A surprising trend has been emerging in Bank of America accounts over the past few months: The gap between America’s wealthy and poor seems to be diminishing. That stands in stark contrast to the prevailing narrative we’ve been hearing for years: that America’s affluent are accumulating wealth at an increasing rate, leaving the less fortunate behind and rendering the American Dream unattainable. The wealth gap, frequently referred to as the “K-shaped economy,” has been attributed to numerous economic challenges and is a primary source of concern for Americans regarding their financial circumstances. Conversely, it has been acknowledged for sustaining the momentum of the US economy, as affluent Americans continue to spend and businesses persist in their hiring practices. But what if that K-shaped narrative is no longer valid? For the “K” theory to hold, income and spending growth for the affluent must surpass the growth in wages and costs for the less fortunate. In other words, the upward- and downward-pointing lines of the “K” exhibit divergence. Instead, by certain metrics, those lines appear to be converging.
The disparity in spending growth between higher- and lower-income Americans has reached its smallest margin in three years, as indicated by a June report from researchers at PNC. On Monday, PNC reported that there is preliminary evidence suggesting the savings gap between upper- and lower-income households is beginning to close. In June, the growth in spending among lower-income Americans surpassed that of their high-income counterparts, as reported by the Bank of America Institute. In June, the gap in discretionary spending growth contracted to its smallest margin since July 2025. This development is a notably positive indicator for the economy, suggesting that consumers across various income brackets possess sufficient confidence to make purchases of non-essential items. That convergence in the “K” lines holds true for pay cheques as well. According to Bank of America, there was essentially no disparity in earnings growth between affluent and less affluent individuals last month. Larger tax refunds from President Donald Trump’s One Big Beautiful Bill Act, consumer spending during the World Cup, and a reasonably stable job market could all help explain why the K is narrowing in 2026. However, the recent months of data further reinforce a trend that has been observable for years.
The “K” has narrowed considerably since 2019, as compensation for lower-income workers has risen to align with the accelerating inflation rates. A significant influx of government stimulus and social safety nets during the pandemic also provided support to lower-income workers, as observed by Joe Brusuelas. Over the past seven years, the net worth of America’s poorest has increased at a rate that significantly outpaces that of the upper middle class. Wealth accumulation among middle-class individuals has outpaced that of the top 1%. By one measure, the “K” has even been narrowing since 1979. Over the past five decades, the percentage of Americans in the lower and middle classes has diminished, while the proportion in the wealthiest group and the upper middle class has increased, as noted by Scott Winship, director of the Center on Opportunity and Social Mobility at the American Enterprise Institute, a centre-right think tank. The middle class is experiencing a decline, primarily due to an increase in the number of individuals attaining greater wealth rather than a rise in poverty, as Winship contended.
The flawed “K” analogy has recently prompted certain economists and business leaders to explore alternative letters. “We’re seeing more of a ‘C,’” argued Treasury Secretary Scott Bessent in an interview. Those on the lower end of the economy are making more, he said. “I got sick of hearing about this K-shaped economy,” Bessent said. “I can say here, definitively, the K-shaped economy is over.” Hilton CEO Christopher Nassetta in June also suggested America’s economy is “C-shaped,” noting people across all price points and income levels are increasing their spending on travel and staying at his hotels. Is the “K” no longer relevant? At this juncture in the year, “that K-shaped narrative probably doesn’t hold as much,” stated Brian LeBlanc. “We’re not seeing lower-income households get worse off,” he said. “There’s still a relative gap. But it’s not getting wider in absolute terms.” Enter: a significant caveat to the “dead-K” argument. Enquire of David Woodyard whether economically disadvantaged households find themselves on more stable footing, and the response will be succinct: “No.” Woodyard oversees Catholic Charities Dallas, an organization that provided assistance to more than 240,000 individuals in the previous year. His organization provided approximately 9 million meals from summer 2024 to mid-2025. Since then, over 15 million. Approximately 60% of individuals who receive food assistance return for aid at least once. “We’re busier than ever, in a total sense,” Woodyard said.
Against this backdrop, the K has been widening as the cost of living has surged and the effects of pandemic-era stimulus have diminished. It becomes evident in the data if we adjust our starting point to, for instance, 2023 rather than 2019, a period when numerous significant economic challenges disproportionately affected low-income families. 2023 marks a period when expenditure on petrol adopted a K-shaped trajectory, indicating that affluent Americans exhibited a greater propensity to travel compared to their less wealthy counterparts. At the onset of the Iran war, the disparity in petrol expenditures expanded considerably. Heather Black observes the expansion of the lower arm of the “K,” indicating an increasing number of individuals facing difficulties in meeting their fundamental needs. Black serves as the vice president of the 211 System Strategy, a helpline backed by the United Way that links individuals to essential services such as food assistance, mental health support, transportation, and additional resources. In 2025, the 211 network facilitated 6 million referrals for housing assistance, in addition to 3 million referrals for utilities. The trends are on a similar track this year, Black stated. Larger tax refunds this spring may have provided families with the necessary liquidity to address outstanding bills for a month or two. However, the singular payment fails to sufficiently influence the trajectory of the “K” itself. “Maybe we get caught up this one time on the overdue rent, but it’s not a solution,” Black said. “It’s a Band-Aid.”
Consider, too, the inherent fragility of the economy that lies beneath those superficial fixes. The job market experienced an unanticipated decline in employment figures during July. If the deceleration persists, it may result in further stagnation of wages, subdued hiring activity, or potential layoffs. Polls indicate that the public is increasingly dissatisfied with Trump’s economic performance, particularly regarding tariffs and inflation. The conflict in Iran has significantly impacted petrol and diesel markets, with no resolution anticipated in the near future. Often, less affluent households simply cannot accommodate the entirety of the burden. Higher petrol prices have disrupted the financial stability of Javier Casillas’ lower-income customers. The proprietor of Live Well Mattress & Furnishing Centers in Alamogordo, New Mexico indicated that his establishment was generating profits at the beginning of the year. However, sales experienced a notable decline beginning in March, and he has remained in the negative since that time. Casillas stated that he continues to sell premium mattresses to affluent consumers. However, his discounted merchandise, even with an 80% reduction, remains unsold. The clearance section currently occupies fifty percent of the store, as he struggles to move the less expensive inventory. Naming the economy can assist in delineating the dynamics occurring in our surroundings. Especially since the pandemic, the “K” illustrates the historic economic divides that increasingly characterise American life.
However, a single letter cannot encapsulate the entirety of individual experiences consistently – much less a $31 trillion economy that stands as the largest and most diverse globally. Despite the prevailing pessimism, consumer spending among Americans continues unabated. Retail sales have experienced an upward trajectory for several months. Consumer spending increased by a robust 3.2% in the second quarter. The economy is in relatively solid shape, largely due to consumer spending that suggests a positive sentiment regarding economic conditions. However, the wealth gap is a tangible issue, and it is fundamentally inequitable. Low-income Americans who cannot afford to enter the housing market and who have minimal engagement in the stock market are beginning from a disadvantaged position. All of those statements can coexist simultaneously. That is why it is crucial to comprehend every nuance, variation, and detail of any correspondence that may arise next. A person’s narrative may manifest on the upturned bottom of the “C,” while another’s may be found on the down-pointing leg of the “K.” The macro data may begin to trend in a new direction before individuals perceive a change in their daily lives. Perhaps the most significant issue with the “K-shaped” narrative is the existence of a singular narrative itself.