Trade indexes in the Producer Price Index

At BLS, we strive to find the best methods for measuring the U.S. economy and to explain those methods clearly to our customers. We’re always eager to clarify issues that aren’t easy to understand. This week’s Producer Price Index (PPI) report for October 2014 received more attention than usual. The 0.2-percent increase in our headline number, the index for Final Demand, surprised many people who had seen recent news reports about large declines in energy prices and their impact on overall inflation trends. Although the index for Final Demand Energy fell 3.0 percent, the October advance in overall Final Demand prices resulted mainly from a 1.5-percent rise in the index for Final Demand Trade Services.

The trade services index is part of a new, more complete method of measuring producer prices that we introduced in January 2014. This new system includes prices for goods, services, and construction. We have some materials to help you understand this more complete picture of the domestic economy. We welcome your thoughts and questions, and I invite you to comment below.

The trade services indexes measure the changes in margins that wholesalers and retailers receive, rather than price changes for physical goods themselves. Businesses in the trade sector buy goods to resell. These businesses usually don’t change the goods before reselling them, so the PPI treats trade businesses as suppliers of services rather than goods. The PPI measures the output of a trade business as the difference between its selling price and purchase price of an item. (This measure reflects any discounts in the selling or purchase price.) This difference is the margin. Margin prices reflect the value that businesses add for marketing, storing, and making goods easily available to buy. You can read more about the methods for measuring trade services in the PPI.

The goal of the PPI is to measure price change for all domestic output. Trade is a significant part of the U.S. economy, so the PPI now includes trade services in the overall Final Demand index. BLS also publishes special indexes that exclude components such as food, energy, exports, and even trade services. For example, in October 2014, the index for Final Demand less Trade Services declined 0.2 percent, while the index for Final Demand less Foods, Energy, and Trade edged up 0.1 percent. Our goal is to allow you to view producer price changes from several different vantage points, while emphasizing the more comprehensive picture.

BLS regional webpages get a makeover

You probably know that BLS publishes national economic statistics and analyses on employment, unemployment, prices, compensation, productivity, and other topics. Chances are that you read at least some of those reports regularly. You also may know that BLS publishes economic information for regions, states, counties, and metropolitan areas. Our national office staff produces some of these reports, but you may not know that our regional staff around the country writes many of these reports. In fact, our regional staff produces about three-fourths of the economic news releases published by BLS.

Maybe you’ve heard the old expression that all politics is local. We don’t get involved in politics at BLS, but it turns out that much of economics also is local. People need to know not just the national economic conditions, but also what conditions are like where they live, work, and do business. For that reason, we think a lot about how we can serve the specific needs of our customers in each region, state, and community.

I’m very pleased to announce that we have given the webpages for our regional offices a makeover to serve our customers better. With the new pages, we have improved navigation to help you browse faster and more efficiently. The pages feature new maps and tabs to help you find information for the regions, states, areas, and subjects that interest you. The pages also have enhanced archives to make it easier to search for older news releases, CPI summaries, and notices.

I encourage you to read more about these improvements to our regional webpages. I also invite you to let me know how you like these changes by leaving a comment below.

Recognizing innovators at BLS

Every successful organization needs to innovate to remain effective and relevant—and BLS is no exception. We strive every day to provide our fellow citizens with the best value for their taxpayer dollars. To produce the best statistics, analyses, and services, we must foster a workplace that encourages innovation. We recently held our annual awards ceremony to recognize the good work of our staff members who work hard every day to provide the public with data that are accurate, objective, relevant, timely, and accessible. One of the honors we presented was the BLS Innovation Award. I want to tell you about the two groups that received the award this year.

The first group we honored found a way to blend data collection for two different but related surveys. BLS surveys rely on the voluntary cooperation of individuals, businesses, and other organizations to provide information about the labor market and economy. We realize that time is valuable for our survey respondents, and we do our best to make our collection as quick and efficient as possible. This year, a team of BLS national and regional office staff designed and tested a process to combine collection of information on the pay and benefits of workers with information on the physical demands and other requirements of jobs. This combined collection will support the data needs of our National Compensation Survey and the Occupational Requirements Survey. The approach relies on BLS field economists to manage the survey process efficiently and flexibly in a conversational interview process. The result is that collection interviews are shorter and therefore less costly in both time and money. Moreover, the survey process is less burdensome to employers that participate in both surveys. The new process is a win-win for BLS and businesses!

The second group honored with the BLS Innovation Award helped make data collection more efficient in a very different way. A team of national and regional office staff developed a self-paced course to impart better skills to manage time and workload. The course uses new technology as it follows “Kathy,” an animated field economist, through her work. The training module includes a process of reviewing course materials, keeping an activity log, viewing a video on the science of productivity, reviewing quick-reference tips and strategies, and taking a quiz. The training equips field staff with the time-management tools to collect data from respondents and manage caseloads efficiently. These new tools enable BLS to improve our efficiency and effectiveness in producing the nation’s statistics.

In addition to these two groups, a number of other excellent projects were nominated for the BLS Innovation Award. All of these projects (and many others) will help BLS provide better, more efficient products and services in the years to come—and are excellent examples of the innovation taking place daily at BLS.

