Bessent said the K-shaped economy 'is over.' Here's what financial experts say

At a time when many Americans remain stressed about affordability, Treasury Secretary Scott Bessent has declared that the U.S. economy is no longer in a "K shape," a term used to describe increasing financial inequality between high- and low-income households.

"I got sick of hearing about this K-shaped economy," Bessent said in a CNBC interview on Aug. 4. "I can say here definitively, the K-shaped economy is over."

For years, experts have called the trend where spending and wage growth for high-income Americans' outpaces that of low-income Americans "K-shaped." In December, then-Federal Reserve Chair Jerome Powell said it was "clearly a thing."

"If you listen to the earnings reports for consumer-facing companies that tend to deal with low- and moderate-income people, they'll all say that we're seeing people tightening their belts, changing products that they buy, buying less," Powell said in a news conference.

According to Bessent, that has changed. He said the economy is becoming C-shaped, citing faster wage increases among low-income Americans than those in higher-income brackets.

Some economists agree that there may be a shift in the K-shaped economy, with the gap between the two prongs narrowing slightly. But, they say, that doesn't mean it has come to an end.

"I think that declaring the death of a K-shaped economy is a little bit premature," Peter Orszag, CEO of the financial advisory firm Lazard, said on CNBC.

Other factors like the war in Iran, gas prices and inflation all play a role in the economy's future outlook.

"I would say the probability is higher for the continuation of a K than the ascent of a C," Deon Strickland, a financial services professor at Wake Forest University, told PBS News.

Here's what to know about the shape of the economy, and what experts say the latest data means.

What is a K-shaped economy?

A K-shaped economy refers to high-income and low-income households moving in different directions for several metrics, including increases in wealth, wages and spending. When visualized on a graph, those trend lines resemble the two diverging arms of the letter K.

WATCH: K-shaped economy: Why the wealthy are thriving as most Americans fall behind

Watch the PBS News Hour segment in the player above.

"A K-shaped economy is generally described as one economy with two different experiences, depending on your income," Breyon Williams, chief economist at the progressive think tank Groundwork Collaborative, said in an email. "Top-income households pull away, seeing faster growth in spending, income and wealth, while lower-income households see slower growth in those areas."

The term was originally coined in 2020 to describe the economy during the COVID-19 pandemic, and it became widely used in 2025. However, it "underscored a decades-long trend of widening inequality," according to a January report from U.S. Bank.

What is a C-shaped economy?

Economists don't widely use the term C-shaped to describe the economy, Williams said.

Strickland said the term isn't being used "consistently." He said the term seems to go back to an April earnings call for Hilton Worldwide, when CEO Christopher Nassetta used it in reference to consumer spending. According to Nassetta, his company saw a rise in demand for lower-and middle-priced hotel chains. This, he said, was a sign that the economy became more balanced.

Nassetta detailed a shift "from luxury and upper upscale toward a more balanced convergence demand shape, or what I have been calling a C-shaped economy."

In a July earnings call, Nassetta maintained that the C-shaped economy was "alive and well," though he clarified that it doesn't mean "the top of the C is coming down." He said there continues to be demand from high-income households for luxury hotels.

Bessent repeated the term in his August comments. But he pointed to wages rather than spending as the metric that supported his analysis. He said wage gains for lower-income Americans outpaced wage gains for higher-income Americans in the last year.

"We're seeing more of a 'C economy,'" he said. "Where the lower end of wage earners are finally calling it back, just like they did in President Trump's first term."

Whether the metric is spending or wages, the idea of being in a C-shaped economy is popular, Strickland said, because it "would imply both sides are doing OK."

What do wages say about the shape of the economy?

Citing the Bureau of Labor Statistics, Bessent said data shows "the bottom quartile of wage earners have had, year over year, 5.5% wage gains. And that's three times more than the top quartile."

But looking at wages alone doesn't tell the full story, particularly for people on the top prong of the K.

"Real wages are growing modestly, slightly greater for low income than high income," Mark Gertler, economics professor at New York University, said in an email. "However, the stock market is booming, which benefits mainly the high income."

He described the economy as a "tilted K," where the upper arm keeps pointing up and the lower arm points forward.

Even though wages have increased, many Americans may not feel relief, particularly those on the bottom leg of the K. Wage growth has slowed to 3.2%, the lowest rate in years, putting it below the inflation rate of 3.4%.

Wage growth "is totally wiped out by inflation," Heather Long, chief economist with Navy Federal Credit Union, told PBS News last week. "That financial squeeze is real for a lot of households."

WATCH: What the July jobs report reveals about the strength of the economy

Watch the PBS News Hour segment in the player above.

A K-shaped economy "was coined to describe how people at the top are doing well and those in the middle and the bottom are not," Aaron Klein, senior fellow in economic studies at the Brookings Institution, said in an email. "That is the reality that most Americans see."

Klein said stock prices "make the rich feel even richer" while "working Americans struggle to pay" for gas and rising energy bills.

What does spending data say about the shape of the economy?

To examine consumer spending, economists look at various sources, including credit card statistics from banks and data from surveys conducted by the Census Bureau, Williams said.

In a July report, Bank of America noted a "convergence" in wages and spending across income groups, but noted that whether the trend persists depends on "whether underlying labor market momentum is sustained."

PNC also reported a narrowing gap in spending between lower-income and higher-income households. But it maintained that "the K-shaped dynamic persists."

Mark Mathews, chief economist for the National Retail Federation, echoed the sentiment.

"The K-shape persists, but lower-income consumers have increased their spending versus last year," Matthews wrote in July. "The question is whether they can sustain this momentum into the second half of the year."

While spending may be up, so is credit card debt, which has risen 60% from five years ago.

WATCH: Credit card debt surges in U.S. as high interest rates make it harder to pay off

Watch the PBS News Hour segment in the player above.

Whether the economy moves from a K to a C shape depends on whether inflation lowers, wages continue to rise and the stock market remains strong, Strickland said.

"As long as gas prices remain high, softening wage growth coupled with sticky inflation mean that the second half of the year might not be as rosy as the first half," Mathews said.