Since the onset of the COVID-19 pandemic, public discourse around the U.S. economy has frequently referenced the concept of a “K-shaped recovery,” which suggests a sharp divergence in economic outcomes: the wealthiest 10 percent of families have prospered significantly, while the lower half of the population continues to struggle. This framework has been used to explain disparities in consumer spending, corporate earnings, and political dynamics. However, recent data from the Federal Reserve’s 2025 Survey of Consumer Finances (SCF) challenges some aspects of this narrative, indicating a more nuanced picture of inequality in the United States.

The SCF, which examines household income, wealth, and spending across diverse demographic groups, shows that while inequality remains very high, it has not increased substantially since the pandemic began; in some cases, it has even decreased. For example, the median income of the top 10 percent of earners stands at roughly $400,000, about five times that of the median family. This ratio has only slightly shifted from when the study began in 1989, when it was four times. Additionally, although mean incomes—which are influenced by the very richest households—reflect even wider disparities, income growth since 2019 has been slower or comparable among the top earners relative to those at the lower end of the distribution.

Wealth inequality, measured by net worth, reveals similar trends. From 1989 to 2013, the richest households saw their wealth grow much more rapidly than other groups. In the past 12 years, however, this gap has narrowed or flattened. In the last three years, the SCF authors report little change in wealth inequality. While the richest continue to accumulate more absolute wealth due to their larger initial holdings, the rate of growth for middle-income households has at times matched or exceeded that of the top tier, leading some analysts to characterize the recovery’s shape less as a “K” and more as a backward-leaning “E.”

The survey also offers fresh insight into consumer spending patterns by wealth cohort. Contrary to prior estimates that attributed up to 50 percent of U.S. consumer spending to the wealthiest 10 percent, the new data suggest this group accounts for about 28 percent of total spending. This finding indicates that consumption growth cannot be dismissed merely as a byproduct of inequality concentrated at the top.

Despite these positive signs, important caveats remain. The bottom 25 percent of the wealth distribution has consistently maintained an average net worth near zero since the SCF began, reflecting persistent financial vulnerability particularly among less-educated groups and minorities. Furthermore, wealth accumulation sources differ by group: wealthier households tend to build net worth through investment portfolios, while home equity is the primary asset appreciating among middle- and lower-wealth families. Rising interest rates threaten to slow housing price growth, which could exacerbate wealth disparities.

Higher borrowing costs also pose a challenge. Although household debt relative to assets has declined, increased interest expenses are leading to a rise in delinquency rates, putting further strain on the most financially fragile.

While survey data have limitations, the 2025 SCF provides a comprehensive snapshot showing that although inequality remains entrenched, many American households across the income and wealth spectrum have experienced real gains over the past decade. Whether these trends will continue and extend to the most economically vulnerable remains uncertain.