Topic Archives: Inflation and Prices

Innovating for the Future

Erica L. Groshen was the 14th Commissioner of Labor Statistics. She served from January 2013 to January 2017. This is her final post for Commissioner’s Corner.

Image of former BLS Commissioner Erica L. Groshen

It didn’t take long after I became Commissioner of Labor Statistics in January 2013 for me to appreciate the skill, dedication, and innovation of the staff that works here. Whether they’re doing sampling, data collection, estimation, or dissemination; whether they’re the IT professionals or the statisticians or the HR staff; whether they’re the newest employees who are so tech-savvy or the more senior employees who hold a wealth of institutional knowledge. To a person they are phenomenal. I am honored to have had the pleasure of leading them — and letting them lead me — during the past 4 years.

 

I have had many opportunities to observe and encourage innovation during my tenure at the U.S. Bureau of Labor Statistics, from listening tours to senior staff conferences to regional office visits to discussions with a wide variety of stakeholders. From these efforts, we have identified several activities that will help us develop and implement the next generation of labor statistics. These days, we call these efforts a variety of names, such as “modernization” and “reengineering.” But, in truth, they just continue the impressive progress that has been the hallmark of BLS for the past 133 years.

In my final Commissioner’s Corner post, I want to tell you a little about some of our current reengineering efforts.

One of the things we do best at BLS is data collection, largely because we are always looking for ways to improve. Recent efforts include identifying alternative data sources, expanding electronic collection, and “scraping” information directly from the Internet. These efforts can expand the information we provide, lessen the burden we place on employers and households that provide data, and maybe even save some money to provide taxpayers the best value for their data dollar.

These efforts are not new. One source of alternative data we’ve used for many years comes from state unemployment insurance filings, which identify nearly every employer in the country. We tabulate these data but also use them as the source of our sample of employers for certain surveys and as a benchmark of detailed employment by industry. We also use information from private sources and from administrative sources, like vital statistics. Our latest efforts involve examining techniques to combine data across multiple sources, including mixing survey and nonsurvey data.

We want to give employers the opportunity to leverage the electronic data they already keep so it’s easier to respond to our surveys. These efforts include allowing employers to provide electronic information in multiple formats; identifying a single source of electronic data from employers, reducing the number of locations and number of requests made to multiple sites of the same organization; and working with employers to allow BLS to access their data directly from the Internet. We rely on good corporate citizens to supply the information that we use to produce important economic data. Making data collection easier is a win-win.

The innovation doesn’t stop at collection. We are using electronic text analysis systems extensively to streamline some of our data-processing activities. Much of the information we collect is in the form of text, such as a description of an industry or occupation, details about a workplace injury, or summaries of employee benefit plans. Transforming text into a classification system for tabulation and publication used to be a manual task. BLS has begun to transform this task through the use of machine-learning techniques, where computers learn by reviewing greater and greater amounts of information, resulting in accurate classification. As we expand our skills in this area and find more uses for these techniques, the benefits include accurate and consistent data and greater opportunities for our staff to use their brainpower to focus on new, unique, and unusual situations.

We are also modernizing our outputs, producing more with the information we have. For example, we have begun several matching projects, combining data from two or more sources to produce new information. One example is new information on nonprofit organizations. By linking our employment data with nonprofit status obtained from the Internal Revenue Service, we now have employment data separately for the for-profit and nonprofit sectors. And we took that effort one step further and produced compensation information for these sectors as well. Look for more output from these matching efforts in the future.

Finally, we’ve made great strides in how we present our information, including expanded graphics and video. And we are not stopping there. Each year we are expanding the number of data releases that include a companion graphics package. We are developing prototypes of a new generation of data releases, with more graphics and links to data series. And we have more videos to come.

My 4 years as Commissioner of Labor Statistics have flown by. I’m excited to see so many innovations begin, thrive, and foster additional innovations. I have no doubt that the culture of innovation at BLS will continue. As my term comes to an end, I know now more than ever that the skill, dedication, and creativity of the BLS staff will lead this agency to even greater advances in the years to come.

Measuring Uncertainty in the Producer Price Index

Our mission at the U.S. Bureau of Labor Statistics is to publish information about the labor market and economy. We always seek to improve our methods and provide the most accurate data in a cost-effective manner. All statistics, however, come with some uncertainty. Last year I wrote about how we deal with uncertainty in our measures. Today let’s talk about how we recently have improved our uncertainty measures in the Producer Price Index.

You may think it’s odd that an agency that tells the public what we know also works hard to explain what we don’t know. It may seem like we’re airing our dirty laundry, but that’s not how we see it. At BLS, one of our core values is to be transparent about our methods. Not only don’t we consider the laundry dirty, but we believe that airing it—that is, giving you more information about the strengths and the limitations of our data—is central to our mission. It’s part of our responsibility to give you information you can use to make better decisions.

