Tyler Schipper, an economics professor at the University of St. Thomas College of Arts and Sciences, recently discussed with CNBC the concept of a âKâ-shaped economic recovery in the aftermath of the COVID-19 pandemic. This recovery has highlighted a stark contrast between different income brackets in America.
For some consumers, like those affiliated with American Express, the trend has been to open high-fee credit cards and spend on luxury items such as travel. Conversely, lending firm Upstart has observed a rise in interest for microloans as financially struggling Americans attempt to make ends meet. This divide emphasizes the disparity between higher-income individuals and those who are struggling financially.
Tyler Schipper noted that lower-income Americans were already facing financial challenges prior to the pandemic. While they had made progress during a worker shortage period, the economic downturn caused by the pandemic has brought about renewed difficulties for this group. The return to a state of financial struggle has become more of a norm for many lower-income workers.
Schipper pointed out that the behavior of seeking out the best prices or trading down can be seen as a return to normalcy for lower-income individuals. This shift towards more budget-conscious spending could be viewed as positive news for the Federal Reserve, as it indicates that previous interest rate increases may be having the desired effect of tightening the economy. However, this also highlights how deeply entrenched poverty is in America and how difficult it is for some groups to recover from economic downturns without significant support from policymakers and other stakeholders.
