CKE
These are not initials or Greek life letters. These are some of the terms that economists, business leaders, and politicians are using to define the current economic situation in the United States.
Since the recovery from the pandemic, the consensus among economists has been to see the economy acting in a “K” shape, with uneven expansion for different groups, with the arms of the “K” pointing in opposite directions.
There is currently debate over whether a K-shaped recovery still exists or whether the economy resembles the letter “C” or “E.”
“This is part of the alphabet soup,” said Joel Mokyr, a Nobel Prize-winning economic historian at Northwestern University.
The race to label today’s economic structures involves more than semantics and bragging rights. In recent years, the disparity between low- and high-income people in the K-shaped economy has become a top concern for politicians, financial policymakers, and consumer executives.
For decades, the letterform has been used to summarize the economy, especially after major recessions. The list of those that have been adopted throughout history includes the “V-shape,” the “L-shape,” and the “W-shape.”
But Don Rissmiller, chief economist at research firm Baird Strategas, said it’s unusual for this type of narrative to have the staying power it has today among ordinary Americans, even years after the recession. He said growing concerns about wealth inequality may be driving the rise in awareness.
“During recessions and economic recovery, letters are very popular,” Rissmiller said. “Using letters during a business cycle may be a little new.”
K to C
Treasury Secretary Scott Bessent caused a stir earlier this month when he declared that the K-shaped economy is in the rearview mirror. Instead, the former hedge fund manager said a C-shaped economy is forming, meaning the lowest consumer class is emerging.
Bessent cited this year’s wage increases and significant tax cuts for low-income earners and said President Donald Trump’s “tip-free” and “overtime tax-free” policies are making the worst of the situation worse.
“I’m tired of hearing about this K-shaped economy,” Bessent, one of Trump’s top economic aides, told CNBC this month. “What we can say clearly here is that the K-shaped economy is over.”
Bessent isn’t the only company giving airtime the letter “C.” hilton worldwide Chief Executive Officer Christopher Nassetta told analysts late last month that his hotel company is “definitely looking” at C-shaped economic growth.
Nassetta said the weakness of higher income groups is not driving convergence between the two ends of the class spectrum. Instead, the CEO said, Hilton’s middle and upper middle class went from negative numbers to higher growth rates of 6%.
“The middle class is getting back into the game,” Nassetta said. “It’s really impossible to deny that.”
A sign posted in front of the Hilton Hotel in San Francisco, California on July 23, 2025.
Justin Sullivan | Getty Images
But Anthony Chan, former chief economist at JPMorgan, said the US war with Iran is causing cracks in this new perspective.
He said low-income consumers would be more affected by high gas prices because they spend much of their income on energy and the conflict could keep inflation high. That would reduce the benefits low-income Americans receive from White House efforts to increase tax refunds and make housing more affordable, he said.
“We will be the first to say that some progress is possible,” Chan said. “But there is no progress that can be said to be able to fill the K-shaped economy.”
I’m still K
Indeed, as long as consumer confidence remains weak and the cost of living emerges as a decisive issue during midterm election cycles, it is difficult to argue that the K-shaped economy has declined, Chan said.
Consumer sentiment fell 11% in August from a year earlier, and was recently near record lows hit earlier this year, according to a thorough study from the University of Michigan released Friday. Research director Joan Hsu said confidence among low- and middle-income respondents had taken a significant hit this month.
Several consumer company leaders said they still see signs of a K-economy.
“The K-shaped economic dynamics that we’re seeing are alive and well in the United States,” said Shane Grant. colgate palmolive‘s head of Americas operations spoke at Deutsche Bank’s consumer conference in June.
Bill Boltz, Merchandising Executive lowe’ssaid on the home retailer’s earnings call last week that the K-shaped economy is one of the variables that will “continue to shape” consumer spending trends. CEO Nicholas Fink constellation brandThe maker of Modelo beer and Robert Mondavi wine told analysts last month that the economy was even looking “more and more” K-shaped.
Pictured is Colgate toothpaste sold at a grocery store in Pasadena, California.
Mario Anzuoni | Reuters
Years after the K-shaped economy became mainstream in economic analysis, some are finally noticing that cracks are beginning to appear in the K-shaped economy.
A report released last month by a team at the Richmond Fed said that while income growth did not show a K-shaped divergence between different income groups from 2021 to 2023, consumption did reflect a clear break.
The Bank of America Research Institute said the situation may be changing. The institute said that while higher income earners are spending more on credit cards, the gap between income groups began to narrow from May this year.
“What was once a ‘K’ consumer is increasingly becoming a convergent consumer,” David Michael Tinsley, a senior economist at the institute, told clients.
New York Fed researchers also said their latest study on credit card debt shows that the K-shaped economy continues to dominate as an economic theme. Total credit card balances in the second quarter reached a near-record high of $1.26 trillion, evidence that many households are living paycheck to paycheck.
Evolution to E
Some wonder if the economy has evolved into an E-shape after more than five years in a K-shape. In this view, there are three distinct classes of Americans that neither diverge further nor converge.
In other words, “each group found a way to survive,” says Baird Strategas’ Rissmiller.
“It may not be the best outcome,” Rissmiller added. “But it’s an outcome that looks more stable than not.”
Michael Eisenband, global chairman of corporate finance at FTI Consulting, recently said in a note to clients that E-shaped valuations are “better indicative” of the distinctly different spending patterns among different income groups. E can serve as a “better depiction of the era,” he says.
The manager of the Sleep Quarter at Clarks Pond in South Portland relaxes on a Tempur-Pedic bed.
Gordon Chibrosc | Portland Press Herald | Getty Images
Heather Long, chief economist at Navy Federal Credit Union, said describing the economy as an E-shape rather than a K-shape may be more accurate because it better captures the clinging middle class. The idea that low-income and high-income people are somehow converging requires “real mental gymnastics,” she says.
Wyndham Hotels & Resorts CEO Jeff Barotti similarly told analysts on an earnings call earlier this year that middle-class consumers were “feeling good” and “regaining confidence in their purchasing power,” which could reflect either the C- or E-shape of the economy.
For other executives, the E-shaped economy, in which the three income groups follow parallel but unequal trajectories, remains a foreign concept for now. Scott Thompson CEO Somni Group Internationalwhen asked about the E-shape analysis during Tempur-Pedic mattress maker’s earnings call this month, admitted it was out of the question.
“That’s new to me,” Thompson said. “I was prepared for K, but I wasn’t thinking about E.”
