Economist: US economy has become 'E-shaped' in 2026 as middle class starts to strain
Mar 8th 2026
Navy Federal economist Heather Long says three tiers now define U.S. consumer behavior in 2026: affluent buyers are driving premium spending, the middle class is nervously cutting costs, and lower earners are relying on credit and Buy Now, Pay Later even as headline inflation eases.
- Heather Long says the U.S. economy shifted from a K-shape to an E-shape in 2026 with three distinct consumer tiers.
- Top 20% of earners account for nearly 60% of consumer spending and are fueling demand for premium products, Moody's Analytics finds.
- Middle-income households are treading water and increasingly shopping at discount and wholesale stores to stretch dollars.
- About 24% of households were effectively living paycheck to paycheck in 2025, per Bank of America Institute data.
- Lower-income households carry higher credit card balances and use Buy Now, Pay Later more often, with BNPL grocery use rising to 25% in 2025.
- Consumer sentiment is down nearly 13% year over year as of February, while CPI sits around 3% and PCE was 2.9% in December 2025.