Real income growth shifts down, especially for the young

Executive summary

Amid a softening in the labor market and reduced dynamism, this report measures income growth at the individual level and examines disparate outcomes across age groups.

We find:

• Real income growth slowed to near-decade lows: Median income growth among 25–54-year-olds declined in early 2025 and remained low through September, hovering near decade-long lows after adjusting for inflation.
• Young workers faced the sharpest slowdown: Young people in our sample—workers aged 25–29—have experienced a more marked slowdown in income gains, potentially a function of the reduced pace of job-to-job transitions across the economy, reflected in lower hiring and quit rates.

Weakening labor market dynamism weighs especially on young workers, who rely to a greater extent on job switching to climb the career ladder.¹ Monetary policymakers have noted outcomes for this group, in part because they tend to be more sensitive to the overall state of the economy.² Slower wage gains add to challenges facing younger generations: their greater exposure to the decline in housing affordability and relatively late entry into a rising stock market make it harder for them to achieve financial goals.

Introduction

The labor market has softened. The official unemployment rate has risen about a percentage point from its low in 2023, and the pace of jobs growth has fallen. Indicators of labor market dynamism—captured via gross hiring or quits rates—have fallen to levels not seen in a decade, outside of the pandemic disruption.³ Amid uncertainty, measures of the intensive margin of the labor market—how incomes are changing—provide a complementary perspective to headline payroll gains, helping assess balance in the labor market.

In this Brief, we measure median year-over-year income growth in a population-representative sample of deidentified data over December 2010 through September 2025.⁴ The income measure is take-home pay, comprising inflows into checking accounts, excluding transactions such as Unemployment Insurance, Economic Impact Stimulus payments from 2020–21, and transfers between individuals’ accounts. We report the median of year-over-year changes in trailing 12-months’ worth of income, following a method similar to those based on public microdata.⁵

We find median income growth in September 2025 dipped to about 2 percent in real terms for prime-aged individuals, while nominal income growth remained just under 5 percent. Real income growth among individuals aged 25–29 has also fallen compared to other groups, implying less growth for people early in their careers. These dynamics show a downgrade in purchasing power growth for all individuals and a meaningful loss of momentum in early-career earnings advancement.

Finding 1: Real income growth weakened through 2025, reaching its lowest sustained pace since the early 2010s.

As of September, median income growth for prime-age individuals—those between 25–54 years old—was just under 5 percent, or 2 percent in real terms, adjusting for changes in the Consumer Price Index All Items.⁶ Figure 1 shows that in terms of real purchasing power, the recent level is near the slowest pace of growth seen in a decade, outside of the pandemic and subsequent inflation. The last period of sustained growth below the current reading was in the early 2010s, when the unemployment rate was still elevated from the Great Recession. 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.

Finding 2. The decline in income growth is most pronounced among young workers, signaling reduced job-to-job opportunities.

The slowdown in real growth has been most pronounced for younger individuals. Early in most individuals’ working lives, people tend to have lower levels of income but relatively high growth.⁷ However, income advancement for this group—those aged 25–29 in our sample—has slowed down by more than older individuals over the past few years. The two panels of Figure 2 show income growth by age groups and a breakout showing differentials at points in time. Growth for the 25–29-year-old group is now just 4 percentage points higher than a typical mid-career individual in their 40s. This difference represents a shift down from the 6–7 percent level prior to the pandemic, a range that largely persisted through 2022. Looking back further, the recent reading suggests a smaller youth-advantage than in the early 2010s, when the labor market was still recovering from the Great Recession.

Outcomes currently facing the younger population carry implications beyond concern for this potentially vulnerable group: they can provide a signal for the state of the overall labor market. Academic and policy work focusing on the unemployment rate of different demographic groups have found that young people often exhibit excess sensitivity to the overall state of the labor market (Aaronson, et al. 2019). Consistent with these findings, the relative slowdown in growth for the younger segment in the population is a potential function of the slowdown in broader labor market dynamism—seen in lower gross hirings and quit rates.⁸

Implications

Breaking out income gains into a nominal and real component and by age group reveals basic facts that help dimension the broad slowdown in the labor market. First, persistently high increases in consumer prices have been a real headwind to purchasing power in recent years. Inflation hasn’t yet fallen to the Fed’s two percent objective, meaning that the solid recent rate of nominal income gains corresponds to nearly the weakest gains in real purchasing power seen over the past decade. Second, the recent slowdown in median income gains has been led by the young. While private sector layoffs remain low, the labor market is producing fewer new job matches. This can disproportionately affect younger people that rely on a dynamic labor market to climb the career ladder, explaining their slower pace of gains relative to historical trends.⁹

The decline in income gains comes at a challenging time for younger generations. People in their twenties and early thirties are less likely to own homes than older individuals, meaning the rise in housing costs since 2022 has hit this group particularly hard.¹⁰ And while they are getting an earlier start to investing, they haven’t benefited as much from the past decade of strong returns.¹¹ Without stronger income gains, they may need to wait even longer for their budgets to catch up to their financial goals.

Media Contact
Shelby Wagenseller
Shelby.Wagenseller@jpmchase.com