Tag Archives: CPI

Why This Counts: How the Consumer Price Index Affects You

Editor’s note: The following has been cross-posted from the U.S. Department of Labor blog. The writer is Steve Reed, an economist at the U.S. Bureau of Labor Statistics.

Every month, Debi Bertram, an economic assistant in our Philadelphia region, checks the price of milk at a local grocery store. She also goes to several stores to check the prices of items such as toothpaste, sports equipment, and appliances. You may not know Debi—or any of the men and women who collect data for the Bureau of Labor Statistics—but their findings have a real impact on your life.

Among other things, the data are used for making changes in the federal income tax structure and providing cost-of-living wage adjustments for millions of American workers. Additionally, the president, Congress, and the Federal Reserve Board use trends in the data to inform fiscal and monetary policies.

How does it work? BLS data collectors visit or call thousands of locations across the country, from grocery stores to doctors’ offices, to get the prices of about 80,000 different items every month. The data help BLS compile the Consumer Price Index, which measures the average change over time in prices consumers pay for a market basket of goods and services. It is the key measure of consumer inflation in the U.S. economy.

Just got paid

Person's Hand Giving CheckIt’s very possible the CPI helps determine how big your paycheck is. Many employers use the CPI, formally or informally, to decide how much of a cost-of-living raise to give employees. Additionally, many states index their minimum wage by the overall CPI increase. The CPI helps determine how much comes out of your paycheck too, as the IRS uses it to adjust tax bracket thresholds. And many states use CPI data to calculate and adjust workers’ compensation payments.

 

The check’s in the mail

Woman inserting letter into a mailboxMailing a birthday card? The CPI helps determine how much it costs. The Postal Regulatory Commission uses CPI data in the decision about price increases for stamps and postal fees.

 

 

 

 

Back to school

Smiling student eating her lunch.The U.S. Department of Agriculture’s Food and Nutrition Services uses CPI data to determine the annual payments and rate adjustments for the National School Lunch and School Breakfast Programs. The CPI is also consulted to adjust thresholds for eligibility to these programs.

 

 

 

 

Got to pay the rent

Hand holding money with a house in the background.The CPI may even affect where you live. Many landlords tie rent changes to CPI increases; in some cities rent increases for some properties cannot exceed the increase in the CPI. The CPI may also come into play if you want to rent government facilities; the CPI for rent is used to adjust fees for using federal facilities.

You can find out more about how the CPI affects your economic life from the CPI webpage.

Increasing Commuting Costs?

With Earth Day approaching, we have been wondering about increased costs for commuting to work. At BLS, we don’t have environmental cost statistics, but we do have worker costs.

Some employees don’t have to commute — they are able to work from home.

  • In 2015, the share of employed persons who did some or all of their work from home on days they worked was 24 percent. This is up from 19 percent in 2003.

An image showing someone working at home.

 

But a large number of the workforce still travels to and from a physical workplace, day in and day out. If you do need to trek into work, over the last 10 years, changes in consumer prices for a couple modes of commuting follow.

If you go by car:

First you need a vehicle.

  • New cars: Up 6 percent

Next you need to fuel it.

  • Gasoline: Down 7 percent

But before you can put it on the road…

  • State motor vehicle registration and license fees: Up 27 percent
  • Motor vehicle insurance: Up 56 percent

And you may have to pay for parking once you get to work.

  • Parking and other fees: Up 38 percent

An image showing cars in rush hour traffic in an urban area.

Those in an urban area may have another option to driving:

  • Intracity transportation (bus, rail): Up 35 percent

And one last option:

  • Human-powered commuting (walking to work): No increase!

We hope these data help you make wise decisions on your commuting choices. If nothing else, you may decide to set up a car pool — to help pay for parking!

Ice Cream versus Bacon

Editor’s note: The following has been cross-posted from the U.S. Department of Labor blog. The writer is Steve Henderson. When not relaxing with a bowl of ice cream, Steve is a supervisory economist at the U.S. Bureau of Labor Statistics. He’s spent half of his government career working on the Consumer Price Index and half on the Consumer Expenditure Survey.

How much did you spend on ice cream last year? According to the BLS Consumer Expenditure Survey, the average U.S. household spent around $54. But why does BLS need to know that?

Let’s take a deep dive into that ice cream. That’s just one of thousands of data we collect to calculate the Consumer Price Index, a monthly assessment of price changes for goods and services in the United States. The CPI has separate inflation indexes for just about everything people purchase. For example, the CPI has an index for “Bacon and related products,” and lots of other itemized food categories, including “Ice cream and related products.”

(Curious about what else we measure? Here’s the CPI’s online table generator tool. You can drill down to the most detailed CPI categories in step 2. Note: You’ll need to enable Java to see the chart.)

Why so many indexes? The CPI needs to carefully track how the prices of food, and just about everything else, change because not every item’s price goes up or down at the same rate. For example, bacon has increased in price almost 32 percent over the past 10 years, while ice cream went up 21 percent over the same time period.

A graphic showing trends in ice cream prices and bacon prices from 2007 to 2017.

Looking at how prices have moved over the last year, bacon is slightly less expensive than it was in January 2016, while the price of ice cream has gone up slightly. This information is helpful for families looking to see where their food budget money went, as well as researchers investigating changing food prