Bank of America Says K-Shaped Economy Fades as Lower-Income Spending Rises and Oil Falls to $79
Updated
Updated · Fortune · Jun 19
Bank of America Says K-Shaped Economy Fades as Lower-Income Spending Rises and Oil Falls to $79
2 articles · Updated · Fortune · Jun 19
Summary
Bank of America said card data from the past week show lower-income households increasing spending on goods and services excluding gas, sharply narrowing the gap with higher earners.
The bank linked the improvement partly to easing economic fears after oil slid to $79 a barrel from above $113 as Middle East tensions cooled, potentially relieving pressure on gas, airfares and groceries.
After-tax wage growth for lower- and middle-income households has also picked up, though economist Shruti Mishra said it is too early to tell whether the shift is durable or partly driven by tax relief.
Labor data add support: unemployment held at 4.3% and ADP said private employers added 122,000 jobs in May, with broader hiring that could extend into blue-collar sectors.
New York Fed wage data suggest mining and construction remain unusually strong, reinforcing hopes that a long-running split between higher- and lower-income consumers may be starting to fade.
As lower-income wages rise, will persistent inflation and new tariffs erase these gains before they are truly felt?
How will America balance the AI boom's job creation with its steep environmental and public health costs?
With recovery tied to a fragile U.S.-Iran deal, what is the backup plan if Middle East tensions reignite?
Oil, Inflation, and the K-Shaped Economy: Assessing the 2026 U.S. Economic Divide and Policy Paths Forward
Overview
The report shows how rising oil prices trigger a chain reaction across the economy. When oil prices go up, some industries switch to natural gas, which increases its demand and pushes up overall energy costs. These higher energy prices lead to more inflation, squeezing middle- and lower-income households as real wages fall. Persistent inflation then shapes monetary policy, making it less likely for the Federal Reserve to cut interest rates. This cycle highlights how energy market shifts can ripple through the economy, affecting household finances, policy decisions, and the broader economic outlook.