New data from the Federal Reserve Bank of New York exposes a growing divide in spending behavior across American households, primarily segmented by income and educational attainment. The statistics indicate that over the past three years, individuals with higher incomes and college degrees have accelerated their expenditure significantly more than other consumers, thereby amplifying existing economic inequalities.
The report, released Tuesday, highlights that by the final quarter of last year, inflationary pressures disproportionately impacted lower-income and rural households compared to their wealthier counterparts. The consumption figures analyzed focus exclusively on goods spending, deliberately excluding automotive purchases, and do not account for ancillary spending patterns typically associated with more affluent groups, such as travel, dining, and entertainment.
This data lends credence to a 'K-shaped' economic pattern, where the upper economic strata contribute a larger share of overall consumption—an essential driver of the economy—while the lower-income segments encounter disproportionately limited gains. This unequal spending trajectory is compounded by higher inflation rates endured by less affluent households, a consequence of their higher expenditure shares on goods experiencing steep price increases since the onset of the pandemic, notably housing, groceries, and utilities.
Specifically, households earning $125,000 or more have augmented their inflation-adjusted spending by 2.3% since 2023. In contrast, middle-income households with earnings between $40,000 and $125,000 have increased spending by 1.6%, while those earning less than $40,000 have celebrated a modest 0.9% rise in expenditure.
The data underpinning these findings are part of the New York Fed’s economic heterogeneity indicators, a collection of datasets designed to illuminate regional, demographic, and income-based disparities obscured by overall national averages.
This expenditure information is drawn from behaviors tracked in a consumer panel of 200,000 individuals maintained by the analytics company Numerator. The New York Fed confirms this dataset provides a highly accurate representation of monthly retail sales as officially reported by the government.
Examining the trends since the pandemic reveals a nuanced progression. Initially, in 2021 and 2022, lower-income households encountered improved economic conditions due to robust hiring incentives and government stimulus payments. However, starting in early 2023, hiring decelerated while the stock market surged, disproportionately benefiting wealthier households through enhanced wealth and spending capacity.
Educational background further differentiates spending behavior. Inflation-adjusted expenditures by households without college degrees declined below their January 2023 baseline and only matched it by November 2024. Conversely, college-educated households had increased their spending by 4% in the same period. Remarkably, even as widespread hiring slowed and layoffs impacted sectors including technology, government, and marketing throughout 2025, college-educated households maintained rapid spending growth.
Rajashri Chakrabarti, an economic research advisor at the New York Fed, alongside colleagues, characterize this phenomenon as emblematic of a 'K-shaped economy,' where divergent economic recoveries persist along education and income lines.
These findings align with recent research, such as an analysis from the Federal Reserve Bank of Dallas. That report noted a gradual rise in consumption and income inequality since the 1990s, with the wealthiest top fifth of Americans increasing their share of earnings from 54% in the 1990-99 decade to 60% between 2020 and 2025. Their spending proportion similarly grew, from 53% to 57% across these intervals.