Treasury Secretary Scott Bessent says the K-shaped economy is over, but the data and many economists tell a different story.
“I do believe the core inflation is slowing,” Bessent said in an interview with CNBC on Tuesday. “I got sick of hearing about this K-shaped economy. I can say here definitively, the K-shaped economy is over, and we’re seeing more of a C economy where the lower end of wage earners are finally calling it back, just like they did in President Trump’s first term.”
The comments come just three months before November’s midterm elections, as Bessent and others in the Trump administration continue to defend the current economy, which has been marred by higher costs of living, increased gas prices as a result of the Iran War, and increased food and utility prices—contributing to an overall growing affordability crisis for many Americans, particularly for lower- and middle-income earners.
Bessent told CNBC that “the media doesn’t want to report it,” but the economy is doing better than we think, with “real wage gains” for working Americans: “The bottom 25% of workers had a 2% wage gain” and are “feeling the benefits of the Working Families Tax Cuts” and other tax cuts in President Trump’s One Big Beautiful Bill Act—such as no tax on tips, no tax on overtime, reduced taxes for seniors on Social Security, and deductibility of auto loans.
However, economists paint a different picture.
“The K-shaped economy remains firmly intact,” Moody’s Analytics chief economist Mark Zandi recently wrote, citing Federal Reserve data. “In the year ending in the first quarter of 2026, outlays [by those earning $200,000 a year or more] grew by an estimated 6.5%, nearly 4% in real terms. Meanwhile, outlays by those in the bottom 80% of the distribution were unchanged after inflation.”
In effect, Zandi says this gap between high-earning households and middle- and lower-income households—known as the K-shaped economy—”has persisted since the pandemic, which helps explain why most Americans are upset about their financial situations and the broader economy’s performance.”
“The pandemic just made these differences more visible,” U.S. Bank chief economist Beth Ann Bovino wrote last month. “But the underlying forces have been building for decades . . . The K-shaped dynamic isn’t about any single shock–even one as visible as today’s oil-driven price pressures. It reflects how recurring shocks are absorbed unevenly across the economy.”
Bovino added that “higher-for-longer interest rates, elevated inflation, [and] the growing adoption of artificial intelligence (AI)” are all factors likely contributing to that uneven growth in the U.S. economy, and among America’s haves and have-nots.
“The K-shaped recovery still here. Most economists see the gap widening,” professor Peter Ricchiuti of Tulane University’s A.B. Freeman School of Business tells Fast Company. “Those who own big positions in stocks and own homes are benefiting from soaring prices. Those struggling are having the dickens of a time.”
Remind me, what exactly is a K-shaped economy?
A K-shaped economy—coined after the shape of the letter: a horizontal line marked by two lines, one going down, the other up—occurs when the economy is rolling along, and then it suddenly loses steam and begins to drop, Fast Company previously reported.
Eventually, the Federal Reserve, seeing the economy is weakening and possibly heading toward a recession, lowers interest rates to get things going again, according to Ricchiuti.
