The K-shaped economy is becoming steadily more K-shaped. That’s the message in our updated estimate of personal outlays by income group. The share of total outlays going to those in the top 20% of the income distribution – making over $175,000 per year nationwide – increased to nearly 60% in the 3rd quarter of 2025. This is another new high in the data we have constructed back to 1989.

After cogitating a bit on the December jobs data, I’m increasingly convinced that the job market is struggling, and the broader economy is fragile, in big part due to U.S. tariffs. There has been no job growth (and likely job declines after all the revisions are in), as measured by either the payroll or household employment data, since Liberation Day last April, following the President’s announcement of significant reciprocal tariffs. This reflects the direct effects of the tariffs on manufacturing, transportation and distribution, and ag-related businesses, which are steadily losing jobs, as well as the indirect uncertainty hit to hiring by most other businesses. Other factors are certainly at play, including highly restrictive immigration policies, DOGE cuts, and artificial intelligence; however, the global trade war’s fingerprints are all over the ailing job market. Thus, the fastest way to boost the job market would be for the Supreme Court to declare the reciprocal tariffs unlawful and for lawmakers to let them become a thing of the past.

The Bureau of Labor Statistics’ estimate of November consumer price inflation, which it released last week, is badly flawed. So much so, we constructed our own estimate of CPI inflation (courtesy @MattColyar). Inflation didn’t decelerate to 2.7% on a year-over-year basis in November as the BLS reported but instead remained unchanged at 3.0%.