Bessent Declares the 'K-Shaped' Economy Over; Experts Offer Cautious Views
In a recent CNBC interview, U.S. Treasury Secretary Scott Bessent stated that the so-called "K-shaped" economy—characterized by divergent economic experiences between higher- and lower-income households—is now a thing of the past. He expressed frustration over ongoing discussions of this economic pattern, emphatically declaring, "I can say here definitively, the K-shaped economy is over."
The term "K-shaped economy" gained traction as an explanation for rising disparities where wealthier Americans experienced faster spending and wage growth compared to those with lower incomes. Former Federal Reserve Chair Jerome Powell acknowledged the phenomenon as "clearly a thing," noting that consumer-facing companies serving low- and moderate-income customers observed belt-tightening and reduced purchasing.
Bessent, however, suggests the U.S. economic trajectory is shifting toward a "C-shaped" pattern, where wage growth among low-income earners is beginning to outpace that of their higher-income counterparts. This implies a potential narrowing of the income growth gap between these groups.
Financial experts, while recognizing signs of change, caution against declaring the end of a K-shaped economy prematurely. Peter Orszag, CEO of Lazard, noted on CNBC that such a declaration might be premature. Deon Strickland, a financial services professor at Wake Forest University, told PBS News that ongoing challenges—such as geopolitical tensions including the war in Iran, fluctuating gas prices, and inflation—continue to influence economic dynamics, suggesting a higher likelihood that disparities may persist rather than diminish significantly.
Though some economists acknowledge a slight closing of the inequality gap represented by the "K" shape, they emphasize that current data and external factors mean the broader economic divide is still a dominant characteristic of the U.S. economy.