The financial pressures on low-income and younger demographics in the U.S. are becoming increasingly hard to ignore. Last week, both the Federal Reserve and fast-casual chain Chipotle Mexican Grill (CMG.US) highlighted the widening economic divide in the country.

Following the latest rate-cut decision, Fed Chair Jerome Powell acknowledged the economy’s overall resilience but noted its uneven distribution—consumer spending is increasingly concentrated among high-income households. "Consumer spending continues to grow, defying many negative forecasts," Powell said during the post-meeting press conference. "However, this trend appears largely driven by high-end consumers," he admitted, adding that spending remains the core pillar of economic activity, overshadowing even AI-driven productivity gains.

Economists widely credit AI as a key factor in helping the U.S. economy avoid a recession, citing surging investments in data centers and semiconductors that have boosted stock markets and, in turn, spending by asset-holding affluent families. Yet this "upper-tier resilience" hasn’t trickled down. Businesses catering to average consumers are feeling the pinch.

During Chipotle’s earnings call last Wednesday, CEO Scott Boatwright revealed a sharp decline in visits from younger and lower-income customers, triggering a nearly 20% stock plunge the next day. "Earlier this year, as consumer confidence dipped, we saw visit frequency drop across all income groups," Boatwright explained. "But since then, the gap has widened, with middle- and lower-income customers cutting back further." He noted that households earning under $100,000—accounting for 40% of sales—have significantly reduced spending, particularly those aged 25–35. "We believe this isn’t unique to Chipotle but reflects broader trends in dining and discretionary sectors," he added, citing pressures like rising unemployment, student loan repayments, and slowing real wage growth.

Data supports this view. The Bureau of Labor Statistics reports the unemployment rate for Americans aged 20–24 rose to 9.2% in August, up from 7.9% a year earlier—the highest since early 2021. BTIG analyst Peter Saleh called Chipotle’s youth traffic slump "slightly concerning," noting it "seemed to accelerate in September and October."

The weakness isn’t isolated. TD Securities’ proprietary consumer survey reveals "acute bifurcation," with high-income households reporting their lowest spending-cut intentions this year, while lower tiers show persistent economic anxiety, echoed by The Conference Board’s declining October confidence index amid job and inflation worries.

Policymakers are taking note. Powell warned that top-tier resilience masks underlying fragility, pointing to mounting job-market strains, including layoffs at giants like Amazon (AMZN.US) and UPS (UPS.US). "We’re closely monitoring hiring freezes or workforce reductions," he said, cautioning that full effects may take time to materialize. Meanwhile, anecdotal evidence of economic splits grows harder to dismiss, with rising unemployment risks exacerbating the divide. "Lower-income Americans are pulling back, while higher earners spend steadily," Powell concluded. "This divergence is real."