Real income sustains weak trend, while cash balances remain stable

Executive summary

Households are going into the end of the year with weak income growth and bank balances that remain flat, after adjusting for inflation. Young people continue to underperform the typical early career growth pattern amid the slowdown in hiring, while about half of workers aged 50-54 are experiencing negative real year-over-year income growth as of October 2025. Households’ cash balances have been holding steady on a real basis, although households putting more money in higher yield alternatives may be weighing on bank balance growth. 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. 

Introduction

The labor market has been trending softer, albeit with a wide band of uncertainty, and inflation pressures remain prominent.¹ Aggregate spending growth has remained resilient this year, according to a range of indicators, while bank account balances remain flat and the savings rate has been below pre-pandemic trends.² In this brief, we provide an update on household financial health, covering median real income growth and cash savings dynamics.³

Median real income growth has been steady at a low level for several months, with the October reading below 2 percent for prime-aged individuals—close to the range observed over the early 2010s when the labor market was weak. Growth for individuals aged 25–29 is below historic trends for younger workers. Workers aged 50-54, who have higher income levels but lower growth, are now experiencing negative growth in purchasing power. While median real cash balance levels have been stable over most of 2025, this differs from pre-pandemic trends, where real balances grew steadily as households aged. Higher-income individuals have had continued decreases in real balances, potentially a result of transfers to higher yielding accounts.

Going into the end of the year, many consumers’ budgets will be constrained by stagnant real income growth, though some may draw on ample stock market gains to augment spending. Especially among younger and lower-income individuals—who are relatively disadvantaged by high housing costs and hold less stock market wealth—consumers may have just enough to spend, but not enough to splurge.⁴

As of October, median income growth for prime-age individuals—those between 25–54 years old—was 1.6 percent in real terms, adjusting for changes in the Consumer Price Index for All Items.⁵ Figure 1 shows that the recent level is within the range observed in the early 2010s, when the unemployment rate averaged 7 percent, notably higher than the current 4.3 percent level. 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.

While younger workers are experiencing slow growth relative to their usual rapid pace, the slowdown in overall growth means that older workers’ nominal gains are now slightly below CPI inflation. The Institute’s last update emphasized the disproportionate effect of the low hiring rates for younger people, who rely on job switching to advance their careers. While this is true, negative real growth for older workers can lead to challenging adjustments, especially for lower-wealth individuals who haven’t benefitted from years of strong gains in housing and stock prices. The 50-54 age group previously saw negative real annual growth during the post-pandemic inflation, along with some of the other age groups, and during the early 2010s. While older workers have higher and more stable pay, their slower annual gains make it easier for an uptick in inflation or weakening in the labor market to send them into negative territory. ⁶

Median real bank balances in October 2025 are up 23 percent relative to pre-pandemic levels in 2019, but have been flat since early 2024.⁷ During the pandemic, balance growth dramatically outpaced typical annual growth and households accrued large cash balances, which then decreased over time. Balances stopped decreasing and remained relatively steady from early 2024 onward, but we would expect balances to increase over time as households age and income and savings increase. For example, during the five years prior to the pandemic, real cash balances grew steadily at a rate of just over 6 percent per year.⁸ If balances had grown at that rate since the start of 2020, they would be up 40 percent in October 2025 relative to 2019. However, those historical trends are based on a period of higher income growth that has not continued into recent years, as shown in Finding 1. Lower income growth would typically lead to lower balance growth. However, flat balance growth still indicates that households might not be accumulating cash savings as we would expect, keeping up with inflation but otherwise not amassing additional cash reserves in their checking and savings accounts.

We observe different trends in checking and savings account balance growth by income, with low-income households returning to positive year-over-year growth last year, while balances are still declining slightly for high-income households.⁹ Across income quartiles, balance growth turned negative in 2022 as households depleted their post-pandemic elevated cash reserves. Balances rebounded faster for low-income households, changing from negative to positive growth in September 2024, with growth of 2 to 6 percent during 2025, dipping slightly to 1 percent in October 2025. In contrast, high-income households’ bank balances continue to decline, though at a slowing rate: only 2 percent negative in October 2025.

The above trends are based only on checking and savings account balances, but the use of investment brokerage accounts has increased notably in recent years and has remained elevated. Although investment activity increased for all income groups, the ratio of high-to-low-income investors was at least two-to-one from 2020 onward, meaning that high-income households will likely have benefitted the most from investment gains (Wheat and Eckerd 2024). If households have increased the share of their cash reserves kept outside of checking and savings accounts, bank balances may continue to decrease even while total cash reserves increase, and we would expect bank balances to be below historical trends.

While we cannot directly observe total cash reserves, we approximate balances across a household’s full set of liquid accounts by tallying observed transfers out of checking and savings accounts and approximating returns to those investments over time.¹⁰ Figure 5 shows that total cash reserves have grown more than bank balances alone, with growth positive for all income groups for at least the last year. Overall, total cash reserves appear to be on the rise once we account for the fact that households are holding a greater share of their cash outside of their checking and savings accounts.

Media Contact
Shelby Wagenseller, Shelby.Wagenseller@jpmchase.com