That’s according to Oxford Economics, who wrote that overall the outlook for consumers is “optimistic” but that the divide between those thriving and those surviving is deepening—and is expected to diverge even further.

“Consumer bifurcation took hold with the post-pandemic inflation surge, disproportionately impacting discretionary spending for low-income and younger households,” Michael Pearce, deputy chief U.S. economist wrote in a note seen by Fortune. Pearce adds that while tariffs present a smaller shock across the board, they nonetheless will have the largest impact on low-income households.

Using data from Haver Analytics and the Congressional Budget Office (CBO), Oxford Economics found that tariffs and changes to the fiscal landscape will have a negative net impact on real income for the lowest 0% to 20% of earners, of approximately 2.5% over the next 10 years.

Conversely, the packages outlined by the Trump administration increasingly benefit those higher up the income ladder. Those in the 40% to 60% income segment will see a negative impact on their spending power (a little over -0.5%) while fiscal packages will boost them approximately 1%. Meanwhile in the top percentile—80% to 100%—fiscal packages will boost real post-tax incomes by more than 2% while being offset by a modest 0.5% drop due to tariffs.

“Tariffs are a tax on all consumers. Based on current tariffs, we estimate they’ll increase average household costs by $450 annually, equivalent to around 0.6% of spending,” Pearce wrote.

He added: “The CBO’s distributional analysis reveals the tax and spending bill’s effects as regressive. Higher-income households benefit most from tax cuts. Low-income households face challenges due to cuts in SNAP and Medicaid benefits. The SNAP cuts will phase in starting next year, severely impacting the South and West.”

A tougher labor market

Pearce points out this divide is not only embedded because of the pandemic but also expected to continue because of a tough labor market. The Bureau of Labor Statistics wrote in its most recent update that the number of new entrants into the market—unemployed people looking for their first job—decreased by 199,000 in August to 786,000.

However, Macquarie’s lead U.S. economist previously told Fortune that this is an established pattern, one which is likely to rebound in September or October. The reason, Doyle outlined, is that over the summer months younger entrants may pick up some seasonal work meaning they don’t need to register as unemployed. When that work dries up, claimants rise.

Digging deeper into the data, Pearce writes: “Besides policy changes, the labor market drives consumer divergence. It reveals stark contrasts between employed and unemployed individuals. Younger and poorer workers experience the most rapid cooling of conditions. A tightening labor market in the years ahead may alleviate some of these disparities, though structural elements could persist.

“While the unemployment rate has remained low, the labor market has become less dynamic, with hiring rates depressed, even as layoffs remain low. That is creating a deeper wedge in spending between employed individuals and those without jobs. Unemployment duration is increasing, with the share of long- term unemployed reaching a more-than-decade high in August.”

This disparity also shows up in size of business, Pearce highlights. For example, ADP data shows that in addition to having lower-paid employees, smaller firms have also shredded more jobs in recent months. Indeed their headcount is, across a rolling three-month average, smaller now than it was in 2018 while larger firms (those with 500 or more employees) have added some 100 employees.

“The consumer outlook is primarily splitting by income, which also manifests in generational impacts,” Pearce adds. “The young tend to be poorer and have accumulated much less wealth. Notably, younger consumers face significant pressure on discretionary spending and will be at the forefront of the latest hit as well.”

Indeed, the reason higher earners feel the economy is going better is because they themselves are driving it. Moody’s chief economist Mark Zandi wrote in a note earlier this month that without wealthy spenders continuing to splash their cash, the U.S. would be in a recession. “The data show that the U.S. economy is being largely powered by the well-to-do,” Zandi noted. “As long as they keep spending, the economy should avoid recession, but if they turn more cautious, for whatever reason, the economy has a big problem.”