#k-shaped-economy

#k-shaped-economy

Something unusual is happening at Dollar Tree: The discount retailer said this week that of the 3 million new households that shopped its stores in the third quarter, approximately 60% of those new customers came from households earning more than $100,000 a year.​​ The trend underscores a deepening split in the American economy. While cumulative inflation has pushed prices up roughly 25% since 2020, wage growth has not kept pace for most households, leaving consumers across the income spectrum hunting for deals.

Days before President Donald Trump was sworn in for his second term, he acknowledged the high prices Americans were seeing at the gas pump and grocery store, pledging to bring them down. "It's always hard to bring down prices when somebody else has screwed something up like [President Joe Biden] did," Trump said in a news conference in early January. "We're going to have prices down. I think you're going to see some pretty drastic price reductions."

A decade ago, low-income workers saw wages grow at the highest rate of any Americans. Now, the opposite is true, and the gap is widening between how quickly wages increase for wealthy and poorer U.S. households. In a Monday blog post titled "K-shaped economy," Apollo chief economist Torsten Slok warned the growing disparity is yet another sign of today's economy continuing to serve the rich, while poor Americans continue to struggle.

The economy is a tale of two halves at present, with wealthy consumers reporting confidence in their outlook, while those at the lower end of the income ladder reportedly feel they're living in a recession-albeit without widespread job losses. This is what economists are calling a 'K-shaped economy,' where the fortunes of two distinct sets of consumers are increasingly diverging over time.