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JPMorgan data shows how Americans in different income brackets perceive the economy.
An analyst said the data shows a “notable bifurcation” between income groups.
Shoppers look at fruit for sale at Frank’s Quality Produce Co. at Pike Place Market in Seattle, Washington, US, on Wednesday, May 28, 2025.
M. Scott Brauer | Bloomberg | Getty Images
Americans have vastly different views of the economy — and the divergence is being driven in part by income bracket, data shows.
Higher-income consumers were more likely to report stronger economic confidence readings when asked to consider the next year given changes since the presidential election, according to JPMorgan’s Cost of Living Survey.
This release adds to a growing body of qualitative and quantitative evidence showing the U.S. economy is in a “K-shape,” a term used by economists to describe the deviation in economic experiences by income. In other words, it can explain why well-off Americans are continuing to spend while lower earners buckle under inflationary pressures.
“Survey results indicated a notable bifurcation,” JPMorgan’s Matthew Boss, a widely followed and respected consumer analyst, wrote in a Tuesday note to clients.
High-income respondents rated their confidence a 6.2 out of 10 — with 10 being the best — on average. More than half of this cohort chose a rating between 7 and 10, underscoring their rosy financial outlook.
On the other hand, low-income consumers reported a 4.4 score on average. Less than a quarter of participants in this category provided a score between 7 and 10, which Boss pointed out creates a 30-point delta between these groups.
Across income brackets, the average respondent rated their confidence at a 4.9 out of 10 rating.
This income-based division was once again prevalent when consumers were asked about their confidence for covering monthly bills compared with six to 12 months ago.
Nearly 6 of 10 high-income consumers said these bills were easier or becoming easier to cover. But just 37% and 30% of middle- and lower-income groups, respectively, said the same.
Higher-income respondents were also more likely to say they were planning to increase spending on nonessential items over the next year than other brackets, according to JPMorgan’s survey.
JPMorgan isn’t the only organization seeing a disparity between income classes when it comes to their economic outlook.
The top one-third of earners have reported an average consumer sentiment rating that’s around 25% higher than the lowest one-third over the last two years, according to the University of Michigan’s monthly consumer survey.
The Michigan survey’s most recent results reflect interviews conducted July 29-Aug. 25 of a statistically representative sample of about 1,000 American households. More
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Federal Reserve Chair Jerome Powell said the central bank is nearing a point where it will stop reducing the size of its bond holdings, but gave no long-run indication of where interest rates are heading.
Though balance sheet questions are in the weeds for monetary policy, they matter to financial markets.
Powell generally stuck to the recent script on the economy and interest rates that policymakers are concerned that the labor market is tightening and skewing the balance of risks between employment and inflation.
Jerome Powell, chairman of the US Federal Reserve, during a news conference following a Federal Open Market Committee (FOMC) meeting in Washington, DC, US, on Wednesday, Sept. 17, 2025.
Kent Nishimura | Bloomberg | Getty Images
Federal Reserve Chair Jerome Powell on Tuesday suggested the central bank is nearing a point where it will stop reducing the size of its bond holdings, and provided a few hints that more interest rate cuts are in the cards.
Speaking to the National Association for Business Economics conference in Philadelphia, Powell provided a dissertation on where the Fed stands with “quantitative tightening,” or the effort to reduce the more than $6 trillion of securities it holds on its balance sheet.
While he provided no specific date of when the program will cease, he said there are indications the Fed is nearing its goal of “ample” reserves available for banks.
“Our long-stated plan is to stop balance sheet runoff when reserves are somewhat above the level we judge consistent with ample reserve conditions,” Powell said in prepared remarks. “We may approach that point in coming months, and we are closely monitoring a wide range of indicators to inform this decision.”
On interest rates, the central bank chief did not provide specific guidance on a path lower, but comments about weakness in the labor market indicated that easing is firmly on the table, as financial markets expect.
“If we move too quickly, then we may leave the inflation job unfinished and have to come back later and finish it. If we move too slowly, there may be unnecessary losses, painful losses, in the employment market. So we’re in the difficult situation of balancing those two things,” he said.
