# K-Shaped Economy: Middle Class Squeeze and Retail Strategy

**Podcast:** Marketplace
**Published:** 2026-02-13

## Transcript

There's a growing gap between the have and have nots in our economy, and that's changing the way we move through it.
From American Public Media, this is Marketplace.
In New York, I'm Kristen Schwab in for Kyris Doll.
It's Thursday, February 12th.
Good to be here with you.
The K-shaped economy.
You've heard us use the phrase again and again and again to describe so many corners of the economy.
But it's looking like we might need a different letter to describe the financial divide.
Bank of America released a new report that confirms yes, there is a growing gap between high and low-income households.
But a newer and notable trend is there are increasing signs that life is getting more difficult for the middle class.
Marketplace's Carla Javier explains.
David Tinsley at the Bank of America Institute is starting to notice that a simple K-shape doesn't totally summarize the situation anymore.
According to January customer data, middle-income household spending growth was just 1%, compared to 2.5% for high-income households.
So if you like, there's a K-shape opening up between higher income households and middle-income households as well.
A K within a K.
And if their spending continues to soften, Tinsley says, the economy would struggle to maintain overall consumer momentum.
At Big Chalk Analytics, which works with retailers, restaurants, and companies that make packaged goods, Rick Miller says he doesn't really think of spending as a straightforward K these days either.
In our data, we see that there are household budgeting stresses happening across the spectrum of incomes.
Which is why he likes to split consumers up by whether or not they're making trade-offs.
He says trade-off consumers are actively cutting the size of the products they're buying, going for a 12-pack of soda instead of a 30-pack, for example.
They're also visiting more stores in search of the best deals.
And about a year ago at this time, we saw about 19% of households that were actively switching from premium brands down to store brands.
That number's jumped up to almost 22%.
So he says retailers are promoting their own store brands.
Jessica Ramirez is the co-founder of the advisory business, The Consumer Collective.
She says those who are still spending are focused on value, which means retailers are looking hard at the assortment of products they offer.
What is my assortment look like going forward?
So where is there going to be an opportunity?
How do I need to downsize my assortment in order not to take on losses?
She says among fashion companies, for example, their strategy this time around is not to mark everything down like they did in the last recession, but instead to plan inventories better to meet today went all the way red.
We'll have the details when we do the numbers where they are.
Tomorrow we'll get the latest read on inflation, the consumer price index for January.
And while the word consumer is key here, the CPI tracks the cost of goods and services.
Businesses are the makers of those goods and services.
And they're dealing with inflation too.
So to get a preview of what we might see in tomorrow's report, we're checking in with a few small businesses today.
We're starting with Ashley Morkin, owner of Unglued, a gift shop and craft store in Fargo, North Dakota.
Business has been surprisingly really good for the dead of winter and Q1, which is traditionally the slowest time for I would say most retailers.
I think we're up 10% or a little higher than 10% for January.
And just so many people coming out, even when it's been that bitter Arctic cold coming through.
We've sold more DIY kits than we probably ever have at this time of year.
We're getting asked every single day about the rebel loon of Minnesota or if we have buttons really related to the world right now.
And so we just bought a button maker so that we can get what people want.
There's been some small increases in wholesale pricing.
Um, like our card maker in Minneapolis just said theirs go up about like 3%.
So it wasn't a giant change.
And they gave everyone lead time, which was really nice, so that we could put in orders before that happened.
It does, of course, increase the price on our end for buying and on the customer's end for buying it from us.
We have so many people asking to work our shop, which is really freaking cool, and I'm really grateful for that.
Um, but we are not adding employees.
We've always had just three of us that are full-time, including myself as the owner.
Um, and one of our full-time crew did move on in January, and we are not replacing her position.
You know, things have just been they feel unstable, whether it's inflation or the tariffs, politically, the world makes us wonder how retail sales and workshop sales are gonna go.
And so we're just being more careful and kind of pensive about decisions we make about labor.
That's Ashley Morgan of Unglued in Fargo, North Dakota.
We have two more small business check-ins coming up later in the show.
President's Day weekend is coming up, and it's usually a big one for sales.
Maybe you've got your eye on some new kitchen appliances, a fancy refrigerator, perhaps.
Well, it seems like there are more options available than ever these days, to both the delight and dismay of consumers.
