Americans' income growth was weak this year, accounting for inflation
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Americans haven't got much of a pay raise this year — income growth overall has been "tepid," new data from the JPMorgan Chase Institute shows.
Why it matters: Weak pay growth hits harder with inflation running hot— and helps explains why so many Americans feel pessimistic about the economy.
- It's a headwind both for consumer spending, which powers the U.S. economy — and for President Trump, who is facing higher disapproval ratings over Americans' affordability woes.
Zoom in: For the past few months, incomes have been growing only very slightly after accounting for inflation, according to bank account data analyzed in the report.
- Growth is at the weak range seen in the early 2010s, when the economy was climbing out of a bruising recession and the labor market was meh.
Zoom out: The labor market now is also weak. Even though the unemployment rate is lower than in that post-recession era, employers aren't hiring and those just entering the labor market are facing a particularly tough time.
By the numbers: Real median income growth was at 1.6% on average for the three months ending in October, per the report.
- In 2019, average income growth was 4.6%.
- It spiked in 2021 and early 2022 as the job market boomed —touching 8%— and went negative for a few months in 2023 as inflation started to hurt.
- Last year, income growth averaged around 2%.
Growth is also below historic trends for young adults age 25-29, who typically have the highest pay increases as they start their careers.
- Their incomes are still growing faster than for older workers — 5.2% on average this year. But in 2019, income growth was 9.7%.
- Workers age 50-54, who do typically see lower income growth are now in negative territory at -0.1%. Last year, it was above 1%.
Where it stands: Bank balances, after falling in the years after pandemic supports faded away, are now holding steady, per the report.
- Before the pandemic, balances were growing at a rate of about 6% a year — buoyed by higher income growth during a time of low inflation.
- These days, households have lower income growth and they're spending to keep up with inflation and can't accumulate as much in their bank accounts.
Yes, but: It's possible that some of the money that folks would be putting in the bank, they're now sending to higher-yielding investment accounts. The data doesn't consider those holdings.
The bottom line: "Income growth isn't what it used to look like," says Chris Wheat, president of the JPMorgan Institute.
- And that's bumming people out heading into the busiest shopping season of the year.
