U.S. economy's K-shaped gap narrows
Summary
The gap between rich and lower-income Americans in how much they spend and earn is getting smaller. Lower- and middle-income households are now increasing their spending and wages faster, which could make the economy more stable.Key Facts
- The U.S. economy has had a "K-shaped" gap where wealthy people spend more while others struggle.
- Recent data shows lower-income people are now spending and earning more, catching up to middle-income groups.
- Bank of America calls this change the "great convergence."
- Lower-income households’ spending growth was 5.4% year over year, higher than the 4.9% for middle-income households.
- After-tax wages for lower-income Americans rose 5.2% in July, exceeding wage gains for wealthier groups for the first time since December 2024.
- The gap in spending growth between richest and poorest PNC bank customers shrank from 5 percentage points last year to just 0.1 points in July.
- The improvement is linked to more lower-income people having jobs and earning paychecks.
- The White House and Treasury Secretary say this means the "K-shaped" economy is ending, although richest Americans still spend more.
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