U.S. Treasury Secretary Scott Bessent declared the K-shaped economy is officially over during a CNBC interview on Wednesday. He stated that lower-income households are no longer falling behind their wealthier counterparts, suggesting the economy is now C-shaped. “I got sick of hearing about this K-shaped economy,” Bessent said, adding that the bottom 25% of wage earners have seen a 2% real wage gain.
Key Details
Bessent attributed this shift to various policy measures under the One Big Beautiful Bill Act, which includes significant tax cuts for low- and middle-income Americans. The act has reportedly increased after-tax income for a typical two-child family by $7,600 to $10,900. He noted that wage growth for the lowest quartile of full-time workers has risen by 5.5% year over year, according to Bureau of Labor Statistics data.
Background
However, some analysts caution that the data does not fully support Bessent's claims. Elizabeth Pancotti, vice president at the Groundwork Collaborative, stated, "I don't think we've seen any evidence to suggest that we're closing the gap on those things." Moreover, Bank of America’s chief U.S. economist Aditya Bhave observed that while consumer spending has ceased to be K-shaped recently, the overall economic divergence remains a concern.
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The declaration could influence consumer confidence and spending patterns, particularly among lower-income households. If wage gains continue, sectors such as retail may see increased consumer activity. Watch for upcoming economic data releases that could further clarify wage growth trends and consumer spending patterns.
Based on reporting by: businessinsider.com, fortune.com