“The data we got right after the July meeting showed that … that the labor market has actually softened pretty considerably, and puts us in a situation where the two risks are closer to being in balance,” Powell added.
Other Fed officials have said recently that the falling labor market is taking precedence in their thinking, leading to the likelihood of additional rate cuts ahead.
Balance sheet math
Powell, though, centered most of his speech on the Fed’s holdings of Treasurys and mortgage-backed securities.
Though balance sheet questions are in the weeds for monetary policy, they matter to financial markets.
When financial conditions are tight, the Fed aims for “abundant” reserves so that banks have access to liquidity and can keep the economy running. As conditions change, the Fed aims for “ample” reserves, a step down that prevents too much capital from sloshing around the system.
During the Covid pandemic, the central bank had aggressively purchased Treasurys and mortgage-backed securities, swelling the balance sheet to close to $9 trillion.
Since mid-2022, the Fed has been gradually allowing maturing proceeds of those securities to roll off the balance sheet, effectively tightening one leg of monetary policy. The question had been how far the Fed needed to go, and Powell’s comments indicate that the end is close.
He noted that “some signs have begun to emerge that liquidity conditions are gradually tightening” and could be signaling that reducing reserves further would hinder growth. However, he also said the Fed has no plans to go back to its pre-Covid balance sheet size, which was closer to $4 trillion.
On a related matter, Powell noted concerns over the Fed continuing to pay interest on bank reserves.
The Fed normally remits interest it earns from its holdings to the Treasury general fund. However, because it had to raise interest rates so quickly to control inflation, it has seen operating losses. Congressional leaders such as Sen. Ted Cruz, R-Texas, have suggested terminating the payments on reserves.
However, Powell said that would be a mistake and would hinder the Fed’s ability to carry out policy.
“While our net interest income has temporarily been negative due to the rapid rise in policy rates to control inflation, this is highly unusual. Our net income will soon turn positive again, as it typically has been throughout our history,” he said. “If our ability to pay interest on reserves and other liabilities were eliminated, the Fed would lose control over rates.”
Views on the economy
On the larger issue of interest rates, Powell generally stuck to the recent script, namely that policymakers are concerned that the labor market is tightening and skewing the balance of risks between employment and inflation.
“While the unemployment rate remained low through August, payroll gains have slowed sharply, likely in part due to a decline in labor force growth due to lower immigration and labor force participation,” he said. “In this less dynamic and somewhat softer labor market, the downside risks to employment appear to have risen.”
Powell noted that the Federal Open Market Committee responded in September to the situation with a quarter percentage point reduction on the federal funds rate. While markets strongly expect two more cuts this year, and several Fed officials recently have endorsed that view, Powell was noncommittal.
“There is no risk-free path for policy as we navigate the tension between our employment and inflation goals,” he said.
The Fed has been hampered somewhat by the government shutdown and the impact it has had on economic data releases. Policymakers rely on metrics like the nonfarm payrolls report, retail sales and various price indexes to make their decisions.
Powell said the Fed is continuing to analyze conditions based on the data that is available.
“Based on the data that we do have, it is fair to say that the outlook for employment and inflation does not appear to have changed much since our September meeting four weeks ago,” Powell said. “Data available prior to the shutdown, however, show that growth in economic activity may be on a somewhat firmer trajectory than expected.”
The Bureau of Labor Statistics has said it has called workers back to prepare the monthly consumer price index report, which will be released next week.
