The K-shaped economy — wealthy Americans propping up consumer spending while poorer consumers increasingly pull back — has become the economic consensus.

• One big problem: Some economists warn that the narrative has outrun the data supporting it.

Why it matters: The narrative has seeped into how CEOs explain spending patterns and how economic policymakers think about risk. Getting this wrong may make the economy look more resilient than it is, with less of a shock absorber than previously believed if conditions turn quickly.

What they're saying: "The narrative of K-shaped growth appears to be exaggerated, downplaying risks of a fragile expansion," a team of economists at Barclays wrote in a note earlier this month.

The intrigue: The wealthiest Americans have long accounted for a larger share of overall consumption. The question is whether that divergence has worsened in recent years.

• The answer is no, according to Pantheon Macroeconomics' Samuel Tombs: The richest 20% of households have accounted for a steady 40% of total consumer spending for the past 25 years — unchanged in 2025, even as asset prices boomed.
• Poorer households' share of spending has held steady, too: The bottom 20% account for roughly 9% of spending.

By the numbers: If wealthy Americans were driving the economic expansion more than in the past, you might expect the categories where they spend the most to be the fastest growing.

• But Pantheon said that spending categories dominated by rich households grew no faster than those of other income groups.
• Indeed, the wealthy's share of a category was "a remarkably poor predictor" of its growth.
• Spending on apparel — where the wealthy account for roughly a third of spending, below their overall share — surged 6%. Auto sales, in which the top 20% account for two-thirds of all spending, rose just 2%, below the overall average.
• The data reveals what Tombs calls a "striking" finding: Spending in categories where lower-income households account for the largest share "grew the most above their long-run trend last year."

Between the lines: Between 2019 and 2024, disposable income among the poorest households grew roughly 38%, the fastest of any income group and outpacing even the wealthy, Barclays says.

• Real income growth (that is, adjusting for inflation) was 14% among the bottom 20%, surprisingly trailing just one group: the absolute richest, whose income grew 15%.
• "If anything, we see somewhat of a U-shape, with high-middle-income households experiencing smaller, but still solid, income and wealth gains compared with other groups," Barclays notes.

The big picture: "If you look at a number of different types of spending data ... those indicators don't show as much of a difference across different income levels," Boston Fed president Susan Collins told Neil at a virtual event hosted by the bank this week.

• But Collins said the narrative is apparent in conversations with businesses: "There is a lot of concern and attention to strains on lower- to moderate-income households."

"When you talk to the people who sell things to wealthy customers, they'll tell you that that market is very strong," Richmond Fed president Tom Barkin said on the panel.

• "The most graphic representation would be the airlines, who talk about the front of the plane being full and the back of the plane being OK."

The other side: The K-shaped narrative is apparent in some consumer sentiment indicators, even if that is not reflected in spending data.

• Consumers who are not exposed to the stock market boom — overwhelmingly, poorer Americans — have historically rated the economy worse than those who own stocks, but that divide grew last month, according to the University of Michigan.

It is Atlanta Fed president Raphael Bostic's final week on the job. He leaves his Fed colleagues with a warning: The public is beginning to question the central bank's political independence.

Why it matters: The Trump 2.0 era has been defined by an extraordinary pressure campaign for lower interest rates, one that has challenged the Fed's political independence like never before.

• Bostic warns that those events have affected how some Americans think about the separation between the White House and the Fed.

What they're saying: "[M]y travels over the past several months have made clear that the legal and rhetorical battles raging around the central bank right now have caused people across a wide cross-section of our population to begin to doubt the Fed's independence," Bostic wrote in a letter published yesterday.

• "This is a major concern," said Bostic, who announced in November that he would retire this month.

Between the lines: The White House attempted to fire Fed governor Lisa Cook last year, a legal fight that has made its way to the Supreme Court. The high court is set to rule on the case any day now.

• Earlier this year, Fed chair Jerome Powell said the Department of Justice had opened an investigation into his conduct — an inquiry the top Fed official said was a pretext for defying calls for lower interest rates.
• "I think it's important that the public understand what is at stake when the Fed's independence is at risk," Bostic said.

What to watch: "I won't be part of the Fed when we see resolutions of these battles," he wrote.

• "But as someone who will always believe deeply in the Federal Reserve's mission and as an American concerned about our country's future, I will be watching closely and hoping that wisdom grounded in the profound success of the U.S. economy over many years prevails."