The K-shaped economy, a term coined during the pandemic, is now a reality, with diverging fortunes for wealthy and poor Americans. This economic disparity has tanked confidence in the economy and the president who promised to solve the affordability crisis in the U.S. While a wave of working-class voters flooded the Republican party ahead of the 2024 presidential election, they sent a loud message in the early November off-year elections, electing Democrats in every single race in which they were running. This includes moderates Mikie Sherrill and Abigail Spanberger in New Jersey and Virginia, respectively, and firebrand democratic socialist mayors in New York and Virginia: Zohran Mamdani and Katie Wilson. Their common theme: affordability. Economists have made it clear that something real is shifting: The rich are getting richer, and the poor are getting poorer. This week, Apollo chief economist Trosten Slok noted wage growth for the lowest-income Americans plummeted to its lowest in about a decade, while wage growth for the highest-income group surpassed all other income levels. The housing market, only in recent memory a booming segment of the economy where many locked in huge equity gains at low mortgage rates, has become nearly frozen because of the "lock-in effect." It’s simply unaffordable to sell your house and buy another one with mortgage rates above 6%. Trump’s role in the K-shaped economy Some of these indicators can be traced back to Trump, who himself rode affordability concerns to a 2024 election victory that once seemed implausible. Trump has noted the changing political attitudes following the election, floating a raft of proposals aimed at easing consumers’ pain, such as a 50-year mortgage and $2,000 rebate checks coming from tariff revenue. But to be sure, the K-shaped economy has existed for decades, economists say, and other economic factors have little to do with the president’s policies. The "low-hire, low-fire" labor market of 2025, for example—which has in particular battered lower-income, entry-level workers such as Gen Z—is more a result of businesses becoming more conservative in their hiring and firing practices following a pandemic-era labor shortage and a hiring binge that may have gone too far during the so-called "Great Resignation." Changing sentiments Lower-income Americans are noting these changes, with consumer sentiment similarly diverging in a K-shape, something Peter Atwater, adjunct professor of economics at William & Mary, who popularized the term "K-shaped economy," believes is being overlooked in the K-shaped conversation. Atwater suggested that so long as Americans perceive a broadening wealth gap, lower- and middle-income consumers will continue to harbor resentment for the ultra-wealthy that could simmer over. He cited a 2011 study from the New England Complex Systems Institute, which linked social unrest in North Africa and the Middle East during the Arab Spring of 2010 to rising food prices. "This is a crisis of confidence," Atwater said. "Sadly, those who are in the best position to address it seem at best indifferent, and that does not go unnoticed by those at the bottom." Nick Lichtenberg contributed reporting