The Producer Price Index (PPI) program measures the average change over time in the prices U.S. businesses receive for the goods they produce and the services they provide. BLS started publishing the PPI 126 years ago, making it one of our oldest measures. In 2014, the PPI expanded its coverage to provide a broader view of price change for goods, services, and construction. The PPI for final demand measures price change for goods and services sold for personal consumption, capital investment, government, and export. The PPI for intermediate demand tracks price change for goods, services, and construction products sold to businesses.

The PPI for final demand was unchanged in October 2016 and was up 0.8 percent over the last 12 months. But these figures are subject to sampling error. What’s that? It’s the uncertainty that results when we collect data from a sample of prices, rather than gathering prices from each of the millions of transactions that occur every day. For the PPI, we collect about 93,500 prices every month. A different sample of prices might give us different estimates of price change. Fortunately, we have tools to measure this sampling error. Most BLS programs collect data from sample surveys because it is far too expensive and would overburden businesses and workers to send all our surveys to everyone. Instead, we select samples carefully using scientific methods. These sampling methods work well, but they can’t avoid the possibility that the characteristics of a sample may differ from those of the population. We provide estimates of this sampling error by publishing variance estimates with the data. We recently released the first-ever variance estimates for the PPI.

If you aren’t into math, skip the next paragraph.

The measure of variance we use for the PPI is called a standard error. We use the standard error to calculate what statisticians call a confidence interval around the estimate. For example, the 1-month median absolute percent change in the PPI for final demand in 2015 was 0.30 percent. The standard error of that median was 0.11 percent. We can use these two numbers to calculate a confidence interval. In this example, we will use what we call a 95-percent confidence interval. To calculate that confidence interval, we take the estimated median price change of 0.30 percent, plus and minus two times the standard error of 0.11 percent. This gives us a confidence interval between 0.08 percent and 0.52 percent. We call this a 95-percent confidence interval because, if we were to choose 100 different samples of producer prices, the median price change would be between 0.08 percent and 0.52 percent in 95 of those samples.

Chart showing median 1-month changes in Producer Price Indexes in 2015 and the 95-percent confidence intervals around those changes.

OK, if you don’t like math, you can come back now. The chart above shows estimates of 1-month PPI changes (the red dots) each surrounded by its sampling uncertainty (the blue bars). If the blue bar crosses the 0.0 percent line, it means the change is not significantly different from zero.

Variance estimates are just one way BLS evaluates and explains the quality of our data and our methods. We have published information about our methods almost since our beginnings in 1884. Carroll Wright, the first BLS Commissioner, insisted on the “fearless publication of the facts.” We believe the fearless publication of the facts means not just explaining our measures and methods in highly technical terms. We want our measures and the uncertainty around them to be understood by a wide range of people, not just those who have advanced degrees in economics or statistics. We continue to seek clearer ways to explain uncertainty. One way is a new chart we are publishing on the monthly changes in nonfarm employment. In the future, we hope to publish more charts like this and simpler explanations of our methods. If you have ideas on how we can explain our data and methods more clearly, please share them with us below.

BLS data are the gold standard of economic statistics. But even gold bars have marks to indicate their impurities. Similarly, we at BLS don’t hide our impurities. We want you to understand the strengths and limitations of our data so you can use that knowledge to make good decisions.

The Value and Influence of Labor Statistics in the 21st Century

What’s in the “DNA” of BLS—what were we born with? Not so long ago, as I prepared to become BLS Commissioner, I read the First 100 Years of the Bureau of Labor Statistics. The first chapter describes how BLS was created (in 1884) during a time of severe economic upheaval and industrial unrest. Policymakers of the time realized that a key barrier to peace and shared prosperity was the lack of trustworthy information about the economy. What has struck me ever since is how we can trace some of the distinguishing features of today’s modern BLS directly back to those first days, to the vision of one of our founders. This post links that past to the BLS of today.

Carroll D. Wright, first BLS Commissioner

Commissioner Carroll D. Wright

In 1893, sometime after becoming the first Commissioner of Labor, Carroll D. Wright set forth a mission for the agency. He was a pioneer in the search for truth and a better understanding of labor statistics by the public. In his Value and Influence of Labor Statistics (later published in the 54th Bulletin of the Bureau of Labor), he described our mission as collecting “information upon the subject of labor in the United States, its relation to capital, the hours of labor, and the earnings of laboring men and women, and the means of promoting their material, social, intellectual, and moral prosperity.”

Today, our mission is much the same as it was then. Commissioner Wright established a modern statistical agency long before the Internet made it possible for anyone to access our data and read our publications on demand. These days we say that our mission is “to collect, analyze, and disseminate essential economic information to support public and private decision-making.” While the wording has evolved with the times, the core meaning remains the same. Furthermore, in support of our mission for the past 132 years, BLS has practiced what Commissioner Wright termed “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.”

