Hey everyone, hope the end of summer is treating you well.
I’ve been thinking a lot about where the economy is at right now, and the short version is: it really depends on who you are and where you’re sitting.
I came across a chart recently, that shows how different groups of Americans are spending. The top 20% by income are still spending pretty freely, but the bottom 80% have pulled back, basically only keeping up with inflation. Economists call this a “K-shaped economy”—one group going up, the other going down, like the arms of the letter K.
Who’s in that top 20%? Generally, people who are older, own stocks and real estate, and don’t depend as much on a single paycheck. Their homes and investments have appreciated, so they feel comfortable spending. The bottom 80%? That’s the vast majority of Americans, living paycheck to paycheck, dealing with higher costs, less job security, and rising risks of layoffs.
Some of the signs aren’t pretty. Loan delinquencies are ticking up. Consumer confidence is slipping. Vegas visitor numbers dropped over 11% in June, and foreign tourism is falling too, which means less money flowing into places like New York, California, and Las Vegas. On top of that, tariffs are raising costs, and AI is shaking up the job market. One stat that really stuck with me: 70-year-olds are now more likely to buy a home than 35-year-olds. That doesn’t feel right.
On the flip side, the stock market has been strong, and big tech companies are pouring trillions into AI and data centers. For shareholders, that’s a good thing. For workers, not so much, many companies are quietly cutting headcount while boosting profits. It’s a weird split: what’s good for Wall Street isn’t necessarily good for Main Street.
That’s really the heart of this K-shaped economy—depending on where you sit, your experience of “how things are going” can look totally different. Some economists talk about a future of abundance if AI drives productivity high enough. I even heard Geoffrey Hinton (the “godfather of AI”) say we should teach AI maternal instincts so it takes care of us—yikes. My own view: abundance sounds great, but it doesn’t mean much if most people aren’t feeling it. A more equal society makes life better for everyone.
The big question is: can we actually share the gains when they come? Right now, it doesn’t look like it.