There’s a big problem with what we’re told about America’s economy

Over the past few months, a startling pattern has emerged in Bank of America accounts: The disparity between the rich and the poor in America seems to be closing.

That runs opposed to the long-held belief that America’s wealthy are becoming richer, leaving the less fortunate behind and making the American economy Dream unattainable.

This wealth disparity, sometimes referred to as the “K-shaped economy,” has been held responsible for a number of economic problems and is a major cause of Americans’ financial anxiety. However, because richer Americans continue to spend and businesses continue to hire, it has also been credited with keeping the US economy thriving.

What if, however, the K-shaped story is no longer accurate?

The ‘K’ appears to be narrowing

In order for the “K” theory to be true, the rise in wealthy people’s income and spending must exceed that of the poor people’s salaries and costs. In other words, the lines of the “K” that point upward and downward diverge.

Rather, the lines appear to be coming closer together by certain metrics.

According to a June survey by PNC researchers, the gap in spending growth between Americans with higher and lower incomes is the smallest it has been in three years. PNC said on Monday that there is even preliminary indication that the difference in savings across households with higher and lower incomes is beginning to close.

According to the Bank of America Institute, lower-income Americans’ spending growth in June also exceeded that of high-income Americans. Additionally, the difference in the growth of discretionary expenditure narrowed to its lowest level since July 2025 in June, which is especially positive for the economy if people of all income levels feel confident enough to purchase items they desire but may not necessarily need.

Paychecks also exhibit this convergence in the “K” lines. According to Bank of America, there was essentially no difference in the growth of incomes between the rich and the poor last month.

A somewhat steady job market, consumer spending during the World Cup, and larger tax returns from President Donald Trump’s One Big Beautiful Bill Act might all contribute to the K’s narrowing in 2026. However, the evidence from the past few months also supports a long-standing pattern.

Since 2019, the “K” has shrunk significantly as lower-paid workers’ wages have increased to keep up with skyrocketing inflation. According to Joe Brusuelas, chief economist of RSM US, lower-income workers were also helped by a significant infusion of social safety nets and government stimulus during the pandemic.

The poorest Americans’ net worth increased significantly more quickly than the upper middle class’s over the previous seven years. Additionally, middle-class people’s wealth increased faster than that of the top 1%.

A narrowing ‘K’ economy

By the end of 2025, the poorest 20% of Americans had increased their wealth by almost 46% compared to the start of 2019, surpassing the increases for the upper-middle 20%.

Cumulative growth in real net worth by income group

The “K” has even been getting smaller by one measure since 197

According to Scott Winship, director of the Center on Opportunity and Social Mobility at the American Enterprise Institute, a center-right think tank, the proportion of Americans in the lower and middle classes decreased over the previous 50 years, while the contingent in the richest group and the upper middle class increased.

According to Winship, the hollowing out of the middle class is primarily due to people becoming wealthier rather than poorer.

Recently, several economists and business executives have tried their hand at other letters due to the flawed “K” comparison.

Treasury Secretary Scott Bessent stated, “We’re seeing more of a ‘C,'” during an August 4 interview with CNBC. He claimed that people at the bottom of the economic scale are earning more.

Treasury Secretary Scott Bessent stated, “We’re seeing more of a ‘C,'” during an August 4 interview with CNBC. “I can declare with certainty that the K-shaped economy has ended.

In June, Hilton CEO Christopher Nassetta also proposed that the US economy is “C-shaped,” pointing out that travel and hotel stays are becoming more popular among consumers of all economic levels.

Is the “K” dead, then?

“That K-shaped narrative probably doesn’t hold as much” at this time of year, according to PNC senior economist Brian LeBlanc.

He stated, “We’re not seeing lower-income households get worse off.” “A relative disparity still exists. However, it isn’t expanding in absolute terms.

Where the ‘K’ is widening

The “dead-K” argument now has a massive asterisk.

David Woodyard’s response to the question of whether lower-class households are doing better would be succinct: “No.”

Over 240,000 people were served by Catholic Charities Dallas, which Woodyard is the director of. Between the summer of 2024 and the middle of 2025, his group served almost 9 million meals. Over 15 million since then. Approximately 60% of recipients receiving food assistance return at least once.

“In every way, we’re busier than ever,” Woodyard remarked.

In this context, the K has been growing as living expenses skyrocketed and stimulus from the pandemic dissipated. If we change our beginning point to, say, 2023 rather than 2019, when low-income families were most affected by the economy’s major problems, it is evident in the data.

A widening ‘K’ economy

Gas spending began to take on a K-shaped trend in 2023, indicating that Americans with higher incomes were willing to travel more than those with lower incomes. That gas-spending gap grew considerably during the beginning of the war with Iran.

According to Heather Black, more people are finding it difficult to cover the fundamentals, making the bottom arm of the “K” even larger. Black serves as vise president of the 211 System Strategy, a United Way Worldwide-sponsored hotline that links people to transportation, mental health services, food assistance, and other resources.

The 211 network referred 3 million people for utilities and 6 million people for housing help in 2025. According to Black, the patterns are following a similar path this year.

Families may have been able to catch up on payments for a month or two thanks to larger tax refunds this spring. However, the “K” itself cannot be bent by the one-time payment.

Black stated, “Maybe we get caught up this one time on the overdue rent, but it’s not a solution.” “It’s a Band-Aid.

Think about how precarious the economy is beneath those band-aids as well. In July, there were unanticipated employment losses. Layoffs, subdued hiring, and more stagnant pay could result from the deceleration. People are extremely irritated with Trump’s economic record, tariffs, and inflation, according to polls. With no end in sight, the war in Iran has rocked the gas and diesel markets.

Poorer homes frequently simply cannot handle it all.

The lower-class patrons of Javier Casillas were caught off guard by rising gas prices. At the beginning of the year, the proprietor of Live Well Mattress & Furnishing Centers in Alamogordo, New Mexico, reported that his business was profitable. However, starting in March, sales drastically decreased, and he has been losing money ever since.

Casillas stated that he continues to sell high-end mattresses to customers that are more affluent. Even at 80% off, his discounted items remains unused. Because he is unable to unload the less expensive items, the clearance area now occupies half of the store.

One letter will never sum up the economy

We can better understand what’s going on around us by giving the economy a name. The “K” represents the historical economic disparities that increasingly characterize American economy life, particularly after the epidemic.

However, a $31 trillion economy that is the largest and most diverse in the world cannot be adequately described by a single letter.

Americans continue to spend in spite of all the bad. For months, retail sales have increased. In the second quarter, consumer expenditure increased by a robust 3.2%. Due in great part to consumers spending as tho they are optimistic about the economy, the economy is in comparatively good shape.

However, the wealth disparity exists and is fundamentally unjust. Americans with low incomes are at a disadvantage since they cannot afford to participate in the property market and are not well-represented in the stock market.

It is possible for all of that to be true simultaneously. For this reason, it is crucial to make an effort to comprehend every nuance of the next letter that is thrown around. Some people’s stories may appear on the downward-pointing leg of the “K,” while others may appear on the upturned bottom of the “C.” Before a person experiences a change in their day-to-day existence, the macro data may begin to curve in a different direction.

Therefore, the fact that there is just one “K-shaped” narrative may be its worst flaw.