{"text":[[{"start":7.2,"text":"Workers’ pay packets are shrinking in relation to prices in a growing number of rich countries as the energy shock unleashed by the Iran war chokes off a nascent recovery in real wages."}],[{"start":18.95,"text":"The squeeze on consumers in the UK, US and elsewhere comes as they face sharp increases in prices for petrol and airfares triggered by the closure of the Strait of Hormuz. "}],[{"start":30.1,"text":"US inflation jumped to an annual 3.8 per cent in April, while average hourly earnings increased by 3.6 per cent over the year, meaning that prices were rising faster than earnings for the first time in two years."}],[{"start":43.45,"text":"“The war is roiling supply chains and will push prices higher [than] before, even if the strait were to open tomorrow,” said Diane Swonk, chief economist at KPMG US. "}],[{"start":55.25,"text":"UK workers face a similar squeeze. Average earnings grew at an annual pace of just 0.1 per cent in real terms in the three months to March, excluding bonuses, and are set to fall outright as inflation rises over the coming months against a backdrop of very weak hiring."}],[{"start":73.8,"text":"In the Eurozone, the energy shock represents a fresh setback for workers who had only just clawed back the ground lost in the 2022 inflationary shock. "}],[{"start":83.39999999999999,"text":"The drag on real wages comes as diplomatic efforts to end the Middle East conflict have intensified in recent days. On Monday, Iran’s top negotiators travelled to Doha as mediators pushed to hammer out the final details of a peace agreement that would involve the gradual reopening of the strait."}],[{"start":101.94999999999999,"text":"Claus Vistesen, at the consultancy Pantheon Macroeconomics, said he expected real wage growth to be close to zero across the Eurozone in 2026. He said it could already be “deeply negative” in countries such as France that had no fiscal space to shield consumers."}],[{"start":null,"text":"
"}],[{"start":119.14999999999999,"text":"The squeeze on workers creates two separate worries for policymakers. One is that households will rein in spending, worsening the hit from the war to economic growth and forcing companies to cut jobs as demand slows."}],[{"start":133,"text":"The other possibility is that workers will succeed in bidding up wages, fuelling persistent inflation even once energy prices fall. "}],[{"start":140.85,"text":"Michael Feroli, chief US economist at JPMorgan, said the real wage shrinkage was “all about the Middle East conflict” so if the Strait of Hormuz reopens and energy prices retreat, “I would expect real wages to start growing again”."}],[{"start":156.29999999999998,"text":"But Swonk said high inflation would “narrow profit margins and take a toll on hiring,” adding: “It is in that way that persistent bouts of inflation become a labour market problem.” "}],[{"start":167.89999999999998,"text":"In the UK, workers were already losing bargaining power at the onset of the conflict, with unemployment rising and vacancies at a five-year low. "}],[{"start":176.49999999999997,"text":"Support for family finances announced by the UK government last week — in the form of VAT cuts on summer trips and meals out, and a delayed increase in fuel duty — was “not completely insignificant” but would not prevent the country facing its fourth period of falling real wages since 2008, said James Smith, chief economist at the Resolution Foundation think-tank. "}],[{"start":197.79999999999998,"text":"In the euro area, compensation per employee grew almost 2 per cent in 2025, as unemployment hovered near record lows."}],[{"start":206.29999999999998,"text":"But a measure of negotiated wages, tracked by the ECB, suggests that unions are struggling to secure such generous terms this year as workers become more worried about job security. "}],[{"start":217.35,"text":"Vistesen, of Pantheon Economics, said France faced a particularly tough outlook. “France is not cutting taxes because they can’t afford it . . . French consumers are really taking it on the chin,” he said."}],[{"start":229.1,"text":"He drew a contrast between their situation and that of consumers in Germany, where workers are in a weak position to bargain for higher wages but will be partly protected from the most immediate price rises by cuts in fuel duty. "}],[{"start":241.4,"text":"Simon Wells, chief European economist at HSBC, said workers in some European countries were better protected from rising prices than their US counterparts — pointing to wage indexation, bigger savings buffers, and generous fiscal support offered in Spain in particular. "}],[{"start":259.9,"text":"Andrew Kenningham, chief Europe economist at the consultancy Capital Economics, said that while the hit from the Iran war remained much smaller than the energy shock of 2022, it now looked increasingly likely that the Eurozone economy would fall into a mild recession. "}],[{"start":275.7,"text":"“The bigger the hit to the economy, the slower the recovery in real wages,” he added."}],[{"start":281.9,"text":"Data visualisation by Keith Fray"}],[{"start":290.59999999999997,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1779774237_5519.mp3"}