Goldman Sachs economists have downplayed concerns over a K-shaped economic recovery in the U.S., asserting that the divergence between high-income and low-income households has been exaggerated so far. However, they warn that by 2026, the economic divide is expected to become more pronounced, particularly impacting lower-income Americans.

According to Goldman Sachs’ chief U.S. economist David Mericle, inflation and real income growth have been relatively uniform across income levels over the past year. However, weak spending in stores catering to low-income households has been attributed to shifts in immigration policy rather than worsening economic conditions for these households. This contrasts with other economists, such as Moody’s Mark Zandi, who noted that half of U.S. states were effectively in a recession last year, with low-income consumers struggling to stay afloat.

Housing Crisis Escalates Divergence

J.P. Morgan strategist Jack Manley highlighted housing affordability as a key driver of economic disparity. With housing shortages forcing more Americans into the rental market, low-income households are increasingly priced out of homeownership—a cornerstone of the American Dream. Shelter inflation continues to be a significant factor driving overall inflationary pressures.

Outlook for 2026

Goldman Sachs predicts that consumer spending will weaken in the coming months, with retail sales expected to decline by 1%. Lower-income households, disproportionately affected by rising gasoline prices and cuts to Medicaid and SNAP benefits, will likely face greater economic challenges. Meanwhile, middle and higher-income households are expected to benefit from stronger income growth and fiscal measures. By 2026, these disparities are projected to become more pronounced, creating a clearer K-shaped economic reality.