The inflation-adjusted wage gains that many American workers accumulated during the first year of President Donald Trump's second term have largely disappeared following a recent spike in consumer prices.
Real wages for production and nonsupervisory workers, a closely watched measure of earnings for rank-and-file employees, are up just 0.1% since Trump returned to office in January 2025 after a sharp erosion of purchasing power over the last four months. The decline came as inflation accelerated, largely driven by rising energy costs tied to the ongoing conflict involving Iran.
Data released by the U.S. Bureau of Labor Statistics on June 10 showed consumer prices increased 4.2% in the 12 months through May, the highest annual inflation rate since April 2023. Energy prices rose 23.5% over the same period and accounted for more than 60% of the monthly increase in the Consumer Price Index
Bureau of Labor Statistics (BLS) data showed the CPI rose 0.5% in May alone. Inflation excluding food and energy increased 2.9% from a year earlier. According to the agency, energy prices rose 3.9% in May after increasing 3.8% in April and 10.9% in March.
At the same time, wage growth has struggled to keep pace with rising prices. Inflation-adjusted hourly earnings for all private-sector workers were unchanged compared with January 2025, while earnings for production and nonsupervisory workers were only marginally higher, according to an analysis published by Axios. The report noted that nominal hourly earnings for production and nonsupervisory workers increased a cumulative 4.9% since January 2025, but inflation rose by a similar amount during that period, effectively wiping out most of the gains.
The latest government figures underscore that trend. Real average hourly earnings for production and nonsupervisory workers fell 0.3% from April to May after accounting for inflation, while real average hourly earnings for all private-sector employees declined 0.1% during the month, according to BLS.
The recent inflation surge has been closely linked to higher fuel and energy costs. Producer prices in May recorded their largest annual increase in more than three years, with gasoline prices jumping 23.4% and energy costs accounting for nearly 80% of the monthly increase in producer inflation, a Reuters report said. The news agency said the rise was largely connected to disruptions and uncertainty stemming from the conflict involving Iran and its effects on global energy markets.
The White House has pointed to the wage gains recorded before the recent inflation spike as evidence that workers were recovering purchasing power lost during previous years of elevated inflation. White House spokesman Kush Desai said American workers had regained a significant portion of earlier real-wage losses before the latest rise in energy prices.
Trump also downplayed concerns following the inflation report. Speaking in the Oval Office after the data was released, the president said he was not worried about the increase in inflation and argued that oil prices would decline once the conflict ends, according the Axios report.
Despite the recent setback, inflation pressures outside energy-related sectors have remained comparatively restrained. The core CPI, which excludes food and energy, increased 0.2% in May and 2.9% over the past year, according to BLS, suggesting that much of the recent inflation acceleration has been concentrated in energy markets rather than spreading broadly across consumer goods and services.