Wright developed much of the vision and practices that he instilled here while working for the Massachusetts Bureau of Statistics of Labor from 1873 to 1878. There he launched several studies to provide the people of Massachusetts with accurate labor market data. One of the largest studies was to find out the true unemployment level in Massachusetts. At the time, many people believed there were 200,000–300,000 people unemployed in the state and 3,000,000 unemployed in the entire country. Alarmists spread word through newspapers, speeches in Congress, and political resolutions until these figures were widely believed as fact, despite no previous attempt to measure unemployment. Wright’s staff canvassed the state twice to discover if the rumored number was accurate. The Bureau of Statistics of Labor of Massachusetts determined the true number of unemployed in the state was 28,508 skilled and unskilled laborers in June 1878; by November there were fewer than 23,000 unemployed, while the national number could not have been more than 460,000 unemployed. Wright explained that “The figures published by the report were used all over the country, and completely reversed the popular belief relative to the vast number of the alleged unemployed in the country.”

Today, you can see a parallel between Wright’s efforts to learn and classify the number of unemployed workers in Massachusetts and how BLS has expanded its offering to include six alternative measures of unused or underused labor. We call these measures U-1 through U-6. BLS not only calculates these alternative measures nationally, but also for each of the 50 states, the District of Columbia, and two large metro areas. This ensures that the American public, researchers, and policymakers have a wide range of data to understand the health of the labor market and make important decisions.

Also similar is our enduring focus on specific populations in the workforce. Under Wright’s leadership, state Bureaus of Labor investigated the use of child labor and uncovered the “evils it entailed upon the community.” The Bureaus published the number of young children (those under 10 years old) who worked in factories and workshops. Because of these studies, the numbers declined significantly. Time and again, Wright sought out the facts and ensured the American people had the information they needed to make decisions. Wright said, “It is only through rigid, impartial, and fearless investigations that any community can know itself in many directions.”

Today, we continue to seek new and better measures about particular groups in our economy and society. For example, in recent years BLS expanded the scope of the Current Population Survey to include six new questions to identify people with disabilities. These data provide insight into the labor market challenges of people with disabilities. The data aid individuals, nonprofit organizations, employers, and policymakers in making decisions affecting the lives of Americans with disabilities. Our monthly Employment Situation report now includes information about the employment status and labor force participation of the more than 30 million Americans age 16 and older living with a disability.

Our “DNA,” that is, our mission, our vision, and our understanding of the value of the statistics we produce, is as important today as it was in 1884. We continue our determined work to impartially collect, analyze, and publish essential economic information to support private and public decision-making. Today BLS provides a wide variety of information that benefits all Americans. I am certain that Commissioner Wright would be pleased that our reports, charts, and data are far more accessible than he ever could have imagined. Whether you’re exploring a new occupation, starting a business, looking for the change in consumer and producer prices, identifying average wages by occupation, or learning how Americans spend their time, there’s a stat for that. For all these situations and many more, BLS helps Americans make smart decisions in their lives. The cost of providing this valuable information may come out to less than $2 per person each year, but its positive impact remains priceless.

Worth a Thousand Words? Announcing Ready-to-Go Interactive Graphics with BLS News Releases

Last spring I wrote about how we’ve been using more and better charts and maps to help you understand our statistics. Today I’m excited to tell you about a new set of graphical tools to make our news releases more illuminating at the moment of their posting.

We want everyone to be able to “see” quickly what’s in the hundreds of news releases we publish every year—on price trends, pay and benefits, productivity, employment and unemployment, job openings and labor turnover, and other topics. The format of these news releases still typically includes a few pages of text to explain the latest information about a topic. Most releases also include tables with lots and lots of numbers. These news releases have served our customers well for decades, but we’re always looking for ways to improve our products and services. Many of you have told us that adding charts and maps to our news releases would make them more useful and easier to understand. In recent years we’ve added charts and maps to many news releases, but most releases only include a couple of these visualizations. We are committed to do more.

We’re adding a cool new feature to many of our releases. Starting last fall, we began posting sets of interactive graphics to complement some of our most widely read economic reports. We’ll update these graphics with each new release of data. Our monthly news release on import and export price indexes was the first to have a set of interactive graphics. The quarterly Employment Cost Index news release was the next to include interactive graphics. Most recently, when we published the Employment Situation—often our most watched news release—on January 8, we presented a lengthy new set of charts from our monthly surveys of households and nonfarm establishments. Over the coming months, we will add chart sets for more releases.

I’ve used the word “interactive” to describe these charts. Let me explain what that means. Interactive features let you choose what you want to see. For example, our chart showing nonfarm employment levels over the last 20 years starts out with two lines, one for total nonfarm employment and the other for total private employment. The legend above the chart lets you turn categories on or off, simply by clicking on the industry titles in the legend. If you want to look at, say, the last 10 years instead of the last 20, you can change the time period by clicking and dragging within the chart. If you hover your pointer over the lines in the chart, you can see the exact values for individual months.

industry-employment

In the coming months we will continue to develop interactive graphics for the rest of our most watched monthly and quarterly news releases. Our goal over the next few years is to have interactive graphics to accompany all or nearly all of our news releases. I am thrilled to have this great set of tools to serve our customers better.

Take a look. I know you’ll agree with me that the BLS staff have done a fine job crafting these ready-to-go visualizations. Whatever BLS statistics you follow, I hope you find many uses for them and send us a lot of comments and suggestions!

 

 

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.