Why This Counts: Understanding what the Producer Price Index measures

Today the Bureau of Labor Statistics released the October 2015 “Producer Price Index for Final Demand and Intermediate Demand.” Let me explain what that technical-sounding title is all about. A decades-long process to improve and expand the Producer Price Index (PPI) culminated in the first monthly release of Final Demand-Intermediate Demand data in early 2014. This expansion may have made things a little more complex for the casual user. While we are exploring ways to simplify our words and concepts, I’m taking a stab at simplification in today’s blog. A rose by another name might be easier to understand.

We have 125 years’ worth of PPI data—one of the oldest measures produced by BLS. Originally called the Wholesale Price Index, the PPI measures the change in the prices that “producers” (businesses) receive for the sale of goods and services. We divide these producer prices into those paid for “final demand” and those paid for “intermediate demand.” Today I’m going to focus on final demand; in a future post I’ll examine intermediate demand.

The PPI for Final Demand measures the change in the prices that businesses receive for the sale of goods and services that are in their final form—ready to use. Sales may be to individuals (for personal consumption), to other businesses (for capital investment), to governments, or for export. The index is further divided by the type of product sold. I’ll provide a few examples—a manufacturer, a service provider, and a retailer.

In October 2015, the PPI for passenger cars rose 2.6 percent for the month and 1.4 percent from a year earlier. To measure this change in the price that auto manufacturers receive for the sale of passenger cars, we want to compare apples to apples. For example, any extra cost associated with adding mandated back-up cameras would be removed as part of a “quality adjustment” made to ensure price comparability. Simply put, auto manufacturers received 1.4 percent more for the sale of a comparable car than they did a year earlier.

As services have become a bigger and bigger part of the U.S. economy, the PPI has expanded its coverage to include many services, such as healthcare. The price that healthcare providers receive for their services, such as office exams, lab tests, and hospitalizations, include co-pays and both public and private insurance reimbursements. The PPI for outpatient care rose 0.2 percent in October 2015 but fell 0.3 percent over the year. Outpatient healthcare providers received 0.3 percent less for their services than they did a year earlier.

For wholesalers and retailers, the PPI measures the difference between the purchase price and the selling price of goods; this difference is known as the margin. Think of your local supermarket. They purchase goods for sale to customers—meat, dairy, fruits and vegetables, quinoa, toilet paper, and other items—all things you might put in your grocery basket. The difference between the price the grocer pays for these goods and the price they receive from the consumer is their margin. The PPI measures the change in that margin. In October 2015, the PPI final demand trade services fell 0.3 percent over the month and 0.7 percent from a year earlier. Wholesalers’ and retailers’ margins were 0.7 percent less than a year earlier.

The following chart shows PPI final demand price changes for selected categories over the past several years.

PPI blog

I hope I’ve provided a little insight into how to read and understand the monthly PPI release. In the future I’ll try to delve further into the PPI and its measure of intermediate demand. Stay tuned.

Discussing the Jobs Report on C-SPAN

Commissioner Erica Groshen on the set with Eric Morath of the Wall Street Journal and C-SPAN host Peter Slen.

Commissioner Erica Groshen on the set with Eric Morath of the Wall Street Journal and C-SPAN host Peter Slen.

I appeared this morning on C-SPAN’s Washington Journal “America by the Numbers” series to talk about the October Employment Situation report. With me was Eric Morath of the Wall Street Journal. We discussed the headline numbers—nonfarm job growth of 271,000 and an unemployment rate of 5.0 percent—but we also discussed some of the thousands of other numbers in the report. We also talked about how BLS gathers these numbers to provide the most accurate gauge possible of labor market conditions. Watch the video and let me know what you think.

Honoring Two Fearless BLS Visionaries

In January 2013, when I was sworn in as the 14th Commissioner of the Bureau of Labor Statistics, I couldn’t help thinking about my predecessors in the position. Each of the previous 13 commissioners has played a unique and pivotal part in the development of this agency in pursuit of our mission to produce data vital to the economic health of our country. I often focused on the first commissioner, Carroll D. Wright, and the 10th, and first female commissioner, Janet L. Norwood. They both played extraordinary roles in making BLS today one of the preeminent statistical agencies in the world.

For this reason, yesterday was an extremely special day for BLS and for me. U.S. Department of Labor Secretary Tom Perez inducted Carroll Wright and Janet Norwood into the Labor Hall of Honor—on World Statistics Day, no less!

Commissioner Erica Groshen speaks at the Labor Hall of Honor with Labor Secretary Tom Perez, Federal Reserve Board Chair Janet Yellen, and Clark University president David Angel

Commissioner Erica Groshen speaks at the Labor Hall of Honor induction ceremony with Labor Secretary Tom Perez, Federal Reserve Board Chair Janet Yellen, and Clark University President David Angel.


The power of statistics and how they help people make informed decisions was certainly on display. The induction ceremony also showed the outsized influence these two extraordinary statisticians and public servants have had on BLS and the country.

For example, did you know that Carroll Wright was self-trained as a statistician, yet served as BLS Commissioner, Chief of the Massachusetts Bureau of Labor Statistics, Superintendent of the Decennial Census, and President of the American Statistical Association? Even so, I believe his greatest accomplishment was his profound commitment that statistics produced by BLS would be devoted to “the fearless publication of the facts without regard to the influence those facts may have upon any party’s position or any partisan’s views.” I love the word “fearless” here—an unusual but totally apt tribute to BLS data nerds!

