By David Enna, Tipswatch.com
The Bureau of Labor Statistics, which compiles and publishes monthly U.S. inflation reports, posted a cryptic announcement this week noting it was scaling back collection of data on prices.
BLS is reducing sample in areas across the country. In April, BLS suspended CPI data collection entirely in Lincoln, NE, and Provo, UT. In June, BLS suspended collection entirely in Buffalo, NY.
Sample reduction and collection suspension affect both the commodity and services survey and the housing survey. These actions have minimal impact on the overall all-items CPI-U index, but they may increase the volatility of subnational or item-specific indexes. The number of imputed items and the response rates increased in April due to these actions. BLS makes reductions when current resources can no longer support the collection effort. BLS will continue to evaluate survey operations.
The cutbacks are a reaction to staffing shortages after deep job cuts earlier this year in the Labor Department and other U.S. agencies. The BLS acknowledged a “staffing shortage” in an email sent to economists, the Associated Press reported.
These cuts and others have raised alarms that U.S. economic reports could be sliding toward inaccuracy or be otherwise compromised. The AP noted:
The cutbacks have intensified worries among economists that government spending cuts could degrade the federal government’s ability to compile key economic data on employment, prices, and the broader economy. The BLS also said last month that it will no longer collect wholesale prices in about 350 categories for its Producer Price Index, a measure of price changes before they reach the consumer. …
“The PPI is cutting hundreds of indexes from production, and the CPI is now being constructed with less data,” Omair Sharif, chief economist at the consulting firm Inflation Insights, said in an email. “That alone is worrying given that we’re heading into the teeth of the tariff impact on prices.”
The BLS, however, said the cuts would have “minimal impact” on overall inflation data, while noting volatility could increase for some items and regions.
What does it mean?
At this point, the move appears to be a reaction to staffing cuts and not an attempt to “cook” the U.S. inflation numbers, as some people have feared. Erica Groshen, a former commissioner of BLS, told the AP the agency has lost about 15% of its personnel since the beginning of the year.
But that doesn’t mean we shouldn’t be wary. Earlier this year, the Trump administration disbanded the Federal Economic Statistics Advisory Committee, which worked with BLS on fine-tuning data-gathering. The latest calendar item for the FESAC, dated June 13, says: “Meeting Canceled.”
That was an odd move at a time of staffing cuts. Members of the FESAC, which was chartered to continue through September 2026, essentially worked for free, receiving only travel expenses. The agency’s total annual budget was about $120,000 for five staff people.
Don’t panic. Yet.
From Wall Street Journal coverage yesterday:
Economists say the staffing shortage raises questions about the quality of recent and coming inflation reports. There is no sign of an intentional effort to publish false or misleading statistics. But any problems with the data could have major implications for the economy. …
If the government’s enumerators can’t track down a specific price in a given city, they try to make an educated guess based on a close substitute: say, cargo pants instead of slacks. But in April, with fewer workers on hand to check prices, statisticians had to base their guesses on less comparable products or other regions of the country—a process called different-cell imputation—much more often than usual, according to the BLS.
The WSJ article included a chart showing the large spike in “estimation” used in the April inflation report. (Remember, estimation is just a fancy word for educated guessing.)
Michael Ashton, an inflation expert who founded the firm Enduring Investments, posted on X a non-alarmist reaction to the BLS announcement:
So, without any evidence to the contrary, I will accept that the U.S. inflation numbers will continue to be “relatively accurate,” which is about as good as they ever were. But we have to accept that budget and staffing cuts at the BLS are going to lead to less accuracy, not more accuracy.
Accuracy, while not perfectly attainable, should be the ultimate goal. These U.S. inflation reports are hugely important because they lead to:
- Cost of living adjustments for Social Security recipients.
- Federal Reserve decisions on future interest rates.
- Interest rate changes for Series I Savings Bonds.
- Principal adjustments for Treasury Inflation-Protected Securities.
- Wage increases under some union contracts.
Be aware. Or to put it another way: “Beware.”
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Treasury Inflation-Protected Securities 
All the big boys/girls cover this in their drafting of escalation clauses…the Q is how many are changing those metrics?
Problem with these point in time numbers they are referenced to a previous prices that already may have resulted in prices the average American could not afford or did not want to pay. So a current low number is meaningless. Myself I quite buying new cars and leases cuz the prices just got physiological too high. Its now only a few dollars more to go to a steakhouse then just buying the ingredients and grilling. I only have Ibonds and glad I got my gains from the last 20yrs locked in, unless the dollar crashes. Im just fixed income now +/- 50%.
I don’t really understand how the government **could** cook the books for CPI even if they wanted to. Let’s say they wanted inflation to be 1% lower each year than it really was (that’s a huge figure, but even if it was only 0.2% or 0.1% lower the same argument would apply).
After ten years, prices would then be permanently 10% higher than actually observed. Unless they later made inflation better than it was this would be a new permanent change, and so on. After 50+ years of doing this anyone could easily observe that these numbers are 50% fantasy. Can anyone point out to me how this argument is incorrect? I just don’t see how the USG could fool us year in and year out with lower inflation than really exists…
But, would this be noticeable after one year, or two or three? Those responsible would likely be long gone in 10 years.
