Economists Raise Questions About Quality of U.S. Inflation Data
Labor Department says staffing shortages reduced its ability to conduct its massive monthly survey
Key Points
- Some economists question U.S. inflation data accuracy due to staffing shortages affecting survey precision.
- The Bureau of Labor Statistics used less precise methods for guessing price changes in April’s inflation report due to hiring freeze.
- Data issues could significantly affect economy, influencing social-security benefits, bonds and Federal Reserve decisions.
Some economists are beginning to question the accuracy of recent U.S. inflation data after the federal government said staffing shortages hampered its ability to conduct a massive monthly survey.
The Bureau of Labor Statistics, the office that publishes the inflation rate, told outside economists this week that a hiring freeze at the agency was forcing the survey to cut back on the number of businesses where it checks prices. In last month’s inflation report, which examined prices in April, government statisticians had to use a less precise method for guessing price changes more extensively than they did in the past.
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.
To calculate the inflation rate, hundreds of government workers called enumerators fan out across cities each month to check how much businesses are charging for products like blue jeans and services like accounting, often by visiting bricks-and-mortar stores. Statisticians roll those figures together into the consumer-price index, a data stream that shows how the cost of living is changing for typical Americans.
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.
“They’re having to turn to less effective methods to fill in the blanks,” said Omair Sharif, an economist at advisory firm Inflation Insights. He said he has been busy with calls from professional traders who make bets on inflation in financial markets and are anxious about the data’s accuracy.
The inflation rate determines how much social-security benefits go up each year, and where federal tax brackets are set. Private-sector contracts such as wage agreements between companies and unions routinely reference the inflation rate. Payments on $2 trillion of inflation-protected federal bonds hinge on the inflation rate, as do yields on standard Treasury bonds. Businesses, investors and policymakers rely on the reading to guide their decisions. The Federal Reserve is laser-focused on inflation data when it sets interest rates for the country.
A handful of economists noticed quirks in the April data published May 13. When some asked the BLS for more information, government officials sent back an excerpt of an internal report.
“The CPI temporarily reduced the number of outlets and quotes it attempted to collect due to a staffing shortage in certain CPI cities,” beginning in April, the email read. “These procedures will be kept in place until the hiring freeze is lifted, and additional staff can be hired and trained.”
The Trump administration issued a hiring freeze on Jan. 20 for federal employees, and the Department of Government Efficiency, previously led by Elon Musk, cut thousands of federal workers through layoffs and buyouts. It couldn’t be determined if BLS employees were subject to those cuts.
The BLS and its parent agency, the Labor Department, didn’t respond to requests for comment.
Economist Alan Detmeister of UBS was among those who noticed that in the April inflation data, 29% of price guesses were made using different-cell imputation, almost twice as high as any month in the past five years.
The report showed that the rate of inflation cooled to a 2.3% rise over the 12 months through April, the lowest rate since 2021. Detmeister said it is impossible to tell whether the reliance on different-cell estimates skewed the data in one direction or the other.
“When you take a sample and reduce the numbers, it’s going to increase the sampling error,” Detmeister said. “We don’t know if this is a big issue or a small issue, but we just know that directionally, it’s making things worse.”
The quality of U.S. economic statistics has been the envy of global policymakers for decades. The system is the product of concerted efforts that began in the depths of the Great Depression to better understand how the economy works.
“Being able to track what’s going on in the economy is very, very important,” Fed Chair Jerome Powell said at a policy conference earlier this year. “It’s something that the United States has led in for a long, long time, and something we need to continue to lead in.”
The concerns around the consumer-inflation survey follow other government-statistics issues that have worried economists in recent months. In May, the BLS suspended publication of hundreds of data series showing wholesale prices for products including some furniture and kitchen utensils. On Tuesday, the BLS said that it had applied incorrect sample weights to the survey of households the unemployment rate is derived from in April. It said the error had a negligible impact.
For years, advocates have warned that government funding for economic statistics has been falling short. Concerns about data quality grew this year after the Trump administration disbanded committees of external experts convened to help improve government stats.