Mar 8th 2026|5 min read
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ECONOMISTS LOVE their alphabet. They describe business cycles as L-shaped (down, then flat), U-shaped (gradually down, then up), V-shaped (the same but sharply) or W-shaped (a V with a hiccup). Since covid-19 some have latched on to another letter. The post-pandemic recovery, economic pessimists feared, would resemble a K: up for some (the wealthy), down for others (the poor). Since then, especially in America, concerns about the “K-shaped economy”, where spending by the super-rich is all that is stopping today’s boom from turning to bust, have lingered.
In recent months these have proliferated, cropping up in everything from Google searches to corporate filings and earnings calls (see chart 1). Every time the economic data show signs of weakness—as on March 6th, when the Bureau of Labour Statistics (BLS) reported a net loss of 92,000 jobs in February—the worries mount further. If the shape of the American economy indeed hinges on the behaviour of a small elite, who could tighten their purse strings at any moment, that would be something to fret about. So does it?
Chart: The Economist
The often repeated statistic behind the K is that about half of America’s spending now comes from the highest-earning 10%. The figure has been hawked most prominently by Moody’s Analytics. The research firm also finds that the share of spending by the top 20% has gone up from 55% in 2019 to 59% in 2025. At face value, this points to a worrying imbalance. Happily, it is almost certainly wrong.
Moody’s starts out by estimating income and saving by income bracket, and then deriving each bracket’s spending as the difference between the two. Income is calculated by applying each bracket’s share of income, as reported in the Federal Reserve’s Survey of Consumer Finances (SCF) conducted every three years and adjusted for tax rates, to an aggregate income figure for all groups from the quarterly national accounts.
Chart: The Economist
To arrive at its figures for saving, Moody’s combines the SCF, which also reports asset holdings by income bracket, with the Fed’s quarterly financial accounts, which aggregate all American households’ purchases of various assets (cash, property, stocks and so on). Total saving for all households is easy enough to calculate by adding these up.
Apportioning total saving by income group is less straightforward and rests on a big presupposition. Moody’s assumes that a bracket’s share of purchases of a particular asset type exactly mirrors the bracket’s historic share of that asset as reported in the last SCF. So if the top 10% of households by income held around 70% of all equities in 2022, they are thought to account for 70% of Americans’ purchases of equities since then.
Chart: The Economist
Using historical shares of income to impute subsequent shares is questionable. Using historical shares of the stock of wealth to impute subsequent flow of saving is, if anything, even more so. For example, new homebuyers do not look like existing homeowners. Besides, households’ behaviour can change: with the rise of digital trading platforms like Robinhood, low-earners have become enthusiastic retail stock traders.
Any estimate of the gap between a questionable figure for income and a more questionable one for saving is therefore more than doubly dubious. Fortunately, there is a less convoluted way to determine how much Americans of various sorts are spending: to ask them. The BLS does this annually, though the figures come out with a delay. Economists at Barclays, a bank, have crunched these survey numbers and adjusted them for under-responding by the rich. They conclude that as of a few years ago, the highest-earning 20% of Americans accounted for just over a third of the spending (see chart 2).
Chart: The Economist
This share also looks extraordinarily stable. Figures for the past few years have not been published yet, but before that they were more or less flat for decades, even in the tumult of the global financial crisis of 2007-09 and the covid-19 pandemic. If those two upheavals did not alter the proportions, it is hard to think of something that could. When Barclays looked at whether spending categories favoured by the rich (like restaurants) or poor (like petrol) rose fastest, the conclusion was that the share of spending by the most loaded crept down slightly in 2025.
Figures from other sources do not look particularly K-ish, either. Consumer Edge, a data provider, estimates people’s spending based on their credit- and debit-card use. According to these numbers, the gap in spending growth between the rich and the rest has gone back and forth in the past few years, averaging about zero (see chart 3). Retail-spending figures from the Fed’s New York branch similarly do not show that well-heeled shoppers have been abnormally spendthrift lately.
Most important, little else in the economy points to a shift towards the wealthy. The wages of low-earners are growing at a similar rate to those of richer ones—and increased at a much faster clip in the years after the pandemic. In surveys of consumer confidence, the gap between the mood of the poor and that of the rich is no wider than usual (see chart 4).
Chart: The Economist
As for assets, the New York Fed shows that since the pandemic the net worth of rich households has not outpaced that of the less well-off. The fortunes of the wealthy have soared recently, but only after crashing when markets slumped in 2022 as the Fed raised interest rates. The wealth of poorer Americans has grown more slowly but also more steadily (see chart 5).
None of this is to deny that America’s economy is unequal by rich-world standards, as well as being unusually fast growing. But the plutocrats alone are not powering today’s expansion. You might worry about inequality in America; just don’t fret for macroeconomic reasons. ■
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