Announcing new research data on jobs and pay in the nonprofit sector

Have you ever wondered how important the charitable nonprofit sector is to your regional economy or within some industry—and if it is adding jobs? BLS now has authoritative and detailed answers to your questions. I am delighted to announce a new research data series on employment and wages in the nonprofit sector of the U.S. economy. Annual data currently are available for 2007 through 2012. Here are a few facts about nonprofit organizations:

  • They employ a lot of people. Nonprofits accounted for 11.4 million jobs in 2012. That’s 10.3 percent of all private sector employment.
  • Nonprofit jobs are concentrated heavily in the healthcare and social assistance sector. This is the largest component of the nonprofit world, accounting for 68 percent of total nonprofit employment in 2012.
  • They’ve grown throughout the recession and recovery. Employment in nonprofit organizations increased steadily each year from 2007 through 2012.

What do we count as a nonprofit organization in these data? Under U.S. tax law, nonprofit organizations are exempt from paying federal income tax. Although there are several categories of nonprofits, the new BLS data are limited to the largest category, organizations covered under section 501(c)3 of the tax law. These nonprofits are commonly referred to as “charitable” organizations.

These new data are available at the national level for fairly detailed industries. Data for states are available for broad industry categories.

You may wonder how we did this. As with the hurricane maps that BLS published in June, the new research data on nonprofits required no new data collection or respondent burden. The data were created by merging existing BLS data from the Quarterly Census of Employment and Wages program with publicly available data from the Internal Revenue Service.

If policymakers, researchers, and the public find these data to be useful, BLS will consider updating them annually as resources permit.

So, please let us know what you think. I invite you to explore the nonprofit data and share your thoughts about the methods used to create the data, the published tables, and the overall usefulness of the information.

Learning about data needs from our customers and partners

With the current interest in labor market conditions, the end of September was a busy time for me—full of good opportunities to speak with some of our customers and partners. BLS serves many different types of customers in fulfilling our mission to bring you objective, relevant, high-quality statistics and analysis in a timely manner. The public—individuals, businesses, and policymakers—all need this information to make better decisions. Thus, we need to understand our customers’ needs. We have forged many partnerships over the years to learn about those needs and how best to conduct our work.

On September 18 I spoke at the meeting in Burlington, Vermont, of the Board of Directors of the National Association of State Workforce Agencies (NASWA). NASWA is an organization of state administrators of unemployment insurance laws, employment services, training programs, employment statistics, and labor market information. Many of our statistical programs at BLS are conducted through partnerships with the state workforce agencies that compose NASWA. I spoke to NASWA members about how we can strengthen our already strong partnerships to use new technologies and data sources to serve the ever-growing data needs of businesses, workers, jobseekers, households, and public policymakers at the national, state, and local levels.

A few days after the NASWA meeting, I spoke in Washington at a meeting cosponsored by the American Enterprise Institute and the International Monetary Fund. The topic of the meeting was “Policy implications of the new U.S. labor market normal.” I took the opportunity to speak to the audience not just about the economic statistics we see in headlines, such as the unemployment rate and job growth, but about other measures that may not be as well known. A few examples of these are the declining but still high levels of long-term unemployment, the still-low number of workers voluntarily quitting their jobs, and the decline since 1998 in job gains from new establishments. I also discussed the slow growth in wages and benefits in recent years. I noted that our nation’s output of goods and services in the business sector increased more than eightfold since 1947, while the total hours worked has not quite doubled. That difference between the growth in output and hours represents productivity growth. Measures of productivity growth are important because, as our economy becomes more efficient, workers and business owners can share the gains and improve living standards. While productivity growth is essential for compensation growth, the two don’t always move in lockstep. Of particular note, since 1973, productivity has expanded at an average rate of 1.8 percent annually, while real hourly compensation has grown at half that rate, 0.9 percent.

Two days later, BLS Associate Commissioner Michael Horrigan and I participated in a conference in Washington at the Peterson Institute for International Economics. The topic of the conference was “Labor Market Slack: Assessing and Addressing in Real Time.” I chaired a discussion session that examined the question, “Can we reconcile slow wage growth and demographic labor supply decline?” In a discussion session on measures of slack, Michael Horrigan described the important perspectives that several BLS programs provide on labor market slack.

At the end of September I spoke in Chicago at the annual meeting of the National Association for Business Economics (NABE). NABE’s members include business economists and others who use economics in the workplace. My talk focused on the opportunities and challenges BLS faces in the years to come. I highlighted some of our recent improvements to data and services, such as the new aggregation system for the Producer Price Index, the BLS Application Programming Interface (API), and the maps and tables of hurricane flood zones on the Atlantic and Gulf coasts. I also talked about some improvements that are coming soon, such as modernizing the Consumer Expenditure Survey, providing data on employment and wages in nonprofit organizations, and adding questions to the monthly Current Population Survey about professional certifications and licenses. Our goal at BLS is to be more flexible, modern, and responsive to the nation’s growing data needs. We need to expand our data offerings, but we can’t sacrifice quality, and we must provide the best value for taxpayer dollars.

I always enjoy speaking to groups like these because it helps me and other BLS leaders learn more about the needs of our data users. The more we know about those needs, the better we can provide the public with data that are most useful—that is, accurate, objective, relevant, timely, and accessible.