Incomes flatline as corporate America slows spending
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Real income growth has slowed to near-decade lows, according to a report from JPMorgan Chase Institute, with young people getting hit the hardest.
Why it matters: As a new wave of companies announce layoffs, a slowdown in income growth is yet one more sign of a softening labor market that could indicate trouble ahead for corporate America.
What they're saying: "Companies might increase wages by less because they're trying to shrink staff," says George Eckerd, research director with JPMorgan Chase Institute, adding that if people don't leave, that is when companies could start laying people off.
- It underscores a broader cooling in the labor market, according to the report, which comes after Amazon laid off 14,000 employees and UPS revealed it cut 48,000 jobs this year.
- The data in the report indicates that even those who have jobs are struggling to keep pace with inflation.
Between the lines: Wage growth is slowing while inflation continues to rise, which is eroding purchasing power, the data shows.
Threat level: The data indicates that income stagnation is the most severe among young people, a demographic that historically provides a signal for the state of the broader labor market.
- Young workers are experiencing the worst income growth since the 2010s as the low-hire, low-fire labor market reduces their pace of job transitions.
- Workers ages 25 to 29 are "underperforming prior generations in terms of the life-cycle income path in recent years," says Chris Wheat, president of the JPMorgan Chase Institute.
Zoom out: This mirrors the unemployment rate for young people, which is above 10%, about double the national average.
- Your 20s are historically the decade with the largest income gains.
- Early career workers tend to switch jobs more frequently while establishing their careers, which leads to higher wages.
- It remains unclear whether young people will have the opportunity to catch up if and when the labor market reaccelerates.
Reality check: It is not as if corporate America is floundering and in need of cost cutting.
- Company earnings indicate 15% aggregate year-over-year growth in this reporting cycle so far. Such solid growth came even before the Big Tech companies reported earnings this week.
- Macro research firm TS Lombard says, "Trumpian uncertainty is to blame: for the unusual economic backdrop, as policy uncertainty may be stalling hiring decisions and corporate spending.
The bottom line: Purchasing power is down, especially for young people, as inflation sticks around and companies are in no rush to hire or give raises.
