Economist who popularized ‘K-shaped economy’ says this one wealth gap indicator is being overlooked

Core Insights - The concept of a K-shaped economy highlights the growing divide between higher- and lower-income Americans, with some sectors recovering post-pandemic while others lag behind [1][3][4] Economic Disparities - Wage growth for the lowest-quartile income Americans has fallen to its lowest level in about a decade, while the highest income Americans are experiencing the fastest wage growth [4] - Subprime loans are increasing, indicating financial strain for many, while super prime loans are also on the rise among high-credit-score Americans [4] - The stock market reflects a K-shaped recovery, with earnings expectations rising for top companies while deflating for the majority of the S&P 493 [4] Consumer Sentiment - Consumer sentiment is split along income lines, with low-income Americans feeling significantly less confident about the economy compared to higher earners [5] - This sentiment shift is different from 2022, where market declines affected confidence across all income levels [5] Behavioral Implications - The differing sentiments may lead to varied consumer behaviors, increasing economic vulnerability [6] - Lower-income individuals may exhibit behaviors such as disengagement and reduced spending, while higher-income individuals may become overconfident and blind to risks [8] Political and Social Consequences - The K-shaped economy may exacerbate tensions between income classes, potentially leading to social unrest if lower-income Americans feel increasingly marginalized [9][10] - Historical parallels are drawn to social unrest linked to economic disparities, suggesting a risk of similar outcomes in the current context [9]