ITR Economics – December 20, 2024
With the upcoming trends in inflation-adjusted household income, it is imperative to manage labor costs and strategize for future economic conditions.
The rise in inflation-adjusted household income stalled in 2022–2023 after appreciably surging going into the COVID-19 pandemic years. Going forward:
- Look for the rising trend to resume in 2025 as the economy heals.
- This trend will be beneficial for firms in the B2C space.
- Beware that discretionary income is shifting.
- Expect income trends across age brackets depicted on the chart to decline in the 2030s.
Look for the Rising Trend To Resume in 2025 as the Economy Heals
It is normal for household income to rise over time, especially when employment is high, unemployment is low, and the labor market is tight. These three conditions will prevail as we enter the post-COVID normalization of the US economy. ITR Economics has shown in various presentations that the ratio of job openings to available people is such that we should expect demand and competition for talent to heat up again as the economy shifts progressively back into a rising trend in 2025. You will be paying more for labor through 2029. Managing that impingement on margin is crucial for profitability over the next five years.