Ernst & Young drops a blunt reality check on the economy

2 hours ago 2

Moz Farooque

Sun, February 8, 2026 astatine 2:13 PM CST 4 min read

The U.S. system appears strong, astatine slightest connected paper.

GDP numbers are growing, consumers are inactive spending astatine a comparatively encouraging pace, and concern business hasn’t collapsed. However, that evident spot is masking thing much troubling, according to Ernst & YoungChief EconomistGregory Daco.

In a caller Bloomberg Businessweek Daily interview, Daco deemed the U.S. system a paradox.

He feels the coagulated header numbers are taking attraction distant from a acold much fragile, polarized world down the scenes.

The seasoned economical pundit argues that a fistful of constrictive pillars, including wealthier consumers, booming fiscal markets, and tremendous AI-driven investment by tech giants, are doing the dense lifting.

At the aforesaid time, households and smaller businesses are feeling the squeeze.

The takeaway mirrors a portion I wrote past period connected IMF Chief Economist Pierre-Olivier Gourinchas, who felt that the monolithic AI investments and soaring banal marketplace valuations are fundamentally crowding retired underlying vulnerabilities.

It’s besides wherefore legendary investors, specified arsenic Bridgewater Associates Co-Chief Investment Officer Ray Dalio, person been emphatic astir gold, calling for 10% to 15% portfolio exposure.

So clearly, with maturation numbers depending connected a remarkably constrictive radical of winners, the downside hazard is bound to rise.

Also, if AI concern slows, the weakness beneath the“strong averages” could aboveground quickly.

Headline economical information look strong, but economists pass the underlying representation is acold much uneven.Ghersi/Getty Images

Jobs(BLS Employment Situation, Dec. 2025; January study was delayed to Feb. 11): Payrolls +50,000, unemployment4.4%, mean hourly net $37.02 (+0.3% period implicit month; +3.8% twelvemonth implicit year). The slow hiring pace supports the constituent that spot has been narrow/uneven beneath the headline.
Inflation(BLS CPI, Dec. 2025): CPI +2.7% twelvemonth implicit year, halfway CPI +2.6% twelvemonth implicit year. Inflation looks person to normal, but galore households are inactive feeling the squeeze.
GDP(BEA, Q3 2025 updated estimate, latest published GDP update): Real GDP +4.4% annualized. That’s a large “average strength” number, which is the benignant that masks polarization.
Consumer spending (BEA Personal Income & Outlays, Oct.-Nov. 2025):PCE+0.5% period implicit month successful October and November. The numbers align with Daco’s constituent that spending tin look coagulated erstwhile backed by a few cohorts.
Manufacturing “pulse”(ISM Manufacturing PMI, Jan. 2026): PMI 52.6 (back supra 50 = expansion). Another “average is improving” signal, with uneven maturation crossed sectors.

Daco explained his halfway thesis successful the Bloomberg interview: The U.S. system is growing unevenly successful ways the averages conscionable can’t seizure astatine this point.