Maggie Hannesy wrote about souped up fridges and why so many people are frustrated with them for taste.
Maggie, thanks for joining me.
Oh, it's my pleasure.
I'm happy to be here.
Well, we are here to talk about something that I am passionate about, and maybe you are too.
Uh the idea that perhaps appliances have gotten too fancy.
What inspired you to write this story?
So it's interesting.
I went through a period of time where I lived in about five different apartments, and I found myself the possessor of five different fridges, none of which I had selected and purchased.
They just came with the place.
And so you sort of readjust yourself to the configurations, and I started to notice myself longing for like the plain white box of the older models.
Um, when I moved into the place I currently live in, it was one of the newest fridges.
And I I took a picture of it and threw it up on Instagram and said, Is anyone happy with the configuration of their fridge?
And to be honest with you, the vitriol that came into my DMs was uh palpable.
Wow.
So we're not we're not the only passionate people about absolutely not.
Far from it.
What what kind of complaints were you hearing from people you talked to?
What was interesting was there was a sense that we have more options for configurations, you know, like drawer in drawer compartments and modular shelving and and freezers with pull-out drawers, and a lot of people said it wasn't working for their lifestyles.
They were um installing their own cardboard dividers.
Um I started to realize there was a combination of things happening.
One, people weren't using the new configurations that refrigerator manufacturers had put in based on a lot of focus groups, a lot of surveys.
But then the other piece of it was too that people are hoarding a lot more than they used to.
A lot of people talked about having huge collections of condiments, a ton of different kinds of beverages and needing to store them.
Well, that makes me want to ask, you know, do these fancy fridges, do they start with us as consumers?
Are these something, is this something we're asking for, or is this something that appliance makers are putting on us?
So what I learned was that fridge manufacturers are in fact super responsive to what consumers want.
Um they spend a lot of time doing focus groups and surveys.
They, you know, scrape user reviews and rely on kind of in-home user data.
Um I I got the sense that, because I came into it a little bit thinking that they weren't listening to me, but I've learned through my reporting that sort of the opposite is true.
On the whole, what people seem to want most of all is filtered water, ice cube makers, lots of storage.
But the funny thing is too, is once it became expected for a fridge to have, for example, filtered water and ice makers, people started to say they didn't want to see it on the exterior of the fridge anymore.
They thought it was unattractive.
So manufacturers, you know, in response started putting them inside, but then in that in turn takes away from precious storage space.
So you can kind of see a bit of our problem here.
We're impossible to please, basically.
Exactly right.
Exactly right.
You know, we've seen sort of a rebellion against some technology, you know, like people are back to record players and digital cameras and even flip phones.
Are you seeing this in the kitchen?
Well, I think from the refrigerator perspective specifically, I was pointed to kind of this like 50s and 60s chef porn, like the early, early GE models.
And they're sort of held up as this ideal of like, why we had it so great.
Why did we change the way we did things?
And they are really pretty, but they're also not particularly functional.
There's, you know, very heavy kind of glass and metal drawers.
And so if they were made to today's standards, um, you know, they wouldn't be affordable for most people, and they would also be just woefully energy inefficient.
I would say a lot of it is is kind of more just like looking with longing at at what we once had, as opposed to kind of realizing that the way these things are made now actually are are a lot more beneficial to us and and a lot more functional than they used to be.
Maggie Hennessy wrote about her frustrations with fridges for taste.
Maggie, thanks for sharing your story with us.
Thanks for having me.
Automaker Stellantis is having its U.S.
employees return five days a week.
Same goes for corporate employees at Home Depot.
Now, we're hearing about this more from established brands, in part because they're established, big and buzzy, but also, as it turns out, because being established has a lot to do with age.
Newer firms are more likely to offer flexible workplace policies, according to a study out this week from the National Bureau of Economic Research.
Marketplace's Daniel Ackerman looks at why and what it could mean for the future of our workforce.
Firms founded since 2015 had employees working from home nearly twice as often as firms founded before 1990.
You know, there's a uh saying, old dogs, new tricks.
Nick Bloom of Stanford University co-authored the study.
I think older firms kind of get stuck in their ways.
If you look at a company, say founded in 2000, 2005.
They've had 20 years of basically coming in five days a week, and it's it's hard to change.
Many of them switched to work from home at the height of the pandemic, but then called employees back into the office once they could.
