K-Shaped Economy Divides Spending, Jobs, Income, and Credit

Wealthy Americans splurge on travel and events while lower- and middle-income people cut back on groceries

Published on Mar. 12, 2026

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The K-shaped economy is growing more lopsided, with wealthy Americans continuing to spend on luxury goods and experiences while lower- and middle-income Americans cut back on necessities like groceries. This divide is seen across various economic indicators, including unemployment rates, wage growth, consumer spending, and credit card debt.

Why it matters

The K-shaped recovery highlights the growing inequality in the US economy, with the top earners thriving while lower-income households struggle with rising costs of living. This uneven economic recovery has significant implications for businesses, policymakers, and the overall health of the economy.

The details

Lower-earning Americans are cutting back on some grocery spending, while higher earners are spending more on meat and fresh produce. The unemployment rate for recent college graduates has consistently outpaced the rate of all workers since 2021. Wage growth has cooled for lower- and middle-income households, unlike higher-income households. Consumers are also splitting at the grocery store, with higher-earning shoppers spending more on meat, vegetables, and beverages, while lower-income consumers are paring back spending on baking supplies. Credit card debt is up across the country, but Americans at the lower end are feeling more strain in paying down their debt.

  • The K-shaped economy has been growing more pronounced over the past few years.
  • Wage growth divide between top and bottom income groups reached its largest point since at least 2015 in February 2026.

The players

Atsi Sheth

The chief credit officer at Moody's Ratings.

Ksenia Bushmeneva

An economist at TD Bank Group.

Peter Atwater

An adjunct lecturer of economics at William & Mary.

Jack O'Leary

An e-commerce thought leader at NielsenIQ.

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What they’re saying

“GDP gains have disproportionately accrued to higher-income groups over the last few years, and that divide has grown starker in the post-pandemic era.”

— Atsi Sheth, Chief credit officer at Moody's Ratings (Business Insider)

“Tax changes passed in the One Big Beautiful Bill Act will partly also contribute to that K dynamic, and research has shown that benefits from lower taxes are expected to flow disproportionately primarily to the middle- and higher-income households.”

— Ksenia Bushmeneva, Economist at TD Bank Group (Business Insider)

“If you are at the top, you have the wherewithal and the opportunity to see things in person. You can go to the Super Bowl, you can go see Taylor Swift, you can go see in person a Broadway show. Those are opportunities that are no longer affordable to many people at the bottom.”

— Peter Atwater, Adjunct lecturer of economics at William & Mary (Business Insider)

“When there is a level of cost consciousness, consumers will begin to think about calories for their dollar to some extent. That means more cash-strapped consumers will cut back on spending in what he calls the 'perimeter categories' of grocery stores — produce, fresh meat, and fresh bakery goods.”

— Jack O'Leary, E-commerce thought leader at NielsenIQ (Business Insider)

What’s next

Analysts and policymakers will continue to monitor the widening K-shaped economic divide and its implications for businesses, consumer spending, and overall economic stability.

The takeaway

The K-shaped economy highlights the growing inequality in the US, with the top earners thriving while lower-income households struggle with rising costs of living. This uneven recovery has significant consequences for businesses, policymakers, and the overall health of the economy, underscoring the need for targeted interventions to support those at the bottom of the K.