The U.S. economy depends on the rich. That could hurt the labor market

Spending is being held up by the wealthy, while consumption from middle and lower income groups continues to fade.

Why it matters: The tale of two economies, also called a K-shaped recovery, is taking shape before tariffs have even taken effect, which could further pressure lower-income spenders, and potentially, the labor market.

Catch up quick: The top 20% of earners now make up over half of consumer spending, according to Moody's. • Meantime, spending from middle and lower income consumers has flatlined to kick off 2025, roughly in line with inflation. • Consumer spending makes up two-thirds of GDP, meaning that it largely determines whether our economy is growing or slowing. • But the rich are doing most of the spending, making consumption overall look resilient, when in realit