This article appeared in SoFi's On the Money newsletter. Not getting it? Sign up here.

The U.S. economy feels very different depending on where you stand. Some Americans have been riding its tailwinds, with rising home values and 401(k) balances creating record wealth and opportunities. Others are working against a relentless headwind, as paychecks get swallowed up by the heightened cost of basic necessities and the dream of owning a home seems to slip further away.

This contrast reflects what economists call a “K-shaped” economy, with the K being what the economy looks like when you plot these divergent paths on a graph: The top arm of the K reflects the segments whose financial world is expanding, while the bottom arm represents those seeing their options shrink.

It’s not simply that some are faring better than others, but that one is getting better while the other gets worse. The term is even being used to describe stark differences across corporate America: Big tech companies, especially those tied to AI, are booming, while other industries lag.

Some economists say evidence of a K-shaped economy goes back decades, though the term reportedly emerged during the early days of the pandemic recovery. What’s new is the size of the gap.

“The K-shaped economy is becoming steadily more K-shaped,” Mark Zandi, the chief economist at Moody’s Analytics, wrote on X Sunday. “It means the economy is highly dependent on a small group of the well-to-do, who, in turn, spend based in significant part on how their stock portfolios are performing.”

One example: Moody’s estimates the top 20% of incomes (people making over $175,000 a year) accounted for almost 60% of total spending in the third quarter of last year — the most since the firm started tracking that data in 1989. That, in turn, means the bottom 80% accounted for less than ever.

So what?

A K-shaped economy not only divides us, but makes it hard to capture the full picture of what’s going on across the country.

The collective equity in U.S. homes is at near-record levels, but many renters can’t afford today’s property prices or mortgage rates. Major U.S. stock indexes might climb to new highs for the umpteenth time, but not everyone has the money to invest in the market. The overall unemployment rate has risen a bit, but the increase is much steeper for recent college grads.

Plus, net numbers can be misleading in a K-shaped economy: Government data shows consumer spending is up, but not everyone is spending more. U.S. airlines are optimistic about their growth, but because tickets for premium seats — not the main cabin — are driving sales. And yes, the average price paid on a new car topped $50,000 for the first time, but mostly because those buying are scooping up luxury models and expensive EVs.

In short, there are striking differences in the American experience, and it can be confusing and isolating to reconcile certain headlines with your own situation. Recognizing that the economy is complex can help you avoid second-guessing your reality or simply renew your appreciation for what you have.

Related Reading

The K-Shaped Economy Reigned in 2025. It’s Not Going Away in 2026 (CNN)

Wealth Inequality in America Just Hit Its Widest Gap in More Than 3 Decades (CBS News)

Entry-Level Hiring Is Drying Up: How Grads Can Survive It (SoFi)