MNI INTERVIEW: US BLS On Track To Miss Nov CPI Report -Beach

The U.S. Bureau of Labor Statistics should be able to generate a good portion of the October jobs report when the federal government reopens, but October and even November CPI reports are likely to be permanent casualties of the near-record shutdown, former Bureau of Labor Statistics Commissioner William Beach told MNI.

As the shutdown enters a second month, field representatives have been unable to interview households for the Current Population Survey or collect prices at physical locations for CPI. Missing data could be estimated, but the BLS would likely refrain from doing so, Beach said. 

"They'll have to make a judgment call and say, should we publish just partial data or not? And my guess is they won't publish partial data," Beach said in an interview. 

"There may be some effort to try to give a sort of bridge CPI or an unofficial CPI where you take as much information as you're able to obtain and then estimate the missing observations based on econometrics or modeling. But I don't think BLS would ever do that," he said. "BLS should not be doing estimations like that. We'll let the Federal Reserve do that or some other entity." 

INFLATION DATA GAP

The BLS recalled staff to generate September’s inflation report whose data collection was completed before the shutdown, but it seems two months of CPI data may be missed for the first time in a century-long series, Beach said. 

"It takes a full month to collect all of the observations, so you might be able to do so with real effort – if everybody's working – in two or two-and-a-half weeks. Certainly three weeks gives you a pretty good shot. But if this goes on for two weeks in November, then we may miss the CPI for November as well."  

Approximately two-thirds commodities and services price collection is done by visits to brick-and-mortar stores, according to BLS, and some staff may have quit while on furlough. Remaining data are collected by phone or on a store's website, and some like gasoline and rent prices from private sector data sets. 

"We'll get some of those data, but how do you put together a CPI with only bits and pieces of it?" Beach said. The statisticians may be able to estimate some October prices from November collections, but "I seriously doubt that October will have a CPI.”

"And when BLS comes back into activity, we'll be able to see how many people have left. Hopefully none, but I would be surprised. They were already short 25% of their normal payroll."

PPI data is mainly collected electronically and should become available once the shutdown ends, though it's unclear if import and export prices, which rely on Commerce Department data, will be available, Beach said.  

Without CPI, the Bureau of Economic Analysis won't be able to produce the PCE price index, the Federal Reserve's preferred measure of inflation, Beach said.  

JOBS REPORT

The BLS should be able to produce some October labor market data after the shutdown, especially payrolls and potentially the unemployment rate, Beach said. 

However, recall bias for the household survey is likely to result in bad responses to questions such as over part- or full-time work. And data will be particularly difficult to collect for certain groups including young people under 25, who typically require longer interviews, and smaller racial demographics, Beach said.  

"The longer we get away from the 12th of October, which is the date on which that survey was supposed to start, the more unlikely they will try to get October labor force data," Beach said.  

OPERATING IN THE DARK

Fed Chair Jerome Powell conceded last week the temporary data outage could warrant caution when the FOMC considers whether to cut interest rates again in December. (See: MNI INTERVIEW: More Fed Cuts Risk Inflation Spike-Weinberg)

"We are starting to operate in the dark, at a crucial time for the economy. There's an indication that prices are rising and the labor market is slowing down, so you would want right now to have the best data available. And yet we have no data available," Beach said. 

"We have a sense that the economy may be operating at a slower pace, but there's some indications from the Atlanta Fed that the economy is actually picking up. These are really interesting times, and we need to have these data up and running as soon as possible."