K-shaped economy is dead in US? Robert Reich points to McDonald's earnings — ‘Even CEOs are admitting...’
The US economy is moving beyond the K-shaped divide, claimed Treasury Secretary Scott Bessent, but economist Robert Reich pushed back, pointing to McDonald's earnings. In
The US economy is moving beyond the K-shaped divide, claimed Treasury Secretary Scott Bessent, but economist Robert Reich pushed back, pointing to McDonald's earnings. In a CNBC "Squawk Box" interview last week, Bessent said that the "K-shaped" economy is over and that a "C-economy" is emerging, with lower-income workers beginning to regain ground. The K-shaped economy refers to a widening gap between higher- and lower-income Americans, with the two groups experiencing different trends in income, spending and wealth. Economy ‘finally clawing it back’ Referring to the Bureau of Labour Statistics data, Bessent said weekly earnings for full-time workers are at the 25th percentile and rose 5.5% from a year earlier in the second quarter.
He claimed that lower-wage earners are beginning to benefit from faster wage growth, including from policies such as the elimination of taxes on tips. Bessent said the data showed lower-income workers are "finally clawing it back, just like they did in US President Trump’s first term." The Consumer Price Index rose 3.9% over the same period, according to the Bureau of Labor Statistics. Also Read | Rising wealth concentration highlights risks for US economy, report says ‘K-shaped economy very much alive’ Reich pushed back against Bessent’s view, saying that the idea that the K-shaped economy is “dead” wrong. “Hogwash. Not only is the K-shaped economy very much alive, but even CEOs are also admitting it's a problem,” he said in the social media post, accompanied by a video.
Pointing to McDonald’s earnings and consumer behaviour, Reich said, fast-food chains saw a double-digit decline in visits from lower- and middle-income customers in the first quarter of 2025 because those consumers could not afford it. Reich pointed out that 70% of the US economy depends on consumer spending, highlighting a structural risk. He said stagnant wages and inflation were weakening the buying power of lower-income households. Reich also said the contrast showed a “two-tier economy,” with consumers earning more than $100,000 in a stronger position while middle- and lower-income consumers faced greater pressure. Also Read | How insulated is the US economy from the Iran war? What did other economists have to say?
In June, Moody’s Analytics chief economist Mark Zandi said that the K-shaped economy remained “firmly intact” — the top 20% of income earners, making more than $175,000, continue to drive the economy. Retail Federation chief economist Mark Matthews said, “The K-shape persists, but lower-income consumers have increased their spending versus last year.” Among the six of the bottom eight spending groups, Matthews said, discretionary spending grew faster than spending on staples. Consumers “seem to be willing to focus more of their spending on the things they want rather than the things they need.”
The BriefWire