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Federal Reserve Data Shows Diverging Economic Outcomes Across US Income Groups

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K-Shaped Recovery Deepens: New York Fed Data Shows Widening Gap Between Rich and Poor in Post-Pandemic Economy

Since late 2022, low-income households have experienced higher inflation rates than middle- and high-income households, driven by rising costs for essentials like housing, groceries, and utilities.

A series of analyses from the Federal Reserve Bank of New York has documented a sustained divergence in economic outcomes for US households based on income and education levels. The data, published between 2024 and 2026, describes a pattern referred to as a "K-shaped" recovery, in which higher-income households have experienced faster wealth growth and spending increases compared to lower-income households, who have faced higher relative inflation and slower gains.

Key Indicators of Divergence

Inflation Disparities

Low-income households are being hit hardest by inflation, as their budgets are dominated by essential goods and services. These categories have seen significant price increases since the pandemic.

Gas prices in March 2024 rose 18.9% year-over-year, the largest increase since August 2022. In March 2026, New York Fed researchers reported a "K-shaped consumption pattern" in gasoline spending:

  • Households earning less than $40,000 per year increased nominal gas spending by 12% in March 2026, while reducing real consumption by 7%.
  • Households earning more than $125,000 per year increased nominal gas spending by 19%, with only a 1% reduction in real consumption.

Spending by Income Group

Data from the New York Fed, tracking 200,000 consumers via the analytics firm Numerator, shows the following inflation-adjusted spending changes since 2023:

  • Households with incomes of $125,000 and higher: increased spending by 2.3%
  • Households earning between $40,000 and $125,000: increased spending by 1.6%
  • Households earning below $40,000: increased spending by just 0.9%

These figures reflect spending on goods, excluding automobiles, and do not account for spending on services such as travel, restaurants, and entertainment.

Wealth and Asset Growth

The S&P 500 has nearly doubled since early 2023, disproportionately benefiting higher-income households who hold more financial assets. Real net worth growth from 2023 to the reporting period reveals a stark divide:

  • 30% for the top 1% of earners
  • 13% for the bottom 20% of earners

Education-Based Divergence

A division in spending patterns is also observed when comparing households by education level:

  • In 2023 and most of 2024, inflation-adjusted spending by households without a college degree fell below its January 2023 level. It regained that level only in November 2024.
  • Households with a college graduate had increased their spending by 4% over the same period.

College-educated households continued to increase spending at a rapid pace in 2025, even as hiring slowed and job cuts occurred in white-collar industries including high tech, government, and marketing.

Broader Context and Related Research

Timing of Relative Gains

The New York Fed report notes that lower-income households fared better economically in 2021 and 2022, a period characterized by active hiring and government stimulus payments. Beginning in early 2023, hiring slowed and stock market gains became a primary driver of increased spending among wealthier households.

Previous Research

The findings align with a November 2024 paper by the Federal Reserve Bank of Dallas. The Dallas Fed found:

  • Modest increases in consumption and income inequality over the past three decades
  • The wealthiest one-fifth of Americans accounted for approximately 54% of earnings from 1990-1999, rising to 60% for the 2020-2025 period
  • The proportion of spending by the wealthiest one-fifth increased from 53% to 57% between these same two periods

Authors and Methodology

The New York Fed research was published in a blog post authored by Rajashri Chakrabarti, Thu Pham, Beck Pierce, and Maxim Pinkovskiy. The data is part of the New York Fed's economic heterogeneity indicators, which track variations in the economy by geographic region, demographic group, and income level. The New York Fed reported that the Numerator-based spending data closely tracks monthly retail sales released by the government.