US economists debate whether the economy is K-, C-, or E-shaped
Economists, corporate executives, and politicians in the United States do not share a common assessment of whether the US economy remains K-shaped — a model in which the positions of groups with different incomes move in opposite directions. C- and E-shaped models are also increasingly appearing in the discussion, CNBC Top News reports.
The K-shaped description became widespread after the economy recovered from the pandemic: it reflected uneven growth for low- and high-income households. Don Rissmiller, chief economist at research firm Baird Strategas, noted that letter-shaped models are usually actively used during recessions and recoveries, while their popularity in the middle of an economic cycle is unusual. In his view, attention to this topic may be linked to growing concerns about wealth inequality.
Arguments in favor of a C-shaped model
US Treasury Secretary Scott Bessent said that the K-shaped economy is already a thing of the past and that lower-income groups have begun improving their position. He cited rising wages for low-paid workers and larger tax breaks this year, including President Donald Trump's policy of exempting tips and overtime pay from taxation.
Hilton Worldwide CEO Christopher Nassetta also said that the company sees signs of a C-shaped economy. According to him, middle-class and upper-middle-class segments have moved from negative figures to growth that in some cases reached 6%.
More current news is available on the UA.News Telegram channel Telegram.
At the same time, former JPMorgan chief economist Anthony Chan considers such conclusions premature. In his view, the US war with Iran may keep fuel prices high, while low-income households spend a larger share of their budgets on energy.
Signs that the gap persists
According to a University of Michigan survey, consumer sentiment in August was 11% lower than a year earlier and remained close to the lows recorded at the beginning of the year. Survey director Joanne Hsu reported that sentiment among low- and middle-income respondents had deteriorated particularly noticeably.
Representatives of Colgate-Palmolive, Lowe's, and Constellation Brands also said that K-shaped dynamics in consumer spending persist. Researchers at the Federal Reserve Bank of New York noted that total credit card debt in the second quarter reached a near-record $1.26 trillion, which, in their view, indicates a large number of households living paycheck to paycheck.
A third group in an E-shaped economy
Some experts propose an E-shaped model, which assumes the existence of three population groups with different but relatively stable trajectories. Heather Long, chief economist at Navy Federal Credit Union, believes this approach more accurately describes the position of the middle class, which, in her assessment, is merely holding on. At the same time, the Bank of America Institute reported that the gap in credit card spending between income groups began narrowing in May.
