America's economy is divided, with luxury travel booming and an increase in 'relief' loans.

• The pandemic is causing consumers to experience varying realities based on their income levels, indicating the likelihood of a "K"-shaped economic recovery.
• Brands targeting lower-income consumers are struggling, while those targeting wealthier customers are doing well.
• The national economy is unclear, which can affect the Federal Reserve and everyday Americans.

Despite the trend of consumers opening high-fee credit cards and spending on luxuries, lending firms are seeing a growing demand for microloans as Americans struggle financially.

The juxtaposition highlights the growing divide among income groups in America, with higher earners benefiting the most from the pandemic recovery while lower-income Americans struggle to keep up.

The current state of the U.S. economy is causing confusion, which may affect the Federal Reserve's decision on interest rates and the outcome of the November election. Additionally, there are concerns that it could harm the robust economy that has been a global success story. This is happening at a time when consumers are relying heavily on debt and some are struggling to cope.

"Christophe Le Caillec, American Express CFO, stated last month on CNBC that their consumers are doing well and are spending on flights and dining out, indicating they are enjoying life."

American Express' typical consumer is affluent and is showing every sign that they are chugging along in the face of stubborn inflation and lingering economic uncertainty. In the latest quarter, more than 3 million new credit cards were issued, some of which carry annual fees costing up to hundreds of dollars. U.S. cardholders as a whole spent 8% more in the most recent three-month period.

American Express cards saw a 9% increase in first-quarter airline spending, indicating a continued desire to pay for experiences. First-class travel has shown particular strength, although management noted that this may be due in part to a resurgence of business trips. This could be a positive sign for white-collar workers, as it suggests businesses are willing to spend on travel once again.

While Upstart's relief loans have seen an 80% increase in originations during the first quarter, some customers' behavior suggests a different view of the economy. According to principal product manager Blair Lanier, these loans have been used for regular expenses like rent.

Fixed-fee loans with an annual percentage rate up to 36% are more likely to be taken by lower-income individuals with no more than a high school diploma, according to Lanier. Some may be turning to these small loans after being rejected for larger sums or by other lenders, but Upstart has also made changes to its automatic approval processes, the company said.

"Lanier stated that the past two years have been a unique and unusual event in the macroeconomy. He is not surprised that there is significant demand for a product like this and that this demand would be visible now."

Struggling lower tier

Those facing financial pressures are increasingly turning to Upstart's microloans, which are popular among Americans.

The conclusion of pandemic-era fiscal stimulus and the resumption of student loan payments have diminished the savings amassed at the start of the pandemic. Additionally, increasing gas prices can be particularly burdensome for those without the option to work remotely. However, higher-income consumers may be encouraged by the rise in home values and the robust performance of the stock market.

A significant portion of the population comes from low-income households, which may contribute to the country's economic pessimism. The University of Michigan's consumer sentiment index dropped by more than 12% between April and May, as consumers' expectations for future inflation increased. Despite falling short of economists' predictions, the index was still higher than it was a year ago at the same time.

Despite economists' difficulty in explaining the change in a closely watched survey, it coincides with the depletion of excess savings among Americans, which peaked at $2 trillion in August 2021, according to data analyzed by the San Francisco Federal Reserve. Since then, the padding has been entirely depleted due to financial strain, with U.S. households now cumulatively $72 billion in debt as of March.

Despite a decrease in the rate of inflation from its recent highs, the cost of various goods and services is still rising at a faster pace than what monetary policymakers consider healthy for the economy.

Despite economists' confusion, the long-awaited consumer slowdown is now evident in various household brands, particularly those popular among lower-income groups.

The soda and snack producer acknowledged that the low-income American is "stretched" and has adopted a "street-fighting mentality" and is "laser focused" on value after higher prices pushed away diners with less to spend.

The frozen food maker has observed a shift in consumer behavior towards eating at home rather than using quick-service restaurants. Management stated that low-tax brackets have specifically switched from Tyson's name brand to private labels when grocery shopping.

Numerous categories, including personal care, electronics, apparel, furniture, and groceries, have shown a trend of "trading down" online over the past four months, indicating consumers are tightening their purse strings, according to market data provider Adobe Analytics.

The furniture e-commerce platform reported that sales of high-priced items have been weak. The tool manufacturer expressed disappointment over the decline in demand for DIY projects and soft consumption trends.

Despite growing uncertainty elsewhere, a hot labor market and rising wages have been a source of optimism among lower-income Americans. However, last month's weak jobs report and a recent jump in unemployment claims can dampen this optimism.

"According to CEO Jane Fraser, low-income consumers are becoming more cautious due to the increased pressure of high living costs. Despite having employment opportunities, their debt servicing levels have risen since before."

Several corporate leaders and economists, including Fraser, are highlighting the "K" shape of consumer habits. While the wealthy continue to spend, those with lower incomes are facing higher prices and interest rates.

Nancy Lazar, the chief global economist at Piper Sandler, stated that middle- and high-income consumers are optimistic, while low-income consumer confidence is in a recessionary state. This difference can undermine the hope for a "soft landing," which aims to control inflation without causing a prolonged economic contraction.

As the economy continues to unravel from the 2020 shock, Tyler Schipper, an associate professor of economics at the University of St. Thomas in Minnesota, believes that lower-income Americans who had been feeling financial pressures before the pandemic will likely face even more challenges now.

"Schipper stated that they were beginning from a position of difficulty. He added, "The notion that low-income workers will prioritize the best prices is, in a way, a return to normalcy.""

The Federal Reserve may view evidence of price matching or trading down as positive indicators that previously raised interest rates have successfully tightened the economy, according to Schipper.

Upper class hums along

Despite being a minority, high-income earners continue to drive growth for some businesses.

Airlines have been competing to increase the size of their business class and premium economy cabins and expand lounges to attract high-spenders. According to sales data, revenue from these cabins has surpassed that of economy class. This week, a smaller New York-based airline announced that it is reducing some flights and increasing business-class seats on routes to the Caribbean.

Customers are not compromising on higher-rated hotels or longer vacations, as they have shown interest in traveling to events such as the Paris Olympics and the European Cup in Germany this summer.

Airbnb management emphasized the desire for experiences among its customers, while Ticketmaster parent stated that there is no weakness in demand.

In their most recent quarters, theme park chains experienced stronger-than-expected attendance. Specifically, Six Flags reported that the number of 2024 season passes sold through April increased by a double-digit percentage compared to the same period the previous year.

Unlike Wayfair, the company is seeing strength in sales of its pricier products, particularly in its fitness segment, which experienced a 40% revenue growth from the same quarter in 2023, driven by wearable technology.

"Garmin CEO Cliff Pemble informed analysts earlier this month that they have observed a strong response to some of their high-end products. People are purchasing based on their requirements, and there is little evidence of downgrading, which they can confidently confirm."

Where's the weakness?

Within sectors, there is a divergence. Look no further than and .

In 2024, consumers are shifting their focus towards saving, while Planet Fitness offers memberships starting at $10. Meanwhile, Life Time's clubs are experiencing waitlists and record-high demand for personal training.

Life Time CEO Bahram Akradi admitted to analysts this month that he had anticipated seeing some weakness for the past 18 months, but was mistaken.

This report was contributed to by Kate Rooney, Amelia Lucas, Brandon Gomez, Robert Hum, Jeff Cox, Leslie Josephs, and Hugh Son of CNBC.