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

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

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 while household debt has decreased modestly, all together, Americans owe a staggering $1.26 trillion on their credit cards, even as balances continue to rise in 2026.

“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 advisor 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.”