In an interview with CNBC, economics professor Tyler Schipper from the University of St. Thomas College of Arts and Sciences discussed the “K”-shaped economic recovery following the COVID-19 pandemic in America. This recovery is marked by a significant difference in outcomes for different income brackets in the country.

One example of this divergence can be seen in American Express customers, who are opening high-fee credit cards and indulging in luxuries like travel, while consumers turning to lending firm Upstart are showing a strong interest in microloans as they struggle financially. This illustrates the growing trend of income inequality in the United States, where higher-income individuals benefit the most while lower-income Americans face financial hardships.

Before the pandemic hit, lower-income Americans were already facing financial pressures, according to Schipper. While they had made some progress due to the labor shortage, the current economic downturn has caused them to fall back into financial distress. This return to struggling for lower-income workers is seen as a normalization of their economic circumstances.

Schipper noted that the behavior of lower-income Americans seeking out the best prices and trading down can be seen as a positive sign for the Federal Reserve. This shows that previous interest rate hikes have had the desired effect of tightening the economy, which is important for stabilizing economic conditions.