# K-Shaped Economy A **K-shaped economy** is one where the top and bottom move in opposite directions. Households with stocks, homes and high incomes keep climbing, the upper arm of the K. Those living on wages and credit stall or fall, the lower arm. Averages such as [[GDP]] and total consumer spending can look healthy while most households feel worse off, because the top carries the totals. The term was popularized early in the COVID-19 pandemic by Peter Atwater, an adjunct professor at William & Mary, who said he saw the letter used on social media. It became a standard part of the economic vocabulary in 2025–26, when record stock prices and record-low consumer sentiment arrived at the same time. ## The evidence **Wealth (Federal Reserve Distributional Financial Accounts, Q2 2026):** - The **top 1%** held **32.5%** of all US household net worth, a record since the series began in 1989, up from 31.1% a year earlier. - The **top 0.1%** held 15.0%, about $28 trillion. - The **bottom 50%** held about 2.3%. The Fed revises this history every quarter, so cite the release date with any figure. **Spending:** - Moody's Analytics (Mark Zandi) estimated the top 10% of earners accounted for nearly **half of all consumer spending** in 2024–25, the highest since at least 1989. - In 2026 Moody's revised its method to account for taxes, which lowered the 2025 figure to about **46%**. Zandi said he is more confident in the trend than the levels. - The Labor Department's [[Consumer Expenditure Survey]] puts the top-10% share much lower, near 23%. The Minneapolis Fed concluded in March 2026 that the K-shaped spending story "is not so simple." **The headline "half of spending" number is contested.** **What the Fed hears:** - The Fed's June 2026 Beige Book described spending as "increasingly bifurcated across income groups amid affordability pressures." - In the October 2026 edition, more than half of the Fed's districts said consumer spending "was driven by high-income households." The New York district reported "signs of strain among lower-income households." **Mood:** University of Michigan consumer sentiment fell to an all-time low of 44.8 in May 2026, and was 48.0 in October, the second-lowest on record. Over the same months the S&P 500 set new records ([[Stock Market Indices]]). ## The fight over the word - **The Fed acknowledges it.** Asked about it in December 2025, Fed Chair [[Jerome Powell]] said "it's clearly a thing… as to how sustainable it is, I don't know." Fed Governor [[Lisa Cook]] said in February 2026 that strong growth "likely masks a challenging situation" for "low- and moderate-income households." - **Democrats press it.** Sen. [[Elizabeth Warren]] wrote to Treasury Secretary [[Scott Bessent]] and [[Kevin Hassett]] in February 2026 urging them to address the "K-shaped economy." - **The administration declares it over.** Bessent told CNBC on Aug. 4, 2026: "I can say here definitively, the K-shaped economy is over." He described a "C economy" instead. Zandi replied the same summer that "the K-shaped economy… remains firmly intact." ## Why it's on the map The K-shape is the economic picture underneath the wiki's map of concentrated power. A record share of national wealth at the very top goes with political influence bought by the same fortunes, while affordability pressure falls on everyone else. Whether officials say the K exists, or describe the economy only through averages, is itself part of the political argument. Related: [[Affordability]], [[Gini Coefficient]], [[Wage Growth vs Productivity]], [[Real Wages]], [[Gilded Age Plutocracy]]. ## See also - [[State of the US Economy]] · [[Stagflation]] · [[Consumer Sentiment Index]] · [[Stock Market Indices]] - [[Student Loans]] · [[Minimum Wage]] · [[Affordability]] - [[Gini Coefficient]] · [[Gilded Age Plutocracy]] · [[Plutocracy]]