The Economy Is at Record Highs. So Why Does Everyone Feel Broke?

The stock market is near record highs, unemployment is historically low, GDP is growing.

By every traditional measure, the US economy, on paper, seems to be doing fine.

And yet in May 2026, the University of Michigan's Consumer Sentiment Index fell to 44.8 — This is the lowest reading ever recorded since the survey began in 1952. It is even lower than during the 2008 financial crisis. Lower than during COVID. Lower than any point in the last 74 years.

So, on paper things are looking good, why is that not how people feel?

Meet the E-Shaped Economy

For years, economists used the term "K-shaped economy" to describe what happened after COVID — the wealthy recovered fast and kept going up, while lower-income Americans fell further behind. Two paths, diverging like the two lines of a K.

In early 2026, Bank of America economists said that model no longer captures what's happening. They introduced a new term: the E-shaped economy.

The E has three lines, not two. Three separate economic realities running in parallel:

• Top earners: wage growth of 5.6% — thriving, spending freely, feeling confident
• Middle earners (52% of Americans): wage growth of just 2% — treading water, not falling but not gaining either
• Lower earners: wage growth of 1% — falling behind in real terms once inflation is factored in

The gap between top and middle wage growth is now the widest Bank of America has recorded since they started tracking this data in 2015.

The Rich Seem to be Carrying the Economy

Here's where it gets striking.

According to Moody's Analytics, the top 10% of earners now account for 49.2% of all consumer spending in the US — the highest share recorded since tracking began in 1989. The gap has only widened since — and it shows no sign of narrowing.

The top 10% also own nearly 87% of all stock market wealth, according to Federal Reserve data. So when the S&P 500 hits new highs, that's largely a story about a small slice of the population getting wealthier — while the majority of Americans watch the number on the news and feel nothing in their bank account.

This is why the economy can look healthy on paper while consumer sentiment hits historic lows. The metrics are being carried by a small group of people.

57% Cite Prices as Their Biggest Problem

It's not abstract for most people. The University of Michigan survey found that 57% of consumers spontaneously cited high prices as the main thing eroding their personal finances — without even being prompted. The declines were steepest among lower-income consumers and those without college degrees.

Half of Americans said in early 2026 that their financial goals for the year had already been derailed — not by bad decisions, but by cost of living. And among people who set financial goals in 2025, 81% said they didn't stick to them.

The numbers back them up. According to USDA and BLS data, grocery prices are roughly 25% higher today than they were before the pandemic — meaning a $100 grocery run in 2019 now costs around $125 for the same items. For the middle tier of the E-shaped economy, where wage growth is running at 2%, prices rising 25% over a few years is a math problem that no stock market record can solve.

The economy grew, but that is not what most people feel like.

The Middle Class Math

The middle class is often described as "shrinking." That's technically true — it's dropped from 61% of Americans in 1971 to around 51% as of the most recent Pew data. But the full picture is more complicated.

Most of the shrinkage happened upward. The upper-middle class — households earning roughly $133,000 to $400,000 for a family of three — tripled in size from 10% in 1979 to 31% in 2024, according to the American Enterprise Institute. For the first time, more American families sit above the traditional middle-class threshold than below it.

But that headline misses the people who moved down. And it misses the people stuck in the middle tier of the E — earning more on paper, but spending more on housing, healthcare, and food at a pace that leaves nothing left over.

Making $80,000 a year in 2026 feels different than it did in 2006. The number is bigger. The life it buys is smaller.

What the E Actually Means

The E-shaped economy isn't a political statement. It's a data observation — and it explains a lot of things that otherwise seem contradictory.

It explains why record stock markets coexist with record-low consumer confidence. It explains why "the economy is strong" and "I can't afford anything" can both be true at the same time. It explains the rise of financial nihilism, side hustles as a survival strategy, and the growing sense that the traditional rules of money don't apply the way they used to.

Currently the economy is doing well, just not for everyone in it.