Economy & Household Finances | Saturday, April 25, 2026 | JBizNews Desk
Goldman Sachs chief U.S. economist David Mericle and his team are revising earlier optimism, now warning that the long-discussed “K-shaped economy” — in which high-income households continue to advance while lower- and middle-income families fall further behind — is materializing with unusual force in 2026. The primary driver is the sharply unequal burden imposed by the U.S.-Israel military campaign against Iran, which has disrupted global energy markets and sent domestic gasoline prices surging.
In a research note this week, Goldman Sachs economists Ronnie Walker, Alec Phillips, and Joseph Briggs highlighted that what had looked like a promising year for consumer spending “has quickly become more challenging,” forecasting a roughly 1% decline in headline retail sales in the months ahead. The analysts pointed to rising gasoline prices as the most regressive element of the current shock, hitting lower-income households with disproportionate severity.
The numbers underscore the disparity. Households in the lowest income quintile spend approximately 18.3% of their wages on gasoline in a typical year — more than double the national average of 7.7%, according to the American Council for an Energy-Efficient Economy. Goldman Sachs calculations show these same households devote roughly four times as much of their after-tax income to gasoline as those in the top income quintile. With national average gasoline prices crossing $4 per gallon in early April for the first time since 2022, and fuel oil costs jumping 30.7% in March alone — the largest monthly increase since February 2000 — the energy shock is amplifying existing inequalities.
Moody’s Analytics chief economist Mark Zandi described the dynamic as functioning like a regressive tax. Higher spending on essentials such as gasoline and utilities reduces real disposable income, forcing lower-income consumers to cut back sharply on discretionary items. This shift disproportionately affects retailers, restaurants, and service businesses that cater to working-class customers. Zandi noted earlier that roughly half of U.S. states were operating under recession-like conditions last year, with lower-income households “hanging on by their fingertips.”
Real wage trends have turned negative for many at the bottom of the income scale. The Economic Policy Institute reported that real wages for low-income workers declined 0.3% last year, reversing gains seen in the immediate post-pandemic recovery. Meanwhile, wealthier households have benefited from strong asset price performance, particularly in equities and technology-driven sectors, creating parallel economies that appear increasingly disconnected.
The divergence extends beyond fuel. Elevated home prices and persistently high mortgage rates have made homeownership — long a cornerstone of middle-class wealth building — more elusive for lower- and middle-income families. J.P. Morgan Asset Management global market strategist Jack Manley has observed that the gap between “haves and have-nots” has been widening over multiple years, with housing affordability emerging as a central flashpoint.
Fiscal supports that cushioned households earlier in the year, including enhanced tax refunds tied to provisions in President Trump’s One Big Beautiful Bill Act, are one-time boosts that will not recur. As these temporary lifts fade, the full weight of sustained higher energy costs is landing at a particularly vulnerable moment. Goldman Sachs’ Mericle previously pushed back against exaggerated fears of a K-shaped recovery but now acknowledges the data are tilting toward a clearer bifurcation.
Retail sales data for March illustrated the split. Headline figures rose 1.7% month-over-month, but the increase was driven largely by higher nominal spending at gas stations rather than broad-based consumption strength. When automotive and gasoline categories are excluded, underlying trends appear considerably softer. Goldman Sachs expects this weakness to intensify through the second and third quarters unless energy prices retreat meaningfully.
The Strait of Hormuz remains a critical choke point. Its ongoing disruption has kept global oil and refined product flows constrained, with limited prospects for quick resolution following the collapse of peace talks in Islamabad on Saturday. Until supply chains normalize, analysts see little relief ahead for the most vulnerable households.
The broader economic implications are significant. Consumer spending accounts for roughly 70% of U.S. GDP, and sustained pressure on lower-income budgets risks dragging on overall growth. While high-income households and asset markets have shown resilience, the consumption slowdown among the broader population could weigh on corporate earnings, particularly in retail, hospitality, and consumer goods sectors.
Goldman Sachs and other forecasters will be closely watching incoming data on retail sales, inflation, and regional employment trends for further evidence of how deeply the energy shock is reshaping the U.S. economic landscape. For now, the trajectory points to a widening divide that will test both policymakers and businesses in the months ahead.
This story is developing.
JBizNews Desk
