economy
'E-shaped' economy is replacing a K-shaped one in 2026, economist says: The middle class is 'spending in a nervous way' now
Economist Heather Long says the U.S. economy is diverging into three tiers of consumer behavior instead of two, amid an ongoing affordability crisis.
TL;DR
- The U.S. economy is shifting from a 'K-shaped' to an 'E-shaped' model, indicating three distinct tiers of consumer behavior.
- The top tier consists of high earners who continue to drive consumption, accounting for a significant portion of U.S. spending.
- The middle tier is characterized by cautious spending, shopping at discount retailers and living paycheck to paycheck, experiencing stress from fluctuating prices.
- The bottom tier is increasingly using credit cards and Buy Now, Pay Later services, with a rise in late payments, especially for essential purchases like groceries.
- Despite falling inflation rates from their peaks, consumers are still grappling with prices significantly higher than in 2020, and real wages have largely stagnated.