The K-shaped economy is getting more uneven

The gap in who’s driving the U.S. economy continues to widen.

New data from Moody’s Analytics show that consumer spending is becoming more concentrated among higher-income households. Over time, a growing share of total spending has shifted toward the top of the income ladder, while the share coming from everyone else has steadily declined.

By the third quarter of 2025, households in the top 20% of incomes — roughly those earning more than $175,000 a year — accounted for nearly 60% of all consumer spending. That’s the highest share in data going back to 1989.

Moody’s Analytics chief economist Mark Zandi describes this pattern as a “K-shaped” economy: one group pulling further ahead while the rest fall behind.

Fewer households are doing more of the work

Here’s why it matters:

• Growth depends more on high earners. When spending is concentrated among a smaller group, the economy becomes more sensitive to what happens to their jobs, investments, and confidence.
• Other households have less room to spend. Lower- and middle-income consumers are contributing a shrinking share of total spending, a sign that tighter budgets and higher prices are taking a toll… especially as more of their income goes toward basics like food, housing, and transportation.

What the headline numbers can miss

Consumer spending accounts for more than three-quarters of U.S. economic output, which helps explain why headline growth still looks strong. GDP expanded at a 4.3% annual rate in the third quarter.

But that strength doesn’t reflect how most households are actually doing. Instead, it hides the fact that many are falling behind, even as overall growth looks strong.

Bottom line: The economy still looks strong when you zoom out. Up close, that strength is coming from a shrinking circle of households.