Except The Fed is fooling itself with a numbers game. Notice clever statment that the inflation rate is back to before Covid levels, but is worded as if the prices were back to pre Covid levels. https://www.federalreserve.gov/econres/notes/feds-notes/new-tools-to-monitor-inflation-in-real-time-20241220.html
True, over the long run the U.S. would get called out if doctoring was going on. But definitely not in the short term. For example, when you are doing a large number of “estimations” you are probably going to fall back on existing trends, meaning a monthly inflation rate of 0.2%. That could happen even without an overt strategy and it could mean the markets and the Fed miss a turning point in inflation, until it is too late.
Something to remember amid concerns about accuracy is that the BLS methodology is a black box. Their calculations regarding inflation are not publicly available and therefore not reproducible.
Perhaps these staff reductions have a silver lining and present an opportunity to revise and improve the methods used to calculate the CPI. The current method of conducting personal surveys and doing field checks of commodity and item prices is truly archaic and full of pitfalls and inefficiencies. The data collection methods result in very small samples and even rely on personal recollections on the cost of an item or service.
The prices of all the items included in the CPI and the prices of all items not included in the CPI data sets are readily available without any surveys. The data is demographically available and can be seasonally adjusted to reflect the anomalies inherent in certain price categories. The use of AI to collect and analyze price data is an obvious solution. AI systems can collect price data from a vast array of sources, including online retailers, physical stores, and digital receipts, much faster and more comprehensively than traditional manual surveys. AI would enable real-time processing and analysis of price data, allowing for more frequent updates to the CPI and better tracking of rapid market change. Imagine the elimination of almost everyone working for the BLS and the CPI data being available on the morning following the last day of the month.
The theme now is to talk up the economy, is inflation up good for the administration? This is about spin now not accuracy.
Using AI to give us inflation or other economic data seems like a nice dream. Maybe researchers will be able to develop AI in ten or 20 or 30 years that can spit out reliable information, and I’ve read many science fiction stories over the past 4 or 5 decades that imagine reliable AI. But here in the real world of the present, AI has a serious hallucination problem. Remember Google AI’s advice to eat rocks to get essential dietary minerals? JFK Jr’s MAHA plan full of scientific references fabricated by AI? Repeated stories of lawyers being referred by judges to ethics panels for submitting briefs citing made-up legal authorities? Musk AI’s aggressive pushing of fabricated stories about mistreatment of Afrikaaners in South Africa (attributed to an unauthorized tweak of the programming)? I’m not ready to blindly rely on some computer programs whose workings nobody understands for critical economic information.
It might be time to panic for those that follow Washington. The theme of one party is not use any tried and true in place measurements that contradict their agenda forcthe rich. A lot of good people are gonna get hurt along with the bad ones if this continues. Midterms can part the red sea! 🙏 for a miracle but vote.
If it does come to pass that a strong feeling develops that the CPI numbers are being manipulated, I wonder whether TIPS would self-compensate for that to some degree. If investors feel that CPI is being underestimated, I imagine that would decrease demand for TIPS, which should (if I understand these things correctly) result in higher real yields at auctions. So, even if the inflation adjustments to principal are lower than they should be, investors would be getting a higher rate of interest. I’m pretty new to TIPS so I’m not sure, but does that seem plausible?
(But even if that does happen, I suppose it wouldn’t help with TIPS purchased previously.)
Inflation data has always been biased to the low side. How many people on this site commented that their “personal inflation” is a good deal higher than the official numbers.
Staff shortages? Call me uninformed, or even stupid, but I have a difficult time believing that ONE person, solely dedicated to collecting and accumulating the required data, wouldn’t be able to do this with 160 hours of work time per month. Most likely with zero need to ever leave a computer terminal to acquire the data. Not to mention script that can scrape the data from nationwide searches itself.
If I am wrong, call me out on it, I can handle it.
I am with you. Not sure just one person could do the job, but we have all heard the jokes about how many government workers does it take to screw in a lightbulb. They should be able to do the job just fine with 15% fewer people. If they worked smarter, not harder they could get the job done.
If you go to the BLS site, you can get locality-based CPI data (as well as indicies for a wide variety of economic sectors). In my 30-year career as an economist, I never once pulled data for a sub-national location. However, those data probably matter greatly to some entities–some employment contracts may be linked to the local CPI, for example. So to that extent, ceasing local data collection in those cities will matter to some, but probably not many. I would assume that BLS looked at number of accesses of locality data and found that almost nobody looked at Provo or Lincoln data.
How the BLS goes from locally-collected prices to the overall CPI-U has always been opaque to me. They have changed procedures several times; it seems the changes always reduce the reported rate of inflation. The government will always have an incentive to do that, so it will always be a source of concern. But beyond that, changes reduce the ability to compare data across time. You can see what the CPI-U was in January, 1913 (answer: 9.8), but how good the comparison is to December, 2024 (315.605) is probably unknowable. But it’s the best we have.
