Content Editor, Dunham | 2025 ThinkAdvisor Luminary Award Winner | 2026 Wealthies Finalist — Thought Leader of the Year | Macroeconomics, markets, geopolitics & global trends
Listen to this blog here
10:51
AI Is Gutting the Jobs That Keep the Economy Running
Technology leads every sector in 2026 layoffs — 85,411 cuts through April, up 33% year-over-year — and AI has been the cited reason two months straight.
The top 10% of earners drive nearly half of all US consumer spending, and the tech workers losing their jobs right now sit at the center of that group.
These tech jobs - coders, analysts, software engineers, and mid-level tech managers - are the exact white-collar, high-income roles that sit squarely at the top of the U.S. income chain. With the U.S. economy showing that the top 10% of earners now account for roughly half of all consumption, these layoffs could pull the whole house of cards down.
The Deep Dive:
Let me paint you a picture.
The top 10% of earners now drive roughly half of all US consumer spending2 - the highest concentration on record going back to the late 1980s. While the bottom 80% is down to barely a third, and falling.
Thus, most of the consumption over the last four decades was increasingly driven by an ever-slimmer slice of the economy.
That’s the setup. Now here's the problem.
The cohort carrying US growth isn't just wealthy - it's a very specific kind of earner.
Lawyers. Consultants. Finance professionals. And above all, the technology sector - software engineers, developers, programmers, and the managers above them. Big paychecks, bonuses, and stock options that make up a cornerstone of their total comp.
And right now, those jobs are getting cut faster than at any point since 2023.
They get big paychecks, bonuses, and stock options (considered a cornerstone of pay packages). Yet they’re shedding jobs faster than at any point since 2023.
For instance, over 114,000 tech workers have been laid off in 2026 alone across nearly 150 companies, according to Layoffs.fyi3 after marking over 80k in Q1.
Amazon. Oracle. Microsoft. Cisco. PayPal. Block - some of the most profitable businesses ever built - are cutting jobs4 specifically because AI is doing the work those headcounts used to do (Challenger, Gray & Christmas reported that AI was the cited reason for layoffs for two straight months running). Albeit that could just be an excuse firms are making to lay people off (it's hard to say).
Either way, this is the big risk - because that's where the ripple effects get serious.
These once-high-paying earners have mortgages, brokerage accounts, discretionary spending on travel, restaurants, and retail - all the consumption categories that have held up GDP while the rest of the country ran out of slack.
Thus, when a senior engineer loses their job, they don't just cut Netflix. They stop remodeling the kitchen. They pull back on the vacation. They start watching the portfolio instead of adding to it.
So here's where we are. The US economy built a structural dependency on a thin slice of high-earning workers to keep spending alive. Then layoffs came for exactly those workers.
The Jenga pieces are being pulled - one job cut at a time.
Figure 1: @KobeissiLetter, May 2026
The Market Just Swung from Panic to Party – But Risks Remain
The CNN Fear & Greed Index has swung from near "Extreme Fear" earlier this year to firmly in "Greed" territory — driven by ceasefire hopes, the SpaceX IPO frenzy, and AI capex optimism.
None of the underlying risks have been resolved. The ceasefire is fragile, the IPO boom echoes prior manias, and the AI buildout is increasingly debt-financed.
What you need to know:
Market sentiment has done a full round trip - from Extreme Fear to Greed — in a matter of weeks, with the CNN Fear & Greed Index5 sitting around 60 as of late May.
Why it matters:
When sentiment swings this fast, markets are more often than not pricing hope ahead of fundamentals - running well beyond what the underlying data can support. It looks like three things are fueling this rally, and all three have a catch
The Deep Dive:
Markets have a short memory. And right now, they're high on “hope-ium”.
The CNN Fear & Greed Index swung from "Extreme Fear" earlier this year (13) to firmly in "Greed" territory - sitting around 60 as of late May. This is the highest reading in months - which marks a remarkable round trip. So what changed?
I believe three things. And each one deserves some scrutiny.
First, the ceasefire.
The Iran–U.S. conflict has moved from an active war footing to a fragile-at-best negotiation, with both sides reportedly "mostly agreed" on a 60-day memorandum6 of understanding. Oil dropped nearly 20% from its 2026 highs on that news - its largest month-over-month decline since 2020. Markets read that as lower inflation risk, fewer rate hikes, and a green light to buy risk assets.
But the optimism may be running ahead of reality.
Both sides believe they've won - which puts them in a dangerous position heading into any real negotiation.
Iran still depends heavily on oil exports for government revenue, and the U.S. Navy is actively constraining those flows7. Meanwhile, global oil inventories are drawing down at a staggering pace as the world tries to cushion prices from the supply shock.
Something has to give - either Iran's fiscal endurance or Washington's tolerance for higher gasoline prices and tighter inventories.
The ceasefire bought time. Yet the underlying pressure is still building on both sides.
Beware - we've seen this movie before. SPACs, EVs, cryptos, clean energy- they were exciting on the way up. But left plenty of wreckage on the way down.
