Arabic version: اقتصاديون يرون إشارات متباينة بشأن شكل الاقتصاد
According to Cnbc, Treasury Secretary Scott Bessent says the K-shaped economy is over and the U.S. is moving toward a “C” economy, in which lower-wage earners are beginning to recover. The K-shaped label, which emerged during the Covid-19 pandemic, describes a widening split between higher-income households and lower-income households in wealth, spending and financial security.
Recent Bank of America Institute data points to some convergence. Lower-income households’ after-tax wages grew at an average annual pace of 5.2% in July, exceeding growth for higher-income households for the first time since December 2024. Lower-income spending rose 5.4% year over year in July, supported by stronger after-tax wage growth, while debit and credit card spending converged across income groups last month.
However, economists say the evidence does not establish that lower-income consumers are broadly gaining ground. Ethan Dornhelm, FICO’s vice president of scores and predictive analytics, said lower-scoring consumers showed slight increases in 90-plus delinquency rates for mortgage and auto loans. Financial pressure also reaches across income levels, with EY-Parthenon Chief Economist Gregory Daco saying higher earners are becoming more cautious about spending.
Housing remains a major source of strain. FICO reported that the average first-time homebuyer’s monthly mortgage payment reached $2,563, up 57% since April 2019, compared with 30% general inflation over that period. In FICO’s July survey of 2,078 U.S. adults, 43% of homeowners said total monthly housing costs made it harder to keep up with other expenses. Student-loan repayment was also a burden, with 56% of borrowers saying it led them to rely more on credit cards or other loans over the past year.
Some economists see other possible patterns. David Tinsley of the Bank of America Institute said an “X” shape could emerge if lower-income spending growth moves persistently above higher-income growth. A stock market downturn could prompt higher-income households, which are more likely to own stocks, to cut spending, Daco said. Economists also said age and life stage may increasingly explain economic pressure, particularly for younger Gen Z consumers facing housing costs and Gen X consumers balancing children, parents and retirement savings.