In 2025, the U.S. economy continued to demonstrate a phenomenon often called a K-shaped economy: wealthier households spend more and raise their incomes faster, while middle- and lower-income groups face pressure from rising living costs. And this is a trend that appears unlikely to disappear in 2026.
In Virginia Beach, Marcus Satterfield has a stable job and a decent income, but he has never had to worry about providing for his daughter – especially during holiday gatherings. This year, holiday gatherings were canceled, the Christmas budget was cut by almost half, and credit cards are maxed out from months of futile efforts to keep up with rising costs.
In Surprise, Arizona, retiree Helen Nerviano struggles to make sure her fixed income lasts as it should. She lives with an 80-year-old husband who requires around-the-clock care due to the late stage of Parkinson’s disease. The cost of everyday goods and services remains higher than the average, and unexpected expenses – especially hospitalizations and medical bills – have become much more challenging.
The New Year usually brings opportunities for new financial goals, but for many Americans, economic pressure remains significant, and their financial plans for 2026 have fallen off course.
“I was thinking about driving for Uber on the side, just to be able to get the extra income and so I can buy more groceries,” said the 38-year-old Satterfield, acknowledging that such a step would mean sacrificing time with his daughter.
“I don’t know of any other way out,” Nerviano added, explaining that she hopes to find a job in 2026 and to consider the lottery or bankruptcy as options for getting out of the situation.
On paper, the U.S. economy looks not worse than normal. In the third quarter, growth stood at 4.3%, partly thanks to strong consumer spending. Interest rates are easing, inflation does not exceed 3% this year, the unemployment rate fluctuates between 4% and 5%, wages are rising, and household debt is supported by overall levels. Yet for many Americans this does not look like a boom time.
Growth appears uneven. The Fed’s rate cuts have not fully reduced borrowing costs. Inflation is rising faster than a normal pace, and most industries have to seek employment for months. Wage growth is slowing, delinquency rates on loans are rising, and most stock-market gains enrich the wealthiest.
“Call it what you will – a K-shaped, two-lane, or windchill economy – but Americans haven’t felt this poorly about present economic conditions since early 2021, when the country was still in the shadow of a worldwide pandemic.”
The more well-to-do households are powering spending; they’ve been able to deal with the higher inflation over the last couple of years.
– Justin Beagle
Total household debt reached a record high – $18.59 trillion at the start of the year, according to the Federal Reserve Bank of New York. However, these figures do not reveal the full picture, as the level of indebtedness depends on many factors such as population growth and the growth of digital commerce, and does not reflect how people manage this debt.
The overall debt-service ratio, reflecting the share of debt from disposable income, after rebounding from pre-pandemic levels, stands slightly below pre-pandemic levels. Yet there are significant “pockets” of financial pain: in the third quarter the share of credit card balances that became seriously delinquent rose to 12.41% – the highest in more than 14 years, and consumer bankruptcies – at five-year highs.
But they’re leveling off near an all-time high,
– Justin Beagle
Delinquency of loans could trigger a chain reaction: lower credit scores, limited ability to buy a home or take out a loan, wage garnishments, and reduced federal benefits – which could lead to lower consumer spending or higher use of credit cards.
Compared with recent years, the cost of living is rising – utilities, insurance, housing, food – and social networks are shrinking. Although prices aren’t rising as fast as after the pandemic, they are rising faster than normal due to broad tariffs imposed by the administration of the previous president.
Satterfield feels this in the example of Christmas shopping for his daughter, the monthly rent, and a high electricity bill: “I’m used to my electricity bill being $130 to $150, and I just got one this month that was $252.” He adds: “Essentially, $100 more than previous years. And that extra $100 could have gone to providing more groceries or household items for me and my daughter, or just a nest egg to save for emergencies and things like that.”
I’m used to my electricity bill being $130 to $150, and I just got one this month that was $252.
– Marcus Satterfield
When Helen Nerviano retired at 62, her monthly costs for health insurance were about $170. She recalls: “Had no clue what was on the horizon – the prices of food, insurance, clothing, and I adopted my granddaughter. It was just like a storm of events that I wasn’t planning on when I retired.”
“It’s just a constant, never-ending struggle,” she adds. “I go to the grocery store, I put things in my cart; by the time I get to the checkout, I turn back around and start taking things out, because I tell myself, ‘You can’t afford this.’”
It’s just a constant, never-ending struggle,
– Helen Nerviano
I go to the grocery store, I put things in my cart; by the time I get to the checkout, I turn back around and start taking things out, because I tell myself, ‘You can’t afford this.’
– Helen Nerviano
It’s perpetual. There’s no end in sight,
– Helen Nerviano
Despite pessimistic generalizations, Satterfield and Nerviano and many other Americans remain hopeful about certain prospects for 2026. If reviews of the latest consumer-focused company reports remain a clue, prices of certain goods may decline. As Justin Beagle says, “The more well-to-do households are powering spending; they’ve been able to deal with the higher inflation over the last couple of years.”
An increasing number of consumer related companies are cutting prices to try to stimulate demand: You’re seeing it with the homebuilders. You’re seeing it with the [consumer packaged goods] companies.
– Justin Beagle
The reasons why they’re cutting is because people cannot afford their products.
– Justin Beagle
Some analysts believe that price cuts could ease life a bit, but expected income growth may slow significantly due to further weakening of the labor market. Relief could come from lowering Federal Reserve rates and a new package of tax incentives tied to the “One Big Beautiful Bill” and expansion of the child tax credit and social security. Also tariff reductions could significantly boost business confidence and ease inflationary pressure.
“So that ‘no tax on tips,’ ‘no tax on overtime,’ and increases in Social Security tax deductions plus expansion of the child tax credit – all this could help middle- and lower-middle-income people ride out any storm that comes,” Beagle noted. “It won’t replace jobs if unemployment spikes, but it will help.”
The biggest stimulus, according to experts, could come from tariff reductions: negotiations continue, increasing the likelihood of actual tariff cuts. If the administration truly eases tariffs, this would be a major boost for the economy and finally relieve pressure on business and reduce inflationary impact.
Outlook for 2026
All told, despite rising costs and overall strain, the U.S. economy presents a mixed picture: on the one hand – notable growth in some sectors and solid consumer demand; on the other – rising debt, more delinquencies, and mounting pressure on the middle and lower classes. Projections for 2026 depend on labor-market dynamics, price stability, and policy in monetary and fiscal realms.
Experts note: despite different trends, optimism will persist among those with steady demand and the ability to adapt to changes. But the bottom line is simple: the economy continues to cut through layers of people, and future policy must reduce inequality and ease financial pressure on those who suffer most from the rising cost of living.