Powell said available data has showed that goods prices have increased, largely a function of tariffs rather than underlying inflation pressures. More
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Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.How stands the world economy? The answer, as my colleague Tej Parikh noted recently, is that it is confusing. That should not be surprising. Quite apart from some evident macroeconomic uncertainties — disturbing trends in fiscal deficits and debts in many important countries, to take one example — we are witnessing two huge events: the abdication of the US as global hegemon and the uncontrolled onset of what could prove to be the most important of all humanity’s technological innovations, artificial intelligence. No wonder we are confused. The remarkable thing, however, is how well the world economy has coped with the shocks and the uncertainty, at least so far.This is a leading theme of both the introductory speech of Kristalina Georgieva, IMF managing director, to this year’s annual meetings in Washington and the latest World Economic Outlook. The big conclusion is that the IMF sees growth slowing relatively little this year and next. Needless to say, any such conclusion is itself highly uncertain. But it is consistent with what has happened so far this year, despite the turmoil.Some content could not load. Check your internet connection or browser settings.Why has the world economy been relatively robust? Georgieva (and the WEO) offer four explanations: less severe tariff outcomes than feared; private sector adaptability; supportive financial conditions; and improved policy fundamentals. First, it is indeed true that tariffs have ended up somewhat less high than initially indicated on Donald Trump’s “liberation day”, April 2 2025. In the end, argues Georgieva, “the US trade-weighted tariff rate has fallen from 23 per cent in April to 17.5 per cent now”. Moreover, there has been surprisingly little retaliation. Yet these are still high tariffs.Some content could not load. Check your internet connection or browser settings.Second, the private sector has responded in a helpful way. This has been especially true in the short run. Thus, notes the WEO, “households and businesses front-loaded their consumption and investment in anticipation of higher tariffs”. Moreover, implementation delays allowed businesses to postpone price changes. In addition, exporters and importers absorbed some of the price increases. Nevertheless, pass-through is occurring. Tariffs are a damaging tax: they will in the end distort the structure and growth of world output.Third, stock markets have continued to be buoyant and financial conditions to remain supportive more broadly. Part of the reason for this, notably in the US, is the AI investment boom. Whether this is rooted in reality or is the sort of bubble that has too often accompanied such innovation is unknown.Some content could not load. Check your internet connection or browser settings.The fourth feature seems to be particularly true of emerging economies. Many have learnt from painful past experience and so have pursued more disciplined fiscal and monetary policies than they used to do. That is the theme of chapter two of the WEO. The problem is that external conditions are unlikely to get easier for many of them. China is grappling with US hostility and domestic weaknesses. Brazil and India have been hit by the criminally high US tariffs of 50 per cent. In the case of Brazil, this is largely because, remembering its military dictatorships, its courts have put its would-be dictator, Jair Bolsonaro, in prison for 27 years. Why should Trump detest this so much?At a time such as this, when the world system is being overturned, it is dangerous to have confidence in what lies ahead. As the IMF notes, there are plenty of fragilities, notably those fiscal deficits and debts. It notes, for example, that the US general government fiscal-balance-to-GDP ratio is expected to deteriorate by 0.5 percentage points in 2026, largely owing to “the passage of the One Big Beautiful Bill Act (OBBBA) and despite an offset of about 0.7 percentage point of GDP from projected tariff revenues”. This also makes big reductions in global current account imbalances rather unlikely, though the IMF forecasts modest reductions.That, in turn, would presage further skirmishes in the global trade war, especially between the US and China. Quite apart from Trump’s tendency to view any bilateral trade surplus as proof that its partner is ripping the US off, China is also viewed as an all-round strategic competitor. The US is particularly upset that China uses its trade muscle in these fights. Scott Bessent, US Treasury secretary, has accused China of trying to hurt the world’s economy after Beijing imposed sweeping export controls on rare earths and critical minerals. So, how does Bessent imagine US victims feel about the trade war being waged upon them?Some content could not load. Check your internet connection or browser settings.The meetings of the IMF and the World Bank are an opportunity not only to consider the overall state of the global economy and the salient risks of further disruption, but particularly to focus on the condition of the poorest countries and people. The WEO notes that “the world’s poorest economies, including those suffering from prolonged conflict, are particularly at risk of seeing their growth momentum decelerate”. One of the reasons for this is cuts in grants and concessional lending. The abrupt closure of USAID is likely to be particularly significant for health. A sobering study published in The Lancet concludes that the dismantling of the agency “could result in more than 14mn additional deaths by 2030”.The IMF and World Bank were created in 1944 to establish the principle of global economic co-operation. The need for this has most certainly not ended. It is encouraging that the US remains a member. The challenges ahead are huge, not least the need to maintain economic progress at a time of such geopolitical upheaval. No country, however powerful, will be immune if the global economic system blows up, [email protected] Martin Wolf with myFT and on X More