Always a new way to cook the books. Take any product with an inflation component with a grain of salt now! I have a big decision to take a fixed annuity payment or a lower one with an inflation component, think Ill just take the higher fixed payment.
I have always been skeptical of these statistics. The cost of shelter accounts for a very large portion of these inflation indexes. It is my understanding that the BLS performs some type of homeowner’s survey (straight out of something in 1960’s) where they call folks and asked them personal questions as to their home’s value to calculate the “Owners’ Equivalent Rent”.
In this age, how many homeowners must you attempt to contact, before anyone would willing give personal financial information about their home’s value? I would never give this type of information to a stranger claiming to be an employee of dept of labor.
One of the questions that they ask people. ” If you put your house up for rent, unfurnished, without utilities, how much would you ask for monthly rent? I have no clue what my current home would rent for, there are no known rental properties in my neighborhood. I have not filed an insurance claim ever; but, if I went to my local State Farm agent, told him I was going to rent out my house, they would tear my policy up and inflate that cost significantly! Too many variables, and I just don’t believe most of the respondents to these surveys could provide much more than a WAG.
The Census Bureau does this through the American Community Survey and the response rates have been pretty good, with five out of six people complying with filling out most of a 20-30 minute long survey. You might be surprised.
Here is the link to census data quality: https://www.census.gov/acs/www/methodology/sample-size-and-data-quality/response-rates/
I think there’s a micro/present aspect to this news report and a potential macro/future aspect.
The micro, where I agree, so far, with David, is that the reported changes seem to be minor, and it’s premature to jump to the conclusion that (for example) the CPI is being tampered with.
The macro is that most rational people believe (and assume public servants to believe) in gathering objective and accurate information, and then basing policy conclusions on it. But this administration and its backers have already demonstrated a tendency to make policy decisions first and then massage information to support the desired policy conclusion. This is not new. Previous examples include the handing of Covid case reporting statistics and the handling of the 2020 census. Information not only can be manipulated, but also caused to completely disappear. For example, the recent removal of climate change information from federal government websites, because if climate changed were acknowledged to exist, then something might have to be done about it. (I can also think of examples closer to home, such as the time I was one-tenth of one point away from an Outstanding performance evaluation, and argued the case to my manager that I deserved it, to which he replied: “You don’t understand. We’re not giving ‘Outstandings’ this year––but if you quote me, I’ll deny that we ever had this conversation.”)
Anyway: nothing yet to get too worked up about concerning inflation statistics, but ongoing vigilance warranted.
It is, of course, laughable that the staff shortage on which this announcement is blamed was itself the result of chaotic layoffs or attrition imposed within the administration itself: We’ve got too many people collecting statistics. We need to do something about that.
Ones response to inflation questions depends on your income, networth level. If you did not cut back on anything there is really no inflation. Of course many seem to like to talk about the other guy when they are still living with no change or upgrade. Survey poverty level!
Meet the new boss, the same as the old boss. Every administration is trying to depress the reported rate. Costs went to far more than 20% the last 4 years. A big downside to TIPS is we have to rely on the government data.
I’m looking forward to your future posts on German Bund Yields, and Gold.
It could be a long wait 😅
And “Converting economy to barter system” too, please
If average inflation changes from 2-3% to 10%, I think we will figure it out without these surveys. Not sure how meaningful it is to be talking about loosing a few decimal points in precision.
As far as “manipulating” – it is already manipulated with all kinds of statistical nonsense and magic tricks. But, that is how Statistics work – guesses and hunches.
President asks a mathematician, statistician and an economist – What is 2+2? Mathematician says 4, Statististician says “approximately 4”, Economist says “How much do you want it to be”.
I thought “How much do you want it to be?” was the question asked by the psychiatrist.
Oh, sorry, my mistake. The psychiatrist asked, “And this inflation [or deflation] you’re seeing. Is it here in the room with us now?” 🙂
The corporate ceo says “4, but I can make it 8 if you deregulate my company and cut my taxes”
Having been on the receiving end of these government surveys, it was a low priority assigned to the least skilled person on the team. I would suggest the quality of the data has always been questionable and will now be worse.
More layoffs at BLS & BEA would allow Trump to manipulate inflation data lower. We know Trump wants lower rates despite tariff-induced inflation. This is the nightmare scenario for inflation-protected securities.
we know= your opinion
Not my opinion. He pressured Powell to lower rates just 2 days ago.
fake inflation data manipulation =opinion that rates are 2 high….are you Harvard or Princeton business grad?
It’s a risk that has a non-zero probability of occurring. Not an opinion. And Princeton doesn’t have a business program.
In a turn-around from the author’s “no political commentary” policy during the chaos of the previous Administration, this site has now become the watchdog for the all-things-bad Trump conspiracy population — and they will respond with their opinions disguised as facts — just like the author. It is time to find another source of financial journalism
I try to keep my articles neutral. Commenters are allowed opinions, but not rants or tirades. If you have a policy opinion, please express it.
I do not think there is another site like this, where the author really has their own money in the game . Lots of armchair looking for Thumbs up for the “algorithm”.