December 30, 2025 07:25 AM IST First published on: Dec 30, 2025 at 06:19 AM ISTThe US just delivered two economic reports that, placed side by side, seem to describe different countries. Official data shows that GDP grew at 4.3 per cent annualised in the third quarter of 2025 — the fastest pace in two years — while the Bureau of Labor Statistics reported that unemployment climbed to 4.6 per cent, with little net change in payroll growth since April. How can an economy boom without creating jobs? The answer carries profound implications, not least for India.Three interpretations dominate the US debate. The pessimistic view holds that GDP is overstated and will be revised down. Historically, GDP revisions tend to be larger than employment revisions; when the two conflict, jobs data is usually more reliable. But this explanation struggles against the strength of consumer spending, which contributed 2.4 percentage points to growth.AdvertisementThe optimistic view flips this: GDP is right, and the weak labour data is misleading. Private-sector job growth has remained solid; headline figures have been dragged down by federal employment cuts. On this reading, the labour market will look healthier once transitory factors wash out. Yet, Fed Chair Jerome Powell has suggested that official figures overstate job growth by roughly 60,000 per month.The third explanation is the most conceptually interesting: Both sets of data are broadly correct. GDP really is growing robustly, but it is being produced with little additional labour. This implies a productivity surge of unusual magnitude. In the first half of 2025, investment in IT and data centres — 4 per cent of GDP — accounted for 92 per cent of GDP growth. Strip out tech infrastructure, and annualised growth was a mere 0.1 per cent. This is growth where compute substitutes for labour — capital-intensive sectors generating enormous output with relatively few workers. Perhaps the traditional relationship between GDP and employment is breaking down. But caution is warranted: A single quarter of unusual data does not confirm an AI-driven productivity revolution.For the Fed, this divergence creates an acute policy dilemma. Core inflation remains stuck near 2.9 per cent, while the labour market softens. Cut interest rates to support employment and you risk reigniting inflation. Hold rates steady and you risk tipping a fragile job market into recession. Powell has acknowledged navigating a “very unusual” economy; the Fed projects only one rate cut in 2026, with several officials favouring none at all. There are no good options here, only trade-offs — the classic bind of stagflation-lite.For India, two lessons emerge.AdvertisementFirst, the spectre of jobless growth. India has long grappled with GDP expansion that fails to generate commensurate employment. The US experience suggests this is not merely a developing-country affliction — it may be the structural reality of capital-intensive, technology-driven growth everywhere. If India’s demographic dividend is to yield returns, growth must be labour-absorbing. GDP targeting alone is insufficient. If a productivity boom is indeed underway, the challenge is institutional: Ensuring its gains translate into shared prosperity.most readSecond, the debate in the US is possible because of credible, independent statistical institutions. The BLS revises its data transparently. The Fed chair publicly questions official numbers. Economists can offer competing interpretations using the same data. When GDP and employment diverge, policymakers can interrogate which signal to trust.India is moving in the right direction — the revamped PLFS now produces higher frequency labour-market indicators, even though its breadth and quality need improvement. Big gaps still remain: Questions around national accounts measurement, persistent mismatches between GDP/GVA and other high frequency indicators, the long delay of the Census, and controversies around the consumer expenditure survey all undermine confidence. You cannot navigate a fog if your instruments are unreliable.The American puzzle will take years to resolve; official data for late 2025 will likely read very differently a few years hence. For India, the lesson should be absorbed now: It is better to confront uncomfortable data than to operate in comfortable ignorance.The writer is assistant professor of Economics, Cornell University