The so-called K-shaped economy is now linked to “a remarkable increase in food insecurity,” according to a new blog post by the Federal Reserve Bank of New York.
Large segments of the population are facing high levels of financial strain, according to a post published on Wednesday, based on data from the Survey of Consumer Expectations.
Among this group, lower- and middle-income households have been hardest hit by prolonged inflation. A greater share of their spending is allocated to goods that have seen prices soar since the pandemic, such as housing, food and utilities, causing them to cut back on groceries, the researchers found.
A higher cost of living, combined with cuts to the Supplemental Nutrition Assistance Program, or SNAP, “have led to renewed concerns about food insecurity among those at the bottom of the K-shape,” the New York Fed researchers wrote.
Households have struggled with the expiration of pandemic-era aid, including expanded SNAP benefits, formerly known as food stamps, researchers said. More recently, President Donald Trump’s “big beautiful bill” tightened the work requirements for SNAP benefits.
Nearly 14% of American households were food insecure in 2024, according to the most recent report by the U.S. Department of Agriculture.
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The New York Fed said that food insecurity is likely linked to why Americans now feel worse off even as the economy overall has expanded at a solid pace since the Covid pandemic.
After a series of recent financial shocks, consumer sentiment has been on a downward trend. The University of Michigan Surveys of Consumers, a closely watched bellwether, hit all-time lows in May.
“Consumers overall have been pessimistic about their own financial circumstances and outlook,” the New York Fed researchers wrote.
But there is also “significant” variation across households, the New York Fed researchers found, “supporting the notion of a ‘K-shaped’ economy.”
The rise of the K-shape
Stock market rallies and appreciating home values tend to buoy high-earner households, who disproportionately own such assets, and leave lower-income households behind.
The pandemic turbocharged those dynamics — as stock and housing wealth soared while lower-income households struggled to keep up with rising prices — giving rise to the concept of a K-shaped economy.
Now, gasoline prices are dragging down the lower prong of the K, too. The national average gasoline price reached $4.46 a gallon as of Wednesday, up about 40% from a year ago, according to AAA.
“The top of the K-shape reflects high and growing levels of net wealth,” the New York Fed researchers wrote, while “the bottom of the K-shape represents a significant share of the middle- and lower-income population experiencing elevated levels of economic uncertainty and financial hardship.”
The central bank’s monthly Survey of Consumer Expectations, released May 7, also found that about one-third of households expect to be in a worse financial situation in one year from now.
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