White House Says New Data Show Lower Inflation and Rising Real Wages

The article is referring to the January 13, 2026 Bureau of Labor Statistics (BLS) “Consumer Price Index – December 2025” news release (CPI-U, CPI-W, and C‑CPI‑U). In that release:

• “Headline” inflation is the All items Consumer Price Index for All Urban Consumers (CPI‑U), which rose 2.7% over the 12 months ending December 2025.
• “Core” inflation is the All items less food and energy CPI‑U, which rose 2.6% over the same 12‑month period. These are the standard headline CPI and core CPI measures BLS publishes each month in the CPI news release tables.

Core inflation is an inflation measure that excludes food and energy prices, while headline inflation includes all categories in the consumer price index.

Differences:

• Headline inflation (CPI-U, “all items”): captures price changes for the full basket of consumer goods and services, including food and energy.
• Core inflation (CPI-U, “all items less food and energy”): removes food and energy components because their prices are highly volatile and often driven by temporary shocks (weather, geopolitics, commodity cycles).

Why economists focus on core:

• Excluding food and energy makes core inflation a more stable indicator of underlying, persistent inflation trends.
• Central banks (like the Federal Reserve) and many forecasters use core measures to judge whether inflation pressures are broad-based and to guide monetary policy.

In the December 2025 CPI release used in the article, BLS explicitly reports both the all-items index (headline) and the all-items-less-food-and-energy index (core).

In official BLS data, “real wage” or “real earnings” gains are calculated by adjusting nominal (current-dollar) earnings for inflation using the CPI over a specified period.

BLS methodology on the day of the article:

• The January 13, 2026 BLS Real Earnings – December 2025 release states that:
  • Real earnings for all employees are calculated by deflating average hourly and weekly earnings with the Consumer Price Index for All Urban Consumers (CPI‑U).
  • Real earnings for production and nonsupervisory employees are deflated with the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI‑W).
• From December 2024 to December 2025, BLS reports real average weekly earnings for all employees rose 1.1% (using CPI‑U); this is the official over‑the‑year real wage change for that period.

The White House article’s claim that real private‑sector weekly earnings are “on track to rise 4%” and imply about $1,100 in average real annual wage gains appears to be derived from BLS real‑earnings data (nominal weekly pay adjusted by CPI‑U) over President Trump’s first full year in office, but the article does not provide the exact start/end dates or the precise series it used. The underlying adjustment, however, would follow the CPI‑based method BLS describes.

Public data as of early 2026 do not provide clear, causal proof that President Trump’s tariffs, tax cuts, and deregulation are what produced the specific changes in inflation and wages cited in the article. What can be said is:

1. Tariffs and consumer prices

• Tariffs typically raise import costs, and many studies of Trump’s 2018–2019 tariffs found they were largely passed through to U.S. importers and, in some sectors, to consumers, increasing prices rather than lowering them.
• The article cites Bloomberg commentary that automakers did not significantly pass the new 2025–26 tariffs into vehicle prices, consistent with the December 2025 CPI data showing new vehicle prices essentially flat year‑over‑year (+0.3%) and used‑vehicle prices up modestly (+1.6%). This suggests competitive pressures and other factors (productivity, margins, exchange rates) offset tariff effects in that sector, not that tariffs directly lowered prices.

2. Tax cuts, deregulation, and wages

• Economic research on the 2017 Tax Cuts and Jobs Act found mixed effects on wages: some studies attribute modest, delayed wage gains to lower corporate taxes via higher investment, while others find limited pass‑through to typical workers, with much going to profits and buybacks instead.
• For the 2025–26 policy changes cited in the article (new tax cuts and deregulation under Trump’s second term), there is not yet peer‑reviewed evidence isolating their impact on wage growth versus other drivers (tight labor markets, productivity gains, Fed policy, post‑pandemic normalization).

3. Inflation trends largely align with monetary policy and normalization

• By late 2024 and 2025, inflation was already falling from prior peaks as supply chains normalized and the Federal Reserve maintained restrictive interest rates. Fed officials in 2025 repeatedly linked slowing inflation primarily to these factors, not to new tariffs.

Overall, existing analysis supports that many forces—monetary policy, global supply conditions, energy prices, and productivity—contributed to lower inflation and evolving wage patterns. There is no strong empirical consensus that the specific White House policies named are the dominant or clearly proven cause of the changes the article highlights.

Other major indicators around December 2025 partially support the view that workers were doing better, but they give a more mixed picture than the White House framing:

1. Unemployment

• The BLS Employment Situation for December 2025 reports the unemployment rate at 4.4%, “little changed” in recent months, with modest job gains (+50,000). That is a historically low, though not record‑low, unemployment rate, consistent with a relatively tight labor market but not dramatic new improvement within late 2025.

2. Labor force participation

• The same report shows the labor force participation rate at 62.4% and the employment‑population ratio at 59.7%, both “changed little” over the year. Participation remains below pre‑2008 levels, indicating that, while conditions are stable, many potential workers are still not in the labor force.

3. Productivity and unit labor costs

• BLS productivity data show nonfarm business labor productivity rose 4.9% at an annual rate in Q3 2025, with unit labor costs falling 1.9%. Rising productivity alongside slower growth in labor costs can support real wage growth with limited inflation pressure, broadly consistent with real earnings rising while inflation moderates.

Taken together: low‑to‑moderate unemployment, flat participation, and solid productivity gains are consistent with modest real wage improvements without accelerating inflation. They support some of the White House’s positive interpretation but do not indicate an unusually strong or broad‑based labor market boom compared with other recent periods.

Future developments can change inflation and real wages in either direction, mainly through three channels:

1. Federal Reserve policy

• If the Fed keeps interest rates high or raises them to ensure inflation stays near its 2% goal, that tends to slow demand, which can further reduce inflation but also cool hiring and wage growth.
• If inflation remains subdued and the Fed cuts rates, borrowing becomes cheaper, potentially boosting growth and employment. That could raise nominal wages, but if demand runs too hot, it can also push inflation back up, eroding real wage gains.

2. Supply shocks

• New shocks to energy, food, or key inputs (for example, conflicts disrupting oil supply, climate‑related crop failures, or major shipping disruptions) can quickly raise headline inflation. If wages don’t keep up, real wages fall.
• Conversely, continued improvements in supply chains, logistics, and technology can keep cost pressures down, supporting lower inflation at a given wage growth rate.

3. International events and trade policy

• Escalating trade conflicts or broader tariffs can raise import costs and, over time, consumer prices, particularly if firms can pass those costs on. That would tend to raise inflation and weigh on real wages, unless offset by higher productivity or subsidies.
• Geopolitical events affecting global demand and capital flows (e.g., recessions abroad or financial crises) can reduce external demand for U.S. exports and investment, weakening the labor market and wage growth.

Because these forces interact, the path of inflation and real wages will depend on how tightly the Fed keeps policy, how severe any new supply shocks are, and whether trade and geopolitical tensions ease or intensify.