And workers didn't love that, says Pablo Serate of Princeton, another co-author.
Workers really, really value the option to work for home.
Even if it's not five days a week, Sarate says employees want some flexibility.
People are willing to take a wage cut, like somewhere between five to maybe 10 to 15% for the option to work from home.
And that could give newer firms a hiring advantage over their older set in their office ways counterparts, says Claudia Macaluso, an economist with the Richmond Federal Reserve.
Still, Makaluso says it's important to not overinterpret the results of the study.
Even the youngest firms had employees working from home just about one and a half days a week on average.
This is consistent with a lot of other things that see work from home become an important reality, but not the majority of work.
Which is one reason Stanford's Nick Bloom says the trend probably doesn't herald the end of corporate office space.
But he says it could impact another piece of the real estate market.
The biggest effect what we see in the data is actually city center housing.
If I have to come in five days a week, I want to live in downtown.
But three days a week?
I might live out in the suburb, get a bit of space, get an extra bedroom for my kid.
And perhaps a home office.
I'm Daniel Ackerman for Marketplace.
As promised, we've got another small business check-in for you today.
And this one just so happens to be with another gift shop.
Lundine's Gifts in Culver City, California.
The last time we heard from owner Katherine Londine, she was dealing with some tariff woes.
We called her for an update.
January is always tricky for retail.
It's always very slow.
But I was looking at the numbers from last year, and it's weird because it's better this year, but it's because we had fires last year.
So we were closed and people weren't buying.
So we're pretty on track for February as of last year, but pricing has been crazy.
I was worried about the tariffs last year, and it really did happen.
Like the tariffs have been very impactful.
I have had to refuse packages that the bill has been like obscenely high.
Like I had an order, a back order of something that I ordered in August from the UK.
And it was these two little sewing kits.
And they wanted me to pay $60 on something that cost me $40.
So these sewing kits would have to be about $35, which no one's gonna pay $35 for a sewing kit.
It'll be interesting because I'm hopeful for the World Cup is coming here to LA, so that hopefully will be a boost in business.
January here was really the weather's been like exceptionally lovely.
So people have been out and about um more.
So I think you know, there's just a lot of hope, I guess, of like crossing my fingers and like hoping that things get better because if they stay as they are, it's it's pretty tough.
That was Catherine Lundine of Londine's Gifts in Culver City.
Stay tuned.
We have one more small business check-in to go.
You have to wake up in the morning believing you can do it.
Starting the day on the right side of the bed.
But first, let's do the numbers.
The NASDAQ gave up 469 points, 2% to finish at 22,597.
And the SP 500 fell 108 points, just shy of one and six tenths percent, to end at 68.32.
Crocs had a sunny fourth quarter.
The Footwear maker beat Wall Street sales and profit forecasts thanks to strong demand through the holiday season.
Crocs stepped up 19%.
Bonds rose, the yield on the 10-year T note fell to 4.09%.
You're listening to Marketplace.
This is Marketplace.
I'm Kristen Schwab.
Throughout the show, we've been checking in with small businesses to see how they've been doing lately.
Our final installment comes from Buffalo, New York, where Johanna Dominguez owns a plant store called Put a Plant on It.
The services have been generally pretty good.
It's been back and forth.
We've had a few really cold days, and so when it's super cold, a lot of people generally don't want to come out and buy plants, and we encourage people not to because we don't want plants to die.
So on the dates that it's been really cold, it's been significantly slower.
But also we have like Valentine's Day coming up this weekend, and so there'll be usually we're pretty busy.
Then after that it's gonna get warmer.
So it's kind of nice to have a little bit of a downtime in January, early February, because then we can get a lot of our projects done.
We've definitely kept prices at the same at the store.
I've been trying to ramp up more of our services because at the end of the day, plants are a luxury item, and people don't have money to afford luxury items right now.
So we've been ramping up our offerings to corporate offices, services, and stuff like that.
One of the many services that we offer is doing interior plant design and installations for businesses and private homes.
So we have two or three private homes that we service and that we installed and take care of plants in.
And then we have about 10, 12 different businesses that we service and take care of plants.
And so I would like to get more of those accounts.
So that's one of the things that we have been focusing on.
I did hire a marketing person for the first time back in October, and she's been great, and we've been getting more calls and more interests, and we have several leads that are happening.
But being Buffalo and being in the winter, we can't physically install anything until March, April anyway.
