SCOTT DETROW, HOST:
Let's take a cue from "Sesame Street" now to talk about one word and one letter that have taken off in 2025. The first is affordability. The other is the letter K, as in a K-shaped economy. Both speak to the current financial picture for Americans, and here to explain how is NPR's Stephan Bisaha. Hey, Stephan.
STEPHAN BISAHA, BYLINE: Hey. Happy to be Elmo's understudy today.
DETROW: (Laughter) Let's start with the word - affordability. Seems pretty self-explanatory - what people feel they can or can't buy. How's that any different from a similar word that we've heard nonstop the past few years - inflation?
BISAHA: Yeah, well, they're both hitting on similar pain points. But I like how Jane Waldfogel explained it to me. She's a professor at Columbia University's School of Social Work. She says affordability is more about how each person is doing.
JANE WALDFOGEL: Inflation sort of refers to what's happening out there. Inflation refers to what's happening with the cost of items. Affordability refers to how that hits home. It's much more personal. It's much less abstract.
BISAHA: Yeah, like can I afford child care? Can I afford that house? The other reason I feel like affordability has taken over is that the rate of inflation has slowed down a lot. The most recent numbers were 2.7%. That's nowhere near as bad as it was in, say, 2022. Now, that does not mean most of the things we buy have gotten cheaper. Prices aren't going up as fast, but they are still up, and affordability really gets to that.
DETROW: So I've had a lifelong goal of being on "Sesame Street," so I'm going to lean into this. The letter of the day is K, as in a K-shaped economy. And we normally hear the economy described with numbers, not letters. What makes an economy K-shaped?
BISAHA: All right, I'm going to try and match your energy. So take a second and imagine in your head the letter K and, you know, the two arms sticking out of it on the right. The one arm shooting up, that represents Americans doing well. These are people who are heavily invested in the stock market. And we know the stock market is doing great right now, setting records. The other arm in the K, shooting down, that is everyone else. They are not doing nearly as well. Now, in reality, that line is not actually plummeting. Most Americans are seeing their wages rise faster than inflation, but it's not by much, and the gap between them and the top earners is widening, making people feel like they're losing ground.
DETROW: So the rich are getting richer. Income equality (ph) is growing. These aren't new concepts, though, that first showed up in 2025, right?
BISAHA: Right. Like, that's what Eric Winograd said. He's the chief economist at the investment firm AllianceBernstein.
ERIC WINOGRAD: What's interesting about this isn't that it's new, because it isn't new. This is an extension of a phenomenon that we've seen for a long time and that we've talked about for a long time. Divergence is one of the defining characteristics of our economy going back 30 years now.
DETROW: So why do you think it is that it was just this year that this phrase - K-shaped economy - really took off?
BISAHA: Yeah, well, I think it's this response, this disconnect people feel between how they're doing and these really strong economic numbers that President Donald Trump and his predecessor, Joe Biden, have touted in recent years. Like, you know, GDP rose 4.3% in the third quarter this year. Great numbers, but those rosy figures are often driven by the top arm of the K. They don't always reflect how people on the bottom of the K are doing. I spoke with Joanne Hsu about this. She's the director of the University of Michigan's Survey of Consumers (ph).
JOANNE HSU: The economy is not a monolith. The population is not a monolith. Some people might be thriving at the same time that other people are struggling.
BISAHA: Yeah, she points out that the K shape is a helpful reminder that these top-line numbers are not the full story.
DETROW: Feels like it's fair to say we will still be thinking and talking about this K-shaped economy in 2026.
BISAHA: Yeah, that is a fair 2026 prediction, in large part because there are some concerning economic signs that could make that gap widen even more. Hsu said Americans are not just worried about prices. They're increasingly worried about losing their jobs amidst a shaky-looking job market. For people on the bottom of the K, that's a double whammy, both that weakening job market and high prices.
DETROW: NPR's Stephan Bisaha, thank you so much.
BISAHA: Thank you. Transcript provided by NPR, Copyright NPR.
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