A war paused but unresolved. A speculative IPO mania is lighting up pockets of the market. And a debt‑fueled capex boom.
Powerful kindling for greed - and fragile foundations all the same.
Keep this in mind.
Figure 2: CNN.com, May 2026
U.S. Defense Orders Are Surging to Near-Record Highs — and the Restock Has Barely Begun
US defense capital goods orders hit their second‑highest level on record in April — and economists expect them to keep climbing as the military works to replace munitions consumed in the Iran war.
At prewar production rates, replacing the Tomahawks fired since June 2025 alone would take 17 years — and that's before NATO allies join the restock queue.
What you need to know:
U.S. defense orders just hit their second‑highest level on record8 as the Iran war forces Washington to replenish missiles, drones, and other munitions — setting up a multi‑year defense spending boom.
Why this matters:
Defense spending could be one of the main pillars holding up U.S. growth this year, right alongside the AI data‑center buildout. This pillar comes with long lead times, heavy industrial demand, and persistent fiscal deficits as Congress signs off on multi‑year restocking programs. It could also push commodities higher as these require heavy raw materials.
The Deep Dive:
The U.S. military has always been a main driver of government spending - spending more on defense than the next nine countries combined.
And it’s looking to keep surging.
To put this into perspective, U.S. defense orders rose 7% in April to $22.2 billion (after a 26% jump in March) – which marks the second‑highest monthly level on record.
Defense now accounts for about ~15% of all capital‑goods orders over the last 12 months - a share only rivaled by the post‑2001 recession (9/11), GFC period, 2019, and the early Covid shock - all moments when government spending stepped in while the private economy wobbled.
This time, though, the driver isn't just a weak economy. It's a depleted arsenal.
The Iran war has burned through US stockpiles fast.
Here are some of the numbers. The US was procuring roughly 60 Tomahawks a year before the war. Yet it has fired close to 1,000 since June 2025 - roughly 30% of its entire prewar inventory9.
Said another way, at prewar production rates, replacing what's been fired would take about 17 years.
Because of this, the Navy just requested 785 more in a single FY2027 budget line (that’s a 1,300% jump from the 55 funded the year prior).
Meanwhile, more than 20% of JASSM-ER long-range cruise missiles have been fired. And about 20% of the Pentagon's MQ-9 Reaper fleet - nearly $1 billion worth - has been destroyed.
This is the mismatch – there was a massive burn rate of munitions within a couple of months that will take years to replace. And that's before accounting for NATO allies lining up to restock alongside the U.S. and Europe10 (the E.U.'s defense spending increased 60% from 2020 to 2025).
But here’s the catch.
Missiles and drones need rare‑earth permanent magnets, guidance systems, and high‑end semiconductors.
The Pentagon is already running a "mine‑to‑magnet" initiative to reduce dependence on Chinese rare‑earth exports (which have a monopoly on these rare earths and critical metals). Thus, more orders at the top of the supply chain mean sustained demand all the way down.
Consumer spending and housing are under pressure. Defense and AI are stepping in as the economic train's new industrial engines - long‑duration projects, guaranteed buyers, politically protected budgets that don't slow down when households do.
This is less a cycle and more a structural wave - one riding on depleted stockpiles, rattled allies, and a world that keeps proving it has no interest in giving an inch.
The point is, war is expensive. But rebuilding after one is more so.
Figure 3: Bloomberg, May 2026
Sources:
Challenger, Gray & Christmas — Challenger Report: April Job Cuts Rise 38% from March; YTD Cuts Down 50% [challengergray.com]
The Wall Street Journal — The U.S. Economy Depends More Than Ever on Rich People [wsj.com]
Al Jazeera — US-Iran 60-day Proposal: What We Know [aljazeera.com]
The Maritime Executive — Little Sign of Movement at Iran’s Oil Terminals Amidst Ongoing Talks [maritime-executive.com]
Reuters — U.S. Space Stocks Rise on SpaceX IPO Hype [reuters.com]
CBS News — U.S. Tomahawks Used in Iran War Faster Than Stockpile Refilled [cbsnews.com]
Wikipedia — 2020s European Rearmament [wikipedia.org]
Disclosures
This communication is general in nature and provided for educational and informational purposes only. It should not be considered or relied upon as legal, tax or investment advice or an investment recommendation, or as a substitute for legal or tax counsel. Any investment products or services named herein are for illustrative purposes only and should not be considered an offer to buy or sell, or an investment recommendation for, any specific security, strategy or investment product or service. Always consult a qualified professional or your own independent financial professional for personalized advice or investment recommendations tailored to your specific goals, individual situation, and risk tolerance. All examples are hypothetical and are for illustrative purposes only.
Information contained in the materials included is believed to be from reliable sources, but no representations or guarantees are made as to the accuracy or completeness of information. This document is provided for information purposes only and should not be considered as investment advice.
Dunham & Associates Investment Counsel, Inc. is a Registered Investment Adviser and Broker/Dealer. Member FINRA/SIPC. Advisory services and securities offered through Dunham & Associates Investment Counsel, Inc.
