The K-shaped economy is having more than 15 minutes of fame/infamy as some recent posts reveal when mentioned on Fortune on November 7th, appearing in the AP on December 1st, posted on NYT on December 19th, and a story told on NPR on December 31st.
In Fortune: Mark Zandi: “You really start to see this in the Reagan era. That’s when you get a structural divergence between productivity growth and median wage growth.” — many elements combined then to weaken labor in favor of capital income: globalization, the decline of unions and manufacturing and major tax reforms. — “The share of national income going to labor has been trending down since the early 1980s and the share going to capital owners–those who already have wealth–has gone up.” — consider the extraordinary surges in economic data seen, halfway through the 2020s…. record highs … incentivizing the (wealthier) Americans … to loosen their purse strings. But the bottom half of the K is extending downwards. — the economy has grown so lopsided … that hte richest Americans are responsible for half the economy. — creating the illusion … [that] consumer spending remains “resilient.”– Lisa Shalett has increasingly been sounding the alarm … “like completely wackadoo” …. “I mean holy cannoli.” — in the context of whether 2026 marks an early or late stage of the economic cycle for investors … decoding this conundrum may hinge on the so-called K-shaped economy. A concept that captures the widening chasm between the ‘haves’ and ‘have-nots.’ — Shalett said the situation is actually even worse than what Zandi produced: the top 40% of households account for 60% of all spending … control nearly 85% of America’s wealth, two-thirds of which is directly tied to the stock market, which has climbed more than 90% in three years…. spending by the wealthiest households was growing 6x-7x faster than for the lowest cohort. — Jerome Powell: “there’s a bifurcated economy there.” — Tyler Schipper: “There’s this underlying thing that has been true for decades and decades and decades. Number one, lower income households always struggle more in the economy. They tend to be more impacted by price changes because they’re spending a higher percentage of their income. And second, that it tends to be that after each recession, lower income workers fall further behind in the income distribution.” — the middle class–and those making about $100,000 per year — are getting pushed into the lower half of the K. — Yale Budget Lab calculated that the levies impact the bottom of the income ladder more than 3x more than the top. — A low-fire, low-hire labor market … contributed to evidence of a two-tiered economy — diverging consumer sentiment has also contributed to a narrative that tow income groups are moving away from each other. — the widening divide between the rich and the poor as a consequence of monetary policy …. the damage lingered as asset holders retained their windfall but wage earners bore the brunt of disinflation. — Claudia Sahm: “The K-shaped economy, the bifurcated economy, is potentially a more vulnerable economy.”
In AP: higher income Americans seeing their income and wealth rise while the bottom part points to lower-income households struggling with weaker income gains and steep prices — an unusually muddy and convoluted period for the U.S. economy. Growth appears solid, yet hiring is sluggish and unemployment rate has ticked up. — affordability … is much more of a concern for middle and lower-income households. — [during 2020 pandemic] the differing fortunes between white-collar professionals still employed and working at home while stock prices rose, even as mass layoffs … pushed unemployment to nearly 15% — slower income growth has left many lower-income workers less able to spend — consumer spending has been driven by richer households, while lower- and middle-income Americans have piled up more credit card debt even as they’ve spent less. — Peter Atwater: “at the very top is an economy that is sort of self-contained, …. And it’s largely contained. It doesn’t flow through to the bottom.” — Federal Reserve: the wealthiest 10% of Americans own 87% of the stock market…. The poorest 50% own just 1.1%.
In the NYT: “an economy … experienced very differently across the population” Joanne Hsu — the wealthy are spending confidently. the [working class] are scrambling to make ends meet — bifurcation is visible in surveys about consumer sentiment. — some … thrive while … others decline — Moody’s estimated that top 10% of households were responsible for nearly half of all spending. — the uneven ways people were recovering from the pandemic — the wealthiest on an escalator going up … but lower income families have been struggling — some … people seeking value and trading down … while companies offering luxury products are seeing sales flourish. — Peter Atwater: “Those at the bottom can’t help but notice the overabundance above them.” — Lower borrowing costs could accelerate growth and wages, though it could also worsen inflation.
NPR: one of the biggest buzzwords … a growing disparity between the rich and the poor. — affordability: what people can or can’t buy. affordability is more about how each person is doing…. affordability refers to how that hits home … much more personal. It’s much less abstract. — the one arm shooting up, that represents Americans doing well…. shooting down, that is every else. They are not doing nearly as well. — that line is not actually plummeting. Most Americans’ … wages rise faster than inflation, but it’s not by much, and the gap between them and the top earners is widening, making people feel like they’re losing ground. — so the rich are getting richer. Income equality (ph) is growing. — this isn’t that it’s new …. this is an extension of a phenomenen that we’ve seen for a long time and we’ve talked about for a long time. Divergence is one of the defining characteristics in our economy going back 30 years now.
10: 49
30: 17
60: 33
washing dishes: a father’s glimpses 