Inflation is weighing on US incomes to a degree comparable to the 2008 Great Recession – potentially reducing consumer spending power ahead of the crucial holiday shopping season, according to a JPMorgan report released Tuesday.
As of October, the median income growth for people ages 25 to 54 stood at just 1.6% once adjusted for inflation, according to an analysis of bank account data.
“Households are going into the end of the year with weak income growth and bank balances that remain flat, after adjusting for inflation,” JPMorgan Chase Institute said in a statement.
In some cases, lower checking and savings account balances could reflect money being diverted to higher-yield money markets or other funds to take advantage of current interest rates, the institute noted.
But that 1.6% growth is similar to the rate seen in the early 2010s, when the unemployment rate was stuck at 7% and slow to come down, the analysis emphasized.
The unemployment rate ticked up to 4.4% in September, the most recent month for which data are available — the highest level since October 2021.
The JPMorgan analysis noted that young workers are not enjoying the same strong income gains normally seen early in their careers when they are frequently changing jobs and earning promotions.
Meanwhile, about half of workers ages 50 to 54 have suffered an earnings loss after accounting for inflation.
Since older workers typically see slower wage gains, it is “easier for an uptick in inflation or weakening in the labor market to send them into negative territory,” the analysis stated.
“With pandemic-era excess cash liquidity in the rearview mirror, consumers are facing a holiday spending season with budgets tempered by tepid income growth but augmented by strong stock market gains – the latter highly unequally distributed,” the JPMorgan Institute said.
“Importantly, nominal growth remains roughly consistent with pre-pandemic levels, but real purchasing power gains are at a relatively low level because of the higher pace of consumer price increases.”
US inflation rose 3% on a yearly basis in September, the fastest rate since January, according to the Consumer Price Index, which was released last month.
But wholesale inflation ticked up just 0.3% in September, keeping the annual figure at 2.7%, the Bureau of Labor Statistics said Tuesday.
Retail sales rose 0.2% in September, though a 0.3% jump in prices meant spending for the month actually fell 0.1%, the Commerce Department stated Tuesday.
Also on Tuesday, a survey from the Conference Board found consumer confidence plunged to 88.7 in November – down from 95.5 in October. That’s the lowest level since April.
Only 1% of consumers said business conditions were “good,” down from 21% the previous month, and just 6% said jobs were “plentiful,” a steep fall from 29% in October.
With Post wires
