From corporate executives to Wall Street analysts to Federal Reserve officials, references to the “K-shaped economy” are rapidly proliferating.

So what does it mean? Simply put, the upper part of the K refers to higher-income Americans seeing their incomes and wealth rise while the bottom part points to lower-income households struggling with weaker income gains and steep prices.

A big reason the term is popping up so often is that it helps explain an unusually muddy and convoluted period for the U.S. economy. Growth appears solid, yet hiring is sluggish and the unemployment rate has ticked up.

Overall consumer spending is still rising, but Americans are less confident. AI-related data center construction is soaring while factories are laying off workers and home sales are weak. And the stock market still hovers near record highs even as wage growth is slowing.

It also captures ongoing concerns around affordability, which is much more of a concern for middle and lower-income households. Persistent inflation has received renewed political attention after voter anger over costly rents, groceries, and imported goods helped Democrats win several high-profile elections last month.

Atwater actually popularized the label “K-shaped economy” during the pandemic after seeing it crop up on social media. Back then, it captured the differing fortunes between white-collar professionals still employed and working at home while stock prices rose, even as massive layoffs at factories, restaurants, and entertainment venues pushed unemployment to nearly 15%.

Inequality was somewhat reversed in the aftermath of the pandemic, when businesses offered large raises for blue collar workers as the economy reopened and demand surged. Many companies — restaurants, hotels, entertainment venues — were caught short-staffed and sought to rapidly increase hiring. Lower-income workers saw larger pay gains than higher-paid ones.

In 2023 and 2024, inflation-adjusted wages for the bottom quarter of workers rose at a yearly rate of 3.9%, outpacing the 3.1% gains for the top quarter, according to research by the Federal Reserve Bank of Minneapolis.

This year, however, inflation-adjusted wage growth has weakened as hiring has fallen, with the drop more pronounced for lower-income Americans. Their wage growth has plunged to an annual rate of just 1.5%, the Minneapolis Fed found, below that of the highest earning quarter of workers at 2.4%.

Slower income growth has left many lower-income workers less able to spend. Based on data from its credit card and debit card customers, the Bank of America Institute found that spending among higher-income households rose 2.7% in October compared with a year ago, while lower-income groups lagged at just 0.7%.

Corporate executives are paying attention and in some cases explicitly adjusting their businesses to account for it. They are seeking ways to sell more high-priced items to the wealthy while also reducing package sizes and taking other steps to target struggling consumers.