New York Fed data shows K-shaped economy isn’t over yet—even if Trump’s treasury secretary says it is

New York Fed data shows K-shaped economy isn’t over yet—even if Trump’s treasury secretary says it is

Jennifer Mattson

Tue, August 11, 2026 at 10:30 PM GMT+3 2 min read

Data from the Federal Reserve Bank of New York is shedding new light on the current state of the American economy.

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On Tuesday, the New York Fed issued its Quarterly Report on Household Debt and Credit, and an accompanying blog post on credit card delinquency. The report found that while household debt saw a modest quarterly decrease, credit card balances actually rose to a staggering $1.26 trillion.

"To us, it reflects this K-shaped economy," researchers from the New York Fed said, as reported by CNBC. "There are a lot of households that live paycheck to paycheck." (In a K-shaped economy, the gap between the richest and poorest widens between high-income individuals who continue to prosper, while lower-income consumers increasingly struggle.)

That's a strong rebuke of what Treasury Secretary Scott Bessent recently said. Last week, Bessent declared "the K-shaped economy is over," adding he is "sick of hearing" about it.

Household, mortgage, and home equity debt

First the good news: "Delinquency rates across most products have held steady over the past two years," Joelle Scally, economic policy adviser at the New York Fed, said in a news release.

For example, a look at the most recent numbers shows total household debt in the U.S. decreased by $13 billion to a total of $18.8 trillion, down by just 0.1% in Q2 2026, according to data from the New York Fed's consumer credit panel.

Also, mortgage balances declined by $74 billion in the second quarter of 2026, and totaled $13.1 trillion at the end of June.

However, home equity lines of credit (HELOC) balances rose by $13 billion, totaling $459 billion—$142 billion above the low reached in Q1 2022.

Americans continue to pile up credit card debt

Now, the bad news: "Still, new delinquencies for auto loans and credit cards remain at elevated levels, a trend we'll continue to monitor," Scally said.

Credit card balances rose by $21 billion in the second quarter, to $1.26 trillion, nearly reaching its all-time high of $1.28 trillion in 2025. At the same time, auto loan balances increased by $28 billion, to $1.71 trillion.

"The percentage of credit card balances over 90 days [past due] rose from 7.6% to 12.8%, prompting concerns that Americans are falling behind on their debt payments at rates not seen since the Great Recession," according to the New York Fed's blog. That post linked to a Wall Street Journal report that blamed the high delinquencies, at least in part, on "soaring interest rates and stubborn inflation."

This post originally appeared at fastcompany.com
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