, he fired the Bureau of Labor Statistics commissioner, a career civil servant.
If you squint, you can see a hazy “AI sector” versus “non-AI sector” distinction in the data, even among the energy and decarbonization companies we cover at Heatmap. But it’s not obvious. Contrary to what you might expect when power demand is surging, utility employment was basically flat last month. Heavy and civil engineering construction jobs were up by 6,000, and “nonresidential specialty trade contractors” — a category that can include electricians — gained nearly 2,000 jobs.
But manufacturing lost 11,000 jobs last month, with the motor vehicles industry driving 2,600 of those losses. Mining, quarrying, and oil and gas jobs were down. The Institute of Supply Management report, a private survey of U.S. manufacturing activity, showed the sector shrank in July for the fifth month in a row.
And even though the Department of Government Efficiency’s deferred buyout program for more than 150,000 people has yet to hit, the federal government bled 12,000 jobs.
In a way, the clean energy industry — or at least solar, battery, nuclear, and geothermal developers — might consider themselves lucky. Despite the best efforts of Trump’s officials, and despite the chaos of President Trump’s policies, they have been able to eke through the past few months because of the AI boom. Nearly 70% of all new power-generating capacity added to the U.S. grid in the first quarter of this year came from solar panels, and the government has thrown its weight behind next-generation nuclear and geothermal technologies. A tepid jobs report might even bring some interest rate relief from the Federal Reserve.
But if that AI boom slows down, we should all watch out below.
