Why you keep hearing about a ‘K-shaped economy’ and ‘stagflation’
They shape how politicians, pundits, and the media discuss the economy, but their nuances and real-world implications are often lost in the discourse. Stagflation fears, for example, are surfacing asoil prices spikedue to theU.S.-Israel war against Iran, reigniting inflation worries. Even Federal Reserve Chair Jerome Powell said he reserved the term for a “more serious set of circumstances” than what the nation faces today.
“I always have to point out that that was a 1970s term when unemployment was in double figures, and inflation was super high,” Powelltold reporters on March 18. “That’s not the case right now.”
Still, such phrases capture real concerns aboutelevated prices, aslowing job market, anda widening gapbetween high-income and low-income households, but jargon can also obscure what economic developments mean for everyday Americans.
USA TODAY asked experts which terms are defining the U.S. economy in 2026. Here are some of the most common, and a few to keep in mind for the future:
Feeling broke in a steady economy?Here’s what’s happening
One of the terms with the most buzz, a”K-shaped” economy, is one in which some groups or sectors pull ahead financially, while others fall behind.
It’s also used to describe the post-pandemic recovery, when high-income earners typically saw their wealth and assets’ values increase. In contrast, many low-income earners with few or no investments struggled to keep up as prices rose faster than their paychecks.
Household wealthremains concentratedat the top, with the highest-earning households driving a larger share of consumer spending, while lower-income households make purchases but account for a smaller proportion of total spending.
“The notion that it’s a ‘K’ makes it sound like low-end spending is going down. …But that nuance of the proportion of the total gets lost,” Head of U.S. Economics at Truist Mike Skordeles said, adding he prefers the term “two-speed economy.”
Stagflationrepresents a scenario in which the nation faces rising inflation, rising unemployment, and stagnant economic growth all at once.
It’s the Federal Reserve’sworst-case scenarioas it attempts to balance its dual mandate of low unemployment and stable prices. The U.S economy is not there yet, but economists see some warning signs.
Bureau of Labor Statistics data revealed that in February, the unemployment rateticked up to 4.4%, still generally considered healthy but higher than a year ago. CPI inflationcame in at 2.4%year-over-year, a figure that did not capture the jump in oil prices driven by the war that some analysts expect will push the number higher in March.
Meanwhile, the Bureau of Economic Analysis found core PCE inflation, which excludes food and energy prices,rose to 3.1% in January – its highest level in more than a year. And on March 13, the agency revised its fourth-quarter estimate of GDP growth to 0.7%, down from 4.4% in the previous quarter.
Supply shocks are large and often sudden shifts in the availability of a good. They’re uncommon, Skordeles said, but the United States has faced several in recent years.
During the pandemic, car production slowed due to factory closures and supply chain disruptions, though people kept buying vehicles. Lower supply and steady demandpushed prices higher. It’s classic supply-and-demand economics.
Today, the halting of traffic inthe Strait of Hormuz, which typically carries about 20% of the global oil supply, has pushed oil prices — and ultimately gas prices at the pump — higher worldwide.
For months, analysts have dubbed the U.S. labor market a “low-hire, low-fire” environment, meaning companies are neither quick to let go of employees nor eager to bring many new ones on board.
“I don’t think companies really know the impact of AI on employment either,” Thrivent Chief Financial and Investment Officer David Royalpreviously told USA TODAY. “They’re not ready to let people go, but they don’t want to hire a bunch of people because they’re not sure they’re going to need them.”
Job gains have beenconcentrated in sectorslike health care, social assistance, and private education, meaning those looking for work outside of those industries often face a more difficult search.
Workers have noticed,clinging to their jobsin fear they won’t find another.
Feeling stuck in a job you don’t want?You’re not alone. Here’s why
One of the most common words used to describe U.S. economic conditions over the past year has been “uncertain.”
Evolvingtariff policy, an unclear timeline for the ongoingwar with Iran, stock-marketvolatility, a rise inAI adoption, the 2026midterm elections, and worries about potential asset price corrections down the road make the future hard to predict for economists.
“There’s a lot of economic uncertainty, market uncertainty, political uncert