The so-called K-shaped economy is now closely linked to a "significant increase in food insecurity," according to a blog post released by the Federal Reserve Bank of New York on Wednesday. The analysis, based on data from the Survey of Consumer Expectations (SCE), indicates that a substantial portion of the U.S. population is experiencing severe financial stress.
Within this group, middle- and low-income households have been hit hardest by persistent inflation. Researchers explained that the post-pandemic surge in prices for essential items such as housing, food, and utilities, which constitute a larger share of these households' budgets, has forced them to cut back on food purchases.
High living costs, combined with reductions in the Supplemental Nutrition Assistance Program (SNAP), have "reignited concerns about food insecurity for those at the lower end of the K-shaped economy," wrote the New York Fed researchers.
Following the expiration of pandemic-era relief policies, including expanded SNAP benefits, many families have faced difficulties. More recently, the "Good Jobs Act" signed by the Trump administration has further tightened SNAP work requirements.
The latest report from the U.S. Department of Agriculture shows that approximately 14% of American households experienced food insecurity in 2024.
The New York Fed noted that although the overall U.S. economy has grown steadily since the COVID-19 pandemic, many Americans feel their standard of living has declined, with food insecurity likely being a key factor.
After a series of recent financial shocks, consumer confidence has continued to fall. The closely watched University of Michigan Consumer Sentiment Index dropped to a historic low in May.
"Consumers are generally pessimistic about their current financial situation and future prospects," wrote the New York Fed researchers.
However, perceptions vary significantly among households, reinforcing the "K-shaped economy" assessment: while high-income groups continue to see wealth growth, middle- and low-income groups are mired in economic uncertainty and financial hardship.
K-Shaped Divergence Intensifies
Rising stock markets and home price appreciation have primarily benefited high-income households, who hold substantial financial and real estate assets, while low-income groups have been left far behind.
The pandemic further amplified this divergence: as stock and property wealth surged, low-income households struggled to keep up with rising prices, making the "K-shaped economy" a hot topic.
Now, rising gasoline prices are once again hitting the lower end of the K-shaped economy. According to data from the American Automobile Association (AAA), the national average gas price reached $4.46 per gallon on Wednesday, up about 40% year-over-year.
The New York Fed concluded: "The upper end of the K-shaped economy is characterized by high and growing net wealth; the lower end represents a large population of middle- and low-income individuals facing increased economic uncertainty and worsening financial distress."
The Consumer Expectations Survey released by the Federal Reserve on May 7 also showed that about one-third of households expect their financial situation to deteriorate further in the coming year.
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