The dreaded "K-shape" in the U.S. economy looks to be easing, at least for now. And that points to solid consumer spending and economic growth in the second half of the year.

In recent years, no economic discussion has been complete without a mention of the financial divide between upper-income households that typically earn more than $130,000 -- and everyone else.

The latter have thrived in recent years as home values and stock gains have increased, while lower-income consumers earning less than $60,000 have struggled in the face of higher inflation and housing costs.

Now there are signs that the divide is narrowing. Spending and wage growth largely converged across households in July, per data from the Bank of America Institute.

Total spending on credit and debit cards by lower-income households rose 5.4% year over year in July. Meanwhile, spending in July among middle- and higher-income households grew by just 4.2% and 4.3%, respectively. Of course, that uptick in lower-income spending could be chalked up to inflation. But discretionary spending, which excludes purchases like food and gasoline, also converged across income groups.

Income growth has also narrowed, with after-tax wage growth for lower-income households surpassing that of higher-income Americans in July for the first time since December 2024. For lower-income households, after-tax wage growth has risen from around a growth rate of 1% to 1.5% earlier this year to a roughly 5% year-over-year gain in July, says David Tinsley, senior economist at the BofA Institute.

Tinsley attributes households' convergence on wage gains to two factors: a healthier labor market and changes in tax-withholding strategies.

Stronger hiring in spring and early summer has led to more Americans changing jobs, particularly younger workers. Job changers tend to see bigger wage increases.

When it comes to tax strategies, Tinsley says the One Big Beautiful Bill Act resulted in higher tax refunds, which helped households. But the data also suggest that some households reduced their tax withholdings this tax year to squeeze more from paychecks. That shows up as a rise in after-tax wages in BofA's data.

From a consumption point of view, both result in more money in people's pockets. Additionally, data show consumers are still in good financial shape, with the share of households paying off their credit-card balances each month on the rise and savings levels remaining elevated compared with prepandemic levels in 2019, when adjusted for inflation.

That bodes well for economic growth in the second half of the year given that consumer spending makes up about 70% of gross-domestic-product growth. BofA forecasts that inflation-adjusted GDP will grow at a healthy 2.5% pace in the third quarter and 2.4% in the fourth.

"GDP and consumer spending tend to move very closely together," says Aditya Bhave, head of U.S. economics research. at BofA Global Research. He's expecting consumer spending growth to be around 2% to 2.5% in the second half. Much of the forecast, however, depends on gasoline price trends.

Tinsley believes that the convergence in spending and wage growth among most Americans could remain a feature of the economy through the end of year, particularly if withholding changes are driving the wage gains. "That will boost it, and it will move the year-over-year wage growth higher," he says.

But longer term, the underlying drivers of the K-shaped economy -- the equity gains supporting higher-income spending and the homeownership gaps between higher- and lower-income households -- have not necessarily dissipated, Bhave says.

Or maybe we'll simply need to pick a new letter to symbolize the next phase of consumer trends. My vote is for "M."