K, C or E? Why economists can’t agree on the shape of today’s economy

Those aren't initials or Greek life letters. They're some of the terms that economists, corporate leaders and politicians are using as they attempt to define the U.S. current economic moment.

Since the recovery from the pandemic, economists have largely viewed the economy as acting in a "K"-shape, displaying an unequal expansion across groups and the arms of the "K" heading in opposite directions.

Now there's a debate over whether the K-shaped recovery still exists, or if the economy instead resembles the letter "C" or "E."

"This is some of the alphabet soup," said Joel Mokyr, a Nobel Prize-winning economic historian at Northwestern University.

The race to label the structure of today's economy involves more than semantics or bragging rights. In recent years, the divergence among low- and high-income consumers, expressed in a K-shaped economy, has been top of mind for politicians, monetary policymakers, and executives of consumer companies.

For decades, letter shapes have been used to sum up the economy, especially following major downturns. The list of those used throughout history includes "V-," "L-" and "W-shaped."

But it's unusual for this type of description to have staying power among everyday Americans several years after a recession, as it does today, according to Don Rissmiller, chief economist at research firm Baird Strategas. Mounting concerns around wealth inequality may be driving heightened awareness, he said.

"During recessions and recoveries, the letters are really popular," Rissmiller said. "To use a letter in the middle of a business cycle, I guess we could say that's a little new."

Treasury Secretary Scott Bessent made waves earlier this month when he declared that the K-shaped economy was in the rearview mirror. In its place, the former hedge fund manager said a C-shaped economy was forming, meaning the bottom class of consumers were gaining ground.

Bessent cited wage gains among lower-earners and larger tax cuts this year, pointing to President Donald Trump's "no tax on tips" and "no tax on overtime" policies as boosting the worst-off.

"I got sick of hearing about this K-shaped economy," Bessent, one of Trump's top economic lieutenants, told CNBC this month. "I can say here definitively, the K-shaped economy is over."

Bessent isn't the only one giving the "C" letter air time. Hilton Worldwide CEO Christopher Nassetta told analysts late last month that his hotel company is "definitely seeing" a C-shaped economy.