Economists have long viewed the postpandemic economy as "K"-shaped. However, there is now debate over whether the K-shaped recovery still exists or if the economy resembles the letter "C" or "E":
"The structure of today's economy is characterized by more than just terminology," says Nobel Prize-winning economic historian Joel Mokyr. "The divergence among different groups in the economy, expressed in a K-shaped economy, is a key issue for politicians and economic policymakers."
From K to C
Treasury Secretary Scott Bessent has declared that the K-shaped economy is in the rearview mirror. He noted that a C-shaped economy is forming, where the lower class is starting to gain ground:
Bessent cited wage gains among lower earners and larger tax cuts this year as boosting the worst-off:
Still a K
However, JPMorgan's former chief economist Anthony Chan said the U.S. war with Iran complicates this emerging view. He noted that lower-income consumers spend more of their incomes on energy, making them more vulnerable to rising gas prices:
"The K-shaped economy still exists as long as consumer sentiment remains weak," Chan said:
Evolution to E
Others wonder if the economy has evolved into an E-shape, where three distinct classes of Americans are neither moving closer nor further apart:
"Each group has found a way to live," Rissmiller said:
