Rising Bond Yields Are Not Slowing Economic Growth Due to Data Center Construction
Despite rising bond yields and higher borrowing costs, the U.S. economy has not yet shown signs of significant slowdown due in part to sustained construction activity driven by data center development. Analysts note that while traditional sectors like housing have suffered from high interest rates, tech firms continue investing heavily in infrastructure, supporting jobs for plumbers, steelworkers, and others who maintain consumer spending power. Barclays' Ajay Rajadhyaksha explains this insulation is temporary; once data centers are completed, the need for permanent staff will drop. However, corporate earnings—boosted by AI adoption—are currently favoring stocks despite inflation risks from geopolitical tensions like rising oil prices and a potential Fed rate hike. The 10-year Treasury yield has approached multi-year highs near 5%, similar to levels seen in 2023 when post-pandemic spending kept the economy resilient. While higher rates are affecting auto loans, credit cards, and lower-income households, construction remains insulated from typical recessionary pressures.
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Topics: bond yields construction sector data centers economic growth interest rates