The rising cost of living spurred by President Donald Trump’s war of choice in Iran continues to wipe out wage increases for U.S. workers, according to new economic data released Wednesday.
The Labor Department reported that inflation rose to 3.7% last month while nominal wages grew by only 3%, meaning workers received an effective pay cut due to higher prices.
Real wages — earnings that are adjusted for inflation — serve as perhaps the best marker for how workers are faring in the economy. They have declined year over year for six straight months after the U.S. and Israel attacked Iran and destabilized oil markets, driving up fuel prices that filter throughout the economy.
Economists struggled to find much good news in Wednesday’s data.
“Inflation has nearly wiped out all wage gains since January 2025,” Heather Long, chief economist at Navy Federal, said on X. “That’s how big of gamechanger the war in Iran has been on Americans’ finances.”
The decline in real wages is a big reason people feel the economy is so crummy despite low unemployment. Poll after poll shows voters do not approve of Trump’s handling of the economy or the war.
Joseph Brusuelas, the chief economist for RSM, said the decline in real wages “is intensifying the very real cost of living crisis that a majority of American households are experiencing.”
“The problem is stubborn and sticky inflation,” Brusuelas said on X, predicting the Federal Reserve would have to raise interest rates at least twice more to tame it.
via Associated Press
According to the Labor Department, higher consumer prices last month were driven in large part by a 9.1% increase in the price of gasoline. Prices went up for used cars and trucks, airfare, housing, clothing and takeout food, though grocery prices dropped slightly.
The surge in fuel prices is turning into a political disaster for the president and Republicans, who are trying to cling to their House and Senate majorities in next month’s elections. Gasoline prices now average $4.33 a gallon nationally, up from $3.08 a year ago, while diesel prices recently hit a record high of $6.53 and now stand at $6.30, according to AAA.
Trump has struggled to find policies that would push down gas and diesel prices without a resolution to the war and a reopening of the Strait of Hormuz, the crucial shipping route where Iran has attacked oil tankers.
The administration floated then abandoned a diesel export ban and later said it was looking at a temporary gas-tax moratorium. Late last week, they announced a deal with Russia to relax sanctions over the war in Ukraine and allow Russia to import diesel to the U.S., but energy analysts are skeptical the move will reduce U.S. prices.
As one economist recently told HuffPost, “All of these Band-Aids have limited effect, no effect or, in some cases, the opposite effect.”