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In the game of Jenga, players remove wooden blocks from a tower and place them on the top. With each move, the tower gets taller and increasingly unstable, until it collapses.
Welcome to the American economy of 2025.
Economic growth is robust and stock markets are hovering around record highs. Set on a foundation of supportive fiscal and monetary policy, the tower appears sturdy enough.
But a closer inspection shows that an increasing number of structural supports — across businesses, labor markets, consumers and stocks — are looking wobbly. A Jenga-like collapse, meaning an unexpected economic downturn, is not inevitable. But it is a growing, underappreciated possibility.
One of the most critical economic Jenga blocks removed this year has been small American companies, especially those focused on trade. Small businesses, often defined as having fewer than 500 employees, play a critical role in America’s economy and employ 46 percent of total workers. They have an even bigger presence in trade. A Department of Commerce study released in April found that small firms account for a third of the total value of imported U.S. goods and an overwhelming 97 percent of all importing companies in America.
These small firms have had fewer resources than their larger competitors to navigate the Trump administration’s tariffs, such as finding new supply-chain partners, lobbying the government for help or managing costs to absorb tariffs without hurting profitability. So it’s no surprise that an Atlanta Federal Reserve report found in April that small U.S. firms expected sales to be 9 percent lower compared with normal business conditions, because of cost increases. That’s three times greater than the sales hit expected by large firms.
In response, small U.S. companies have grown more cautious, reducing their staffs to control costs. Private-sector payroll data from ADP, a payroll processing company, showed that between April and September, small firms cut 107,000 jobs while large firms were still adding to their head counts.
There are more wobbly labor-market Jenga blocks than that comprising small companies, though. The federal government is estimating that it will eliminate roughly 300,000 jobs this year. Across the private sector, companies of all sizes are offsetting increased costs and artificial intelligence-related investments by freezing hiring and trimming personnel.
Indeed, the public and private sector together in October announced the largest monthly number of layoffs in 22 years, according to data from the outplacement firm Challenger, Gray and Christmas.
Without income from jobs, consumers pull back on spending. That in turn means less revenue for companies, which makes them more cautious and makes the Jenga tower much less stable.
So far this year, despite the worrying signals coming from the labor market, consumer spending has been resilient. Indeed, it is one of the biggest blocks holding up the U.S. economy.
That said, the range of households willing and able to spend is shrinking, with consumption increasingly dependent on the country’s wealthiest households. In a November speech, a Federal Reserve governor, Lisa Cook, noted that among low-to-middle-income households, “we have observed large increases in delinquencies, especially last year, and there is some evidence that their spending has stagnated, in particular compared to the robust spending growth of their higher-income counterparts.”
According to Federal Reserve data, the top 10 percent of American households by wealth owned more than 87 percent of the country’s corporate equities and mutual fund shares as of mid-2025. Those households have benefited from an S&P 500 equity index that has gained more than 74 percent since November 2022, when ChatGPT emerged, according to data from Bloomberg, the news and financial information company.
That gets to today’s most important economic support: American technology companies. A.I.-focused firms have driven the lion’s share of the stock market’s recent gains, creating wealth and confidence that has boosted consumption.
These firms have also made extraordinarily large investments in infrastructure, especially data centers. Just this year, capital expenditure from Alphabet, Meta, Microsoft and Amazon is expected to surpass $380 billion, more than the decade-long Apollo space program, in today’s dollars, with potentially more to come in 2026. In the first half of this year, A.I.-related investments were an even larger contributor to gross domestic product than personal consumption.
Spending from this small subset of firms provides a private-sector stimulus for the economy, leads equity markets higher and supports consumption by the wealthy. The question investors and economists are increasingly asking is: How long can it last?
These companies are the cornerstones of the economic Jenga tower. If they can stay firmly in place, they will support business across the A.I. infrastructure ecosystem. That means there is less risk of job losses.
Those expecting that the economic Jenga tower can grow taller, even on an increasingly narrow foundation, point out that tax refunds next spring should provide a measure of support for households, and that moderating inflation, if it occurs, may allow for more central bank interest-rate cuts.
They also believe that A.I. firms can keep spending and making profits, pointing to announcements like that from Meta Platforms, which said on Nov. 7 that it will invest $600 billion in U.S. infrastructure and jobs over the next three years. A week earlier, the Meta chief executive, Mark Zuckerberg, said on an earnings call that the company is “seeing the returns in core business. That’s giving us a lot of confidence that we should be investing a lot more.”
Wall Street is buying into the taller-tower hopes, at least based on consensus expectations compiled by Bloomberg. Economists estimate that American annual G.D.P. growth next year will be similar to this year’s pace, and that earnings from S&P 500 companies will expand next year by more than 12.5 percent, above this year’s estimated 11.5 percent.
What could topple the tower? A.I. firms could hit constraints, such as energy needed to power data centers. They might not show as much revenue for their efforts as expected. Any number of catalysts, such as stubbornly high inflation that limits consumption and slows the pace of Fed rate cuts or a Chinese technology breakthrough, could knock the stock market sideways.
It’s far from clear what comes next. One thing we do know: Jenga towers eventually fall down.
Rebecca Patterson is an economist and a senior fellow at the Council on Foreign Relations who has held senior positions at JPMorgan Chase and Bridgewater Associates.
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