Treasury Secretary Declares End of “K-Shaped” Economy

Bessent cited recent Bureau of Labor Statistics figures showing that weekly earnings for full-time workers at the 25th percentile rose 5.5 % year-over-year, while earnings at the 75th percentile increased 1.5 %. He noted that consumer-price inflation ran 3.9 % over the same period, eroding real wage gains. Bessent also referenced the impact of the war in Iran, which pushed gasoline prices to an annual rise of 4.2 % in May, the fastest pace since 2023.

The Hill

Economists remain divided on the extent of the shift. Mark Zandi, chief economist at Moody’s Analytics, argued that the K-shaped economy remains “firmly intact,” pointing to the continued dominance of the top 20 % of earners (those making over $175,000 annually). Mark Matthews, chief economist at the National Retail Federation, observed that while lower-income consumers have increased discretionary spending, the K-shape “persists.” Matthews cautioned that “softening wage growth” and “sticky inflation” could dampen momentum in the second half of the year.

The Hill

If Bessent’s assessment holds, lower-income households may see modest improvements in purchasing power, especially as discretionary spending outpaces staple purchases across most lower deciles. However, analysts warn that persistent inflation and uneven wage growth could limit these gains, leaving the overall trajectory of the economy uncertain.

The Hill

• “The K-shape persists, but lower-income consumers have increased their spending versus last year,” — Mark Matthews, chief economist at the National Retail Federation

The Hill