We tracked the path of CPI, wages, and real (or inflation-adjusted) wages during President Biden’s term of office, and here we continue to track these three indicators during President Trump’s second term. We also examine the unemployment rate during this period.
The data used here is the headline CPI (the seasonally adjusted CPI-U), and average hourly earnings of all employees in the private sector, also seasonally adjusted. These data are released by the Bureau of Labor Statistics every month, and currently both data series are available through January 2026.[1]
The first graph below shows the CPI, rebased to 100 at the beginning of President Biden’s administration (January 2021) and at the beginning of President Trump’s second term (January 2025). For President Biden, the price level in the graph is set to 100 in January 2021, his inauguration, and then that indexed price level changes each month by the same percent as the CPI for all months through January 2025, the last month of the Biden Administration.
The Federal Reserve’s 2% per year target for inflation is also shown.[2] That dashed line indicates the path the CPI would take if it was to grow monthly at a rate that generated 2% per year inflation.
For President Trump, the graph again has a rebased price level set to 100 in his inauguration month, January 2025, and then that indexed price level changes by the same percent as the CPI changes for all months that follow. Currently the available data is through January 2026, the 12th month from President Trump’s inauguration month.
The price graph is revealing. The blue line shows the movement in the CPI during President Biden’s term, with the initial period of rapidly rising prices from January 2021-June 2022, followed by slower but still-rising price level growth from that summer of 2022 until the end of his term.
The red line shows the price level increases during these early months of the President Trump’s current term. It is hard to distinguish the red line from the Fed’s target line (the dotted line). Prices have risen from January 2025 through January 2026 by 2.4%, not far above the Fed’s 2% target path. If the Fed’s 2% target for inflation in the PCE Price Index is roughly equivalent to a 2.33% inflation rate in the CPI, then CPI-inflation over this period is only slightly above the Fed’s target.
What about real wages? Real wages are calculated as the wage rate – average hourly earnings – divided by the CPI. Real wages increase when the growth rate in wages is higher than the growth rate in the CPI, i.e. when the rate of growth of wages exceeds the inflation rate. Real wages fall if the growth rate of wages is slower than the inflation rate.
Figure 2 graphs real wages for both the second Trump and the Biden presidencies, again with the real wage set to 100 at the beginning of each term in office, and the real wage index changing each month by the same percentage change as the calculate real wage for the period graphed. Real wages fell during the early period of the Biden Administration, as the CPI increased more rapidly than growth rate of wages, resulting in a decline in the purchasing power of wages. This occurred during the period from January 2021 – summer 2022. Afterwards, real wages increased, slowly, for the remainder of President Biden’s term in office. However, the purchasing power of real wages never quite made it back to the level of January 2021.
During President Trump’s first year of his second term, wages grew at 3.7% while prices rose 2.4%. The result has been an annualized growth in real wages -- in the purchasing power of wages -- of 1.3%. To put this in perspective, real wages from March 2006 through August 2025 grew by an average annual rate of 0.6%. The growth rate of real wages over the first year of President Trump’s current term is nearly twice this long-term average.
Finally, what about the unemployment rate? Figure 3 shows the unemployment rates during the months of the two administrations. President Biden took office during the COVID pandemic, with an unemployment rate of 6.4%. That unemployment rate fell steadily until the middle of 2022, at which point it hit a plateau of about 3.5%. During the last 18 months of his presidency, the unemployment rate rose somewhat, but at the end of his term the unemployment rate was 4.0%.
To put this in perspective, the Federal Open Market Committee reports in their Survey of Economic Projections that the median projection of the unemployment rate ‘in the longer run,’ that is after 2028, is 4.2%. If we take this as one institution’s concept of the ‘full employment rate of unemployment’ or what is also called the ‘natural rate of unemployment,’ then for many months of the Biden administration the unemployment rate was significantly below this number indicating a very tight labor market, and even by the end of the administration the unemployment rate was still slightly lower than this long run unemployment rate.
President Trump was inaugurated in January 2025 with the unemployment rate at 4.0%. The unemployment rate rose slightly in the first few months, to 4.2%, but then read 4.1% in June 2025, his fifth month. From there the unemployment rate rose every month, reaching a high of 4.5% in November. In the following two months the unemployment rate ticked slightly downward, to 4.4% in December and to 4.3% in January 2026. The unemployment rate was above 4.2% for several months of this first year, by the twelve month mark, the unemployment rate remained just slightly above the FOMC’s 4.2% long run unemployment rate.
The inflation story for President Trump’s second term has been, so far, a good one, especially as contrasted with his predecessor, and considering the difference in the long term measurement differences between the Fed’s inflation target (the PCE Price Index) and the CPI. The real wage story has also been favorable. At the same time, the unemployment rate tells a less positive story, although by the end of the year the unemployment rate ended up only slightly above the FOMC’s 4.2% median projection of the longer run unemployment rate.
FOOTNOTES
[1] Data on the CPI-U for the month of October is missing. The government shutdown in the fall included workers at the BLS, leading to an absence of the survey data necessary to construct the CPI for that month.
[2] The Federal Reserve’s 2% year-over-year inflation target is stated in terms of the Personal Consumption Expenditure Price Index. The CPI generally overstates inflation relative to the PCE Price Index. From January 2010 to September 2025, the PCE Price Index increased at an annual rate of 2.25% while the CPI increased at an annual rate of 2.58%, a difference of 0.33%. This suggests that if the Fed were to exactly hit its 2% PCE Price Index inflation target, the CPI inflation rate would likely be 0.33% higher, or 2.33%.