NY Fed: K-Shaped Economy in a 'Freeze' Since 2023
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- NY Federal Reserve researchers Rajashri Chakrabarti, Thu Pham, Beck Pierce, and Maxim L. Pinkovskiy found that since late 2022, low-income households have consistently faced higher inflation than middle- and high-income households.
- Oil shocks and Strait of Hormuz disruptions pushed inflation to its highest rate since May 2024 in March, with gas prices up 18.9% year-over-year — the largest jump since August 2022.
- Lower-income households spend a larger share of their budget on gas (3.5% for the bottom 10% vs. 1.9% for the top 10% in 2024 BLS data), amplifying the impact of fuel price spikes on already-stretched budgets.
- The S&P 500 has nearly doubled since the start of 2023, but those gains flow disproportionately to higher earners who hold larger shares of financial assets.
- Real net worth for the top 1% of earners has grown 30% since 2023, while the bottom 20% has seen just 13% growth — a gap the Fed attributes to uneven financial asset gains including equity, bonds, and crypto.
- The K-shape is in a 'holding pattern,' not worsening in 2026 but not closing either: a Bank of America Institute report notes higher-income consumers can cushion fuel costs through wage growth or credit, options the lowest earners don't have.
Why it matters: The Fed's own researchers are now putting hard numbers behind what lower-income workers feel: with the bottom 20% gaining just 13% in real net worth since 2023 versus 30% for the top 1%, and the bottom decile spending nearly twice the share of its budget on gasoline, the divide is structural rather than cyclical. The report's 'K freeze' framing — a divide that isn't widening but isn't closing — signals that the post-pandemic lift for lowest earners has fully unwound.
