Not too long ago, U.S. consumers were waiting for the pressure to finally break.
Inflation cooled from its peak, Wall Street was looking for the Federal Reserve to move toward rate cuts, and many households hoped the economy was finally moving in the right direction.
However, Moody’s Analytics chief economist Mark Zandi warns that the relief is not spreading evenly.
According to reporting by NewsNation, in this latest breakdown, he argued the K-shaped economy remains firmly intact.
Put simply, he feels one side of America is moving up the escalator while the other is still climbing broken stairs.
Wealthier households continue to spend aggressively, backed by strong incomes, stocks and home equity. On the flipside, the lower and middle-income consumers continue slugging it out over rent, debt, groceries and insurance.
That split is now the central tension in the economy.
Sarah Silbiger/Bloomberg via Getty Images
What Mark Zandi said about the K-shaped economy
Zandi’s main point is that the U.S. economy is still being held up by a narrow group of higher-income consumers.
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The Moody’s Analytics chief economist said the K-shaped economy remains “firmly intact”, with the top 20% of earners, households making more than roughly $175,000 a year, now accounting for nearly 60% of consumer spending.
In other words, the headline spending remains robust, but the strength is not evenly distributed.
Zandi’s warning is that affluent households continue benefiting from higher incomes, rising stock portfolios, home equity and stronger balance sheets. They can keep spending even as prices, borrowing costs and insurance bills stay elevated.
Conversely, the lower and middle-income consumers are in a different position.
They spend a larger share of income on essentials such as food, rent, utilities, gasoline and debt payments. Even when inflation slows, those households are still dealing with the cumulative jump in prices from the past several years.
The source of spending has become incredibly concentrated, which means if wealthy households pullback, the economy’s apparent resilience could weaken quickly.
It’s important to note that Zandi’s tone has become a lot sharper over the past year.
Earlier, his view was that the economy remained resilient but fragile, supported by GDP growth, AI investment and high-end consumer spending. However, its potential was still weighed down by slower growth, policy uncertainty and a cooling labor market.
By early 2026, his warnings had become more direct. He described an economy still growing, but with weak job creation and rising unemployment risk. He also framed AI as both a growth driver and a potential threat, especially if it fuels job losses while inflation keeps the Fed constrained.
According to a recent Business Insider report, he said that,
“The economy is growing, but at a rate below its potential, so the situation is tenuous.”
Speaking of the Fed, I recently covered Bank of America, pointing to three rate hikes instead of interest rate cuts this year, a stunning turnaround.
The key numbers behind America’s uneven recovery
- According to Zandi, the top 20% of earners account for nearly 60% of consumer spending, showing how headline spending can mask things even when most households feel squeezed.
- According to the Census Bureau, May retail sales rose 0.9%, a sign demand has not broken but also a reminder that investors need to ask who is doing the spending.
- According to the BLS, May CPI rose 4.2% from a year earlier, keeping pressure on the Fed and delaying relief for borrowers, consumers and rate-sensitive stocks.
- According to the BLS, payrolls increased by 172,000 in May as unemployment held at 4.3%, pointing to a stable but cooling labor market.
- According to the BEA, first-quarter GDP grew at a 1.6% annual rate, showing expansion but not enough strength to prove the recovery is broadening.
What this means for everyday Americans and investors
For everyday Americans, Zandi’s warning explains why the economy can look resilient in official data while still feeling punishing at home.
Naturally, if higher-income households are carrying most of the spending, lower- and middle-income consumers remain more exposed to rent, groceries, insurance, credit-card rates and auto-loan payments.
For investors, stocks tied to affluent spending, premium travel, luxury goods, high-end services and wealth management could hold up better than companies dependent on lower-income shoppers. Moreover, discount retailers and defensive sectors may also stay relevant if more households trade down.
The bond market angle is different.
Sticky inflation and uneven consumer pressure make the Fed’s path harder, reducing confidence in fast rate cuts. That is critical for growth stocks, tech and AI names because higher-for-longer rates can pressure valuations, especially for companies priced on future earnings.
Related: Bank of America revamps interest-rate forecast for rest of 2026
