Holiday spending this year is expected to surpass $1 trillion for the first time, according to the National Retail Federation. But it’s the very wealthy, making expensive purchases, who will be driving much of that spending while many lower-income Americans will buy discounted versions of items or finance them with credit cards. Call it the “K-shaped” economy, holiday edition.
“When people talk about the K-shaped economy, they’re talking about an economy that is being experienced very differently across the population,” said Joanne Hsu, the director of the Surveys of Consumers at the University of Michigan. The wealthy, represented by the line of the K that is angled up, are spending confidently. The less wealthy, the line trending down, are scrambling to make ends meet. This “bifurcation,” Dr. Hsu said, is visible in surveys about consumer sentiment.
“K-shaped” entered the popular parlance in 2020 and is now ubiquitous, used for divergent consumer outlooks, unsteady spending at stores and restaurants, and even corporate stumbles, as some companies, especially tech-focused ones, thrive while the prospects of others decline. Moody’s Analytics recently estimated that the top 10 percent of households were responsible for nearly half of all spending.
How it’s pronounced
/kā-shāpt/
Peter Atwater, a lecturer in economics at the College of William & Mary, is credited with popularizing the term. He saw an account on X (then Twitter) using “K-shaped” to describe the uneven ways different people were recovering from the pandemic and thought the framing sounded apt. “I hoped it would be short-lived,” he added.
Instead, the term and the conditions underpinning it have persisted. In the years since the pandemic, financial markets have hit record highs, and the wealthiest Americans have been on “an escalator” going up, Mr. Atwater said. But lower-income families have been struggling. Wages are rising most slowly for the lowest-paid workers, data from the Federal Reserve Bank of Atlanta shows; the unemployment rate has ticked up to 4.6 percent, the highest in four years; and tariffs, inflation and the job-market risks of artificial intelligence have only added to economic stress. In Bank of America’s 2025 Holiday Survey, 62 percent reported feeling financial strain, and 87 percent of those respondents said they planned to shop at discount stores.
On earnings calls, some executives are talking about people seeking value and trading down, while companies offering luxury products are seeing sales flourish. Delta Air Lines, for example, said in October that premium tickets were set to outpace coach sales.
The Federal Reserve chair, Jerome H. Powell, has acknowledged this gap. “If you listen to the earnings calls or the reports of big, public, consumer-facing companies,” he said at a news conference last month, “many, many of them are saying that there’s a bifurcated economy there and that consumers at the lower end are struggling and buying less and shifting to lower-cost products,” though wealthier people are still spending.
Americans are currently living in two different worlds, said Mr. Atwater, who popularized K-shaped. “Those at the bottom can’t help but notice the overabundance above them.”
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