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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David Enna is a financial journalist, not a financial adviser. He is not selling or profiting from any investment discussed. I Bonds and TIPS are not “get rich” investments; they are best used for capital preservation and inflation protection. They can be purchased through the Treasury or other providers without fees, commissions or carrying charges. Please do your own research before investing.
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