NY Fed Data Contradicts Treasury Secretary on K-Shaped Economy

Data released by the Federal Reserve Bank of New York on Tuesday, specifically its Quarterly Report on Household Debt and Credit and an accompanying blog post on credit card delinquency, indicates that a K-shaped economy, characterized by widening disparities between high-income earners and those living paycheck to paycheck, continues to affect Americans. Researchers from the New York Fed stated that the data reflects this economic division, a perspective that directly challenges recent assertions made by Treasury Secretary Scott Bessent. Bessent declared last week that "the K-shaped economy is over" and expressed weariness with the discussion surrounding it.

Despite the ongoing K-shaped economic trend, some debt categories have shown stability. Joelle Scally, an economic policy advisor at the New York Fed, noted in a news release that "delinquency rates across most products have held steady over the past two years." Total household debt in the U.S. saw a modest decrease of $13 billion in the second quarter of 2026, bringing the total to $18.8 trillion, a decline of just 0.1% according to the New York Fed's consumer credit panel data. Mortgage balances also declined by $74 billion during the second quarter, concluding June at $13.1 trillion. However, home equity lines of credit (HELOC) balances experienced an increase of $13 billion, reaching $459 billion, which is $142 billion higher than the low point recorded in the first quarter of 2022.

The report highlights a concerning trend in credit card debt. While overall household debt has seen a slight reduction, credit card balances have continued to rise significantly. New delinquencies on auto loans and credit cards are remaining at elevated levels, a situation that the New York Fed plans to continue monitoring. In the second quarter of 2026, credit card balances increased by $21 billion, pushing the total to $1.26 trillion. This figure represents a substantial amount, with Americans owing a staggering $1.26 trillion on their credit cards, and balances continuing their upward trajectory throughout 2026. This persistent rise in credit card debt for a significant portion of the population underscores the ongoing economic challenges faced by lower and middle-income households, reinforcing the New York Fed's assessment of a K-shaped economic reality.