Wright’s work to ensure the impartiality of government statistics is still the bedrock of our agency and his greatest legacy. Articulating this doctrine and fashioning the steps to achieve it (as obvious as they might seem today) were key innovations when he introduced them.

Labor Secretary Tom Perez speaks at the Labor Hall of Honor with Federal Reserve Board Chair Janet Yellen, Clark University president David Angel, and Commissioner Erica Groshen.

Labor Secretary Tom Perez speaks at the Labor Hall of Honor induction ceremony with Federal Reserve Board Chair Janet Yellen, Clark University President David Angel, and Commissioner Erica Groshen.


Almost 100 years later, Janet Norwood carried on in Wright’s tradition. After rising through the ranks as a career employee at BLS, she was nominated to be the 10th Commissioner. Janet served as BLS Commissioner for 13 years, spanning three Presidential administrations. When she retired in 1991 after 28 years of service at BLS, the New York Times said she had a “near-legendary reputation for nonpartisanship.”

She was also responsible for making BLS what it is today—a model workplace with professional, dedicated employees fearlessly (!!) producing quality statistics for U.S. policymakers, businesses, and families. BLS rose to new heights of prominence as a result, with Janet testifying before Congress an amazing 137 times during her 13 years as Commissioner!

Both Carroll Wright and Janet Norwood set new standards for BLS Commissioners, and it was truly a highlight of my time as Commissioner to see them inducted into the prestigious Labor Hall of Honor.

Why This Counts: Celebrating 100 years of Current Employment Statistics

You’re only as old as you feel, or so the saying goes. Here at BLS, we agree that age is only a state of mind. I’m proud to say the Current Employment Statistics (CES) survey—which some call the “payroll survey” or the “establishment survey”—is still going strong as it turns 100 years old this month. To celebrate, BLS is hosting a free public event with exciting guest speakers and topical booths staffed with economists ready to answer your questions. We will hold the 100 Years of CES Symposium on October 19, 2015, in Washington, DC. You need to register to attend. We hope to see you there.

Throughout its 100 years, many things about the CES have remained the same, while others bear no likeness to the survey’s origins. Instead of the monthly news releases and web updates we post rapidly today, the start of the modern CES program was one table called the “Number of employees and amount of earnings in identical establishments in certain industries during one week of October and November, 1915,” published in the January 1916 Monthly Labor Review. Interestingly enough, when the survey began, many analysts viewed the amount of earnings as more useful than a count of employees because they believed earnings were more closely tied to changes in production. Employers were more likely to reduce hours worked and therefore pay than lay people off. Today, the headline number on the monthly jobs report is the number of jobs added or lost each month.

One crucial feature that remains unchanged is the survey’s reliance on voluntary reports from US employers. So, I thank CES survey respondents for your cooperation then and now, because the survey could not succeed without you. The U.S. labor market is fueled by business of all sizes and industries. The experience of each employer tells an important story, so I encourage you to say “yes” when we call to ask for your participation.

The states have always played an especially important role in making, publishing, and explaining CES estimates. I thank our state partners for their continued support of the CES program.

I encourage all our readers to check the Monthly Labor Review regularly in the coming months because we will publish several articles that highlight the survey throughout the decades. As always, your source of the most up-to-date information about national and state and metro area employment, hours, and earnings estimates is www.bls.gov.

Have a question about the survey? Staff economists are available Monday through Friday from 8:30 a.m. to 4:30 p.m. Eastern time. For questions about national estimates, call (202) 691-6555 or send us an email. State and metro area economists are available at (202) 691-6559, and you also can email them.

Celebrating Our Customers

This week, BLS celebrates National Customer Service Week. We work every day to ensure you have a positive experience when you connect with us. Whether answering questions from the public, speaking at events, designing our website and releases, or helping businesses and households throughout the data collection process, BLS staff always put the customer first. It’s just the way we do business here.

Providing direct access to our experts is a cornerstone of the BLS culture of making our data accessible to all. This accessibility helps ensure that data users get the information they need quickly and easily. Each BLS program and regional office posts telephone numbers and email addresses that take you directly to the experts. I encourage you to take advantage of this wonderful service. Every year BLS economists and information specialists help thousands of data users. These information seekers, ranging from students to Congressional staff, are trying to find data that will help them make informed decisions.

Besides answering information calls and emails, BLS experts serve customers by speaking at events around the country. Speakers are available to discuss many topics about the U.S. labor market and economy. If you want to have a BLS speaker attend your event, please check out the BLS Speakers’ Page.

Another important way BLS staff help the public is through the data collection process. Every day, our economists and economic assistants collect data from businesses and households. We use these data to produce statistics about the national and regional labor markets. We always ask ourselves and our customers, the respondents, how we can improve efficiency. Whether we collect data by phone, using the Internet or other electronic options, or through personal visits, BLS staff mix high-tech methods with the high touch of building personal relationships. This ensures we receive the highest quality, most accurate data possible, with the lowest burden on respondents.

I thank our customers and my staff here at BLS, who work together to ensure we deliver the best possible data for the public to make decisions that shape the future.