So it's gonna be a busy spring.
That was Johanna Dominguez in Buffalo, New York, to round out our retail roundup.
If you're in Washington, DC or into the arts, or maybe at this point, even if you're not, you're probably aware of all the drama happening at the John F.
Kennedy Center for the Performing Arts.
There's the push to put President Trump's name on it, reports of poor ticket sales, and now plans to close the theater for two years for renovations.
Before the closing announcement was made, though, many performers had cut ties with the center, including the Washington National Opera.
Here to talk Opera Shop is Mark Scorka.
He is president emeritus of Opera America, a nonprofit that helps support artists and companies.
Mark, thanks for being here.
Thanks so much for having me.
I'm delighted to be here.
So I first want to get an understanding of the Washington National Opera's place in the arts and the opera scene.
Some people might not know that it's actually our national opera company designated by Congress.
It is.
The Washington National Opera is a very important company.
It's celebrating its 70th anniversary and has performed for the last 50 plus years at the Kennedy Center, doing an array of masterpieces from the inherited repertoire, but having a real dedication to supporting American opera.
It is a fine, distinguished national and international company.
And we know now that the Kennedy Center is going to close, so the opera won't be performing there, but it actually left before the venue made that announcement.
Why?
The Washington National Opera is in an agreement with the Kennedy Center that allows them to use the facility and to benefit from other shared services.
The new Kennedy Center administration issued some policies about how budgets in the future had to be formulated.
And those policies were just unsustainable in terms of producing opera.
The majority of income of any opera company in the United States comes from contributions from individual donors, corporate sponsorships, foundations, and some government grants.
And in fact, at most opera companies and most nonprofit performing arts organizations, individual contributions exceed box office income.
The Kennedy Center said we want you to go forward with budgets that are based on ticket sales plus corporate sponsorships.
And all of that confirmed in advance.
But the fact is that it is in the course of every year that individual contributions build what's called the annual fund, and that the annual fund helps pay for productions midstream in the middle of the season through the entire year.
So the idea that all of the revenue would have to be confirmed in advance and primarily from ticket sales and corporate sponsorships, that's just impossible.
You're based in New York now, but you worked in DC for a while, and I'm sure still have lots of connections there.
I do.
What is the mood and the art scene in Washington like right now?
The mood in the art scene in Washington is a sombre one.
The Kennedy Center was, as you can imagine, kind of the ultimate show place for the arts.
And there certainly are plenty of other venues in Washington, D.C.
and wonderful smaller arts organizations.
But in terms of the public perception of the pinnacle of the arts, it was the Kennedy Center.
It is tremendously disappointing that this ultimate arts venue somehow has changed its mission and a place where people no longer feel particularly welcome.
You know, you took your final bow as the president of opera America after what, 35 years, is it this fall?
30 35 years.
What was it like to step down at a moment like this?
And what's your outlook, at least short term for the arts and opera in the US?
You know, my I had planned my retirement before this all occurred.
And it is with great regret that I see the challenges to the arts uh economically across the country.
Uh, although box office numbers are up this year over last year, and contributions are holding on, costs are escalating even faster.
So opera companies are strapped to continue producing the number of productions and performances that they do.
And it is disappointing to see the economics of the arts becoming even more difficult.
I think we we all have to be hopeful.
And the history of opera is that it has survived many periods of turmoil and crisis.
I do say to people that if you have a life in opera, you've got to be an optimist.
It's too hard to put on a performance every night with choristers, orchestra musicians, soloists, and stage hands all working together.
You have to wake up in the morning believing you can do it.
Otherwise you you'll just get stuck under the burden of the challenges.
So, opera people are inherently optimistic, and I think we continue to believe in the art form.
Opera is about the world we live in today.
So we are confident about the art form and optimistic we'll find a way.
In January, sales of existing homes saw the biggest monthly drop in almost four years, down nearly eight and a half percent from the month before.
Some of this might be because of bad weather, but it's also about a persistently tough housing market.
Home prices that are still too high, and not enough homes to go around.
Our daily production team includes Livy Burdett, Andy Corbin, Maria Hollenhorst, Sarah Leeson, Sean McHenry, Michaela Sia, and Sophia Terenzio.
Will Story is the supervising senior producer, and I'm Kristen Schwab.
We'll be back here tomorrow.
This is APM.
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