US workers hit by slowing income growth
JPMorgan research shows the young are affected the most as they battle weakening labour market and persistent inflation
Eva Xiao in New York
Income growth in the US has slowed to a near-decade low, with young workers especially hard hit, in a sign American consumers are struggling with a weakening labour market and persistent inflation.
Real income growth for workers aged between 25 and 54 this year dropped to its slowest pace — excluding periods of pandemic volatility — since the 2010s when the 2008 financial crisis led to high levels of unemployment, according to new research by the JPMorgan Chase Institute.
The slowdown is the latest sign of an increasingly distressed US labour market, and comes as Federal Reserve officials are expected to cut rates on Wednesday.
George Eckerd, co-author of the report, told the Financial Times: “We’re looking at a level of year-on-year growth that’s actually similar to [the 2010s] when the labour market was a lot weaker and the unemployment rate was higher.”
“Inflation is eating into otherwise decent levels of pay gains,” he added.
Inflation has eroded purchasing power across all age groups, even as nominal income growth has remained more or less consistent with pre-pandemic levels, according to the institute’s report.
Earlier this month, Fed chair Jay Powell signalled his support for more rate cuts even as economists worry about the potentially inflationary impact of President Donald Trump’s tariff policies, warning “downside risks to employment appear to have risen”.
The Fed is expected to end its three-year phase of quantitative tightening — or shrinking its balance sheet — this week because of concerns that funding is getting too tight in money markets.
Complicating the central bank’s challenge of balancing cuts to boost the economy without spurring inflation is the lack of up to date employment data from the Bureau of Labor Statistics because of the federal government shutdown.
Instead, US investors and others have turned to private, alternative data suppliers, such as payroll-processing company ADP.
Last month, it found private payrolls decreased by 32,000 jobs in September, the largest decline since 2023.
The report by the JPMorgan Chase Institute, the in-house think-tank of the Wall Street bank, drew on a variety of the group’s own data, including take-home pay, inflows into current accounts and transfers between individuals’ accounts.
Unlike payroll data, which looks at labour supply and demand, income growth reveals “how well people are doing”, Eckerd said.
The institute found the income slowdown is particularly affecting young workers, who may be more dependent on a dynamic labour market for career progression than their older peers.
Those aged between 25 and 29 typically have higher rates of income growth than older cohorts.
While this is still true, the gap between this group and others has narrowed and remained low since 2023.
This “flattening” of younger workers’ income growth compounds the cohort’s housing woes; they are less likely to own homes and are more exposed to the housing affordability crisis, said Eckerd.
While there has been a big increase in stock market participation by young people, by dint of their age this cohort will not have benefited as much as their older peers from the past decade of strong returns.
The slowing income growth for younger workers is “not an auspicious sign”, Eckerd said.
“Is it going to be permanent?
It’s too early to tell.”
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