News

Some economists are questioning the accuracy of recent U.S. inflation data—and say it could have big economic implications (The Wall Street Journal, subscription).

What’s going on: “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 the April inflation report, government statisticians had to use a less precise price-change measurement method than they had used previously.

Why it’s important: The staffing shortage poses questions about the accuracy of recent and coming inflation reports, economists say.

The details: To determine the inflation rate, hundreds of government staffers known as enumerators disperse across U.S. cities, checking—often at brick-and-mortar locations—how much businesses are charging for goods and services.

• Statisticians pull that data into the consumer price index, which shows how the cost of living is changing for Americans.
• If enumerators can’t find specific prices, they make educated guesses based on close substitutes.
• But in April, with the hiring freeze on, they often 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 effect: In the April inflation data, 29% of price guesses—a percentage twice as high as any month in the past five years—were made using these less-accurate comparisons.

• One economist told the Journal: “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.”