For years, America's economy has been defined by a "K-shaped" gap: The rich kept spending at a rapid pace, while everyone else struggled to keep up. - That divide is suddenly narrowing. Why it matters: Economists warned that consumer spending growth was increasingly reliant on wealthy Americans, leaving the economy vulnerable to a stock market downturn or any other wealth shock. - Importantly, the "K" appears to be closing from the bottom up, meaning that lower- and middle-income Americans are catching up, rather than affluent households pulling back. - That could put consumer spending on a more resilient footing. Zoom in: Bank of America is calling it the "great convergence." - The bank's data shows spending and wage growth among its…
What has Treasury Secretary Scott Bessent said regarding the "K-shaped" economy?
Treasury Secretary Scott Bessent told CNBC last week that "the K-shaped economy is over," arguing that lower-wage workers are finally catching up.
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How is the spending growth of the top 5% of Americans behaving according to Bank of America?
The very richest Americans appear to be an exception to the convergence; Bank of America states that spending growth among the top 5% continues to outpace everyone else, even as their wage growth has cooled.
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What is the current economic sentiment gap between lower-income and higher-income Americans according to University of Michigan data?
While economic sentiment among lower-income Americans is improving, it still lags behind the higher-income cohort by 12 points according to the latest University of Michigan data.
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How have after-tax wages for lower-income Americans performed in July compared to higher-income households?
In July, after-tax wages for lower-income Americans rose 5.2% from the same period a year ago, surpassing the wage growth rate for higher-income households for the first time since December 2024.
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What is the current status of the spending growth gap between the richest and poorest account holders according to PNC?
PNC reported on a Monday that the gap between spending growth among its richest and poorest account holders shrank to just 0.1 percentage point in July, compared to a peak of 5 percentage points last year. The bank attributes this shrinking gap to an improving labor market, noting that more lower-income households are working and collecting paychecks.
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How has the spending growth for different income groups changed according to Bank of America's data?
Bank of America describes a "great convergence" where spending and wage growth have converged across income groups since May. Specifically, spending growth among lower-income households hit 5.4% year over year, which slightly exceeds the 4.9% rate seen among middle-income households.
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