The most common refrain so far this corporate earnings season is that the U.S. economy is increasingly divided between wealthy consumers and everyone else.
While many Americans tighten their belts amid rising costs and a weakening job market, a fortunate few are still spending freely, insulated by a financial cushion of stock market gains and years of rising home values.
The split is having an outsize impact on consumer-facing companies, but those effects aren’t being felt evenly across brands.
McDonald’s CEO Chris Kempczinski said the “two-tier economy” was a major factor in the fast-food giant’s decision to revive its “Extra Value Meal” combos last month.
“Traffic for lower-income consumers is down double digits,” Kempczinski told CNBC in September. “We needed to step in.”
Coca-Cola’s chief operating officer, Henrique Braun, said the company continued to see “divergency in spending between the income groups” last quarter. “The pressure on middle- and low-end-income consumers is still there.”
The widening K
The U.S. economy has been turning more “K”-shaped for decades, with the high-earner cohort doing better and better while others fall further down the economic ladder.
In 1989, the top 10% of U.S. wealth holders already controlled about 61% of the total wealth in the economy, according to Federal Reserve data. Today, it’s about 67%.
While inequality has grown throughout this period, its rate of growth has ebbed and risen.
For example, signs of bifurcation blared louder during the first six months of the Covid-19 pandemic. As the stock market began to recover its early losses, huge parts of the economy remained shut down.
But these signs receded somewhat in the following years, as government stimulus checks and loan-payment forbearance helped boost the fortunes of lower-income households.
Five years on, worrying signals of inequality are roaring back into view. This time, the cracks appear to be hardening.
Average worker pay only barely outpaces inflation — which remains above the Federal Reserve’s 2% target. But the pace of that wage growth is higher for salaried workers than for those paid by the hour, according to data from the Atlanta Federal Reserve.
For nearly all workers, the employment outlook is uncertain, with mass layoffs in the news and AI doing work that people used to do.
“While upper-income consumers are doing great and benefiting from the wealth effect of owning their home and having a stock portfolio, anyone renting or who doesn’t own stocks is not,” said Peter Boockvar, chief investment officer at OnePoint BFG Wealth Partners. “At best, their wages are only keeping up. They’re doing a lot of running in place.”
Two kinds of consumers
The same K shape that characterizes widening income inequality is reflected in consumer spending.
As a result, the volume of companies reporting evidence of a two-tiered economy among their customers surged in recent weeks.
Chipotle CEO Scott Boatwright said the restaurant chain had seen the divide among its customers deepen just in the past few months.
“Earlier this year, as consumer sentiment declined sharply, we saw a broad-based pullback in frequency [of restaurant visits] across all income” levels, he said on Chipotle’s earnings call Wednesday.
“Since then, the gap has widened, with low- to middle-income guests further reducing frequency” of their visits, he said.
Younger adults ages 25 to 35 are being particularly hard hit, said Boatwright. “This group is facing several headwinds, including unemployment, increased student loan repayment and slower real wage growth.”
It’s not just fast-casual dining that’s feeling the loss of lower-income customers.
On Tuesday, the CEO of snack giant Mondelez said the company saw weakness in its cookie and cracker segment last quarter partly due to “value-seeking consumers increasingly turning to discounters and club stores.”
Yet a decline in consumers willing to pay for name-brand snacks like Oreos and Chips Ahoy is only part of the challenge, said chief executive Dirk Van de Put.
“Higher-income consumers increasingly are choosing premium and better-for-you products,” he said, a category that excludes many of Mondelez’s biggest sellers.
The twin issues, he said, were starting to affect the company’s bottom line.
Washington is watching
The growing inequality between a small percentage of consumers and everyone else has caught the attention of the Federal Reserve.
Fed Chair Jerome Powell said he had noticed the surge in consumer-oriented companies reporting split-screen spending patterns.
They “are saying there is a bifurcated economy there, and that consumers at the lower end are struggling and buying less and shifting to lower-cost products,” Powell said Wednesday.
“But at the top, people are spending, at the higher income and wealth,” said Powell. “So, we think there is something there.”
President Donald Trump’s tariffs are part of the equation, too, Fed governor Christopher Waller told CNBC.
Rising prices on a subset of consumer goods hit with tariffs has contributed to a “two-tier” spending scenario where higher-income shoppers had become virtually “price insensitive,” he said.
Meanwhile, lower-income customers will simply “walk out the door” if they see higher prices, Waller said.
The wealthy keep shopping
As lower-income consumers pull back, spending by the top half of the K is increasingly helping to keep the economy humming.
The top 10% of earners account for about half of all consumer spending, according to recent estimates from Moody’s Analytics.
This month, American Express reported that spending by its typically higher-income card holders accelerated by 8%. The number of newly opened “Platinum Card” accounts doubled, partly due to a recent “refresh” of the card’s perks.
Automakers and airlines have likewise expanded their higher-end offerings — with stellar results.
Delta Air Lines now expects sales of premium seats like Comfort-Plus to exceed sales of main cabin seats for the first time, starting next year.
“Premium products used to be loss leaders, and now they’re the highest-margin products,” airline President Glen Hauenstein said on the company’s recent earnings call.
Likewise, Ford and GM both reported booming sales for their largest and most expensive SUVs.
“Today’s auto market is being driven by wealthier households who have access to capital, good loan rates and are propping up the higher end of the market,” Erin Keating, an executive analyst at Cox Automotive, wrote in September.
Beyond consumer spending
Simply looking at consumer behavior may not capture the full financial picture of American households, said Chris Wheat, managing director at JPMorganChase & Co. and president of the the bank’s research institute.
“Just looking at spending, do you really have the full picture of ‘How K-shaped is the K?’” he said. “There are other ways people might be taking advantage of some of the economic growth we’ve been experiencing.”
For example, there are signs that more lower-income households are investing in the stock market than a decade ago.
As of May 2025, the share of people with below-median incomes transferring funds to investment accounts was about five times higher than the average seen between 2010 and 2015, according to data from the JPMorganChase Institute.
Meanwhile, there is evidence that the K may be flattening for the rich.
Upper-income households face new financial pressures today in a rapidly changing labor market that’s witnessing an unprecedented slowdown in the growth of traditionally higher-paying white-collar jobs.
Credit delinquencies among individuals making $150,000 or more have doubled since 2023, according to credit modeler VantageScore.
During the same period, delinquencies for people making between $45,000 and $150,000 rose 58%, and just 17% for borrowers earning less than $45,000.
The key distinction is annual income versus total wealth, said Rikard Bandebo, VantageScore’s chief economist.
Today, the share of jobs being created that are considered high-income has fallen to its lowest level since at least 2015, he said.
This suggests that even a well-paying job is no longer a reliable source of financial stability compared with owning assets like stocks and real estate.
“We are seeing more people in the U.S. economy struggling to make ends meet — and even seeing people in the higher-income range struggling,” said Bandebo.
“It’s not as simple as income being the differentiator here — it’s wealth being more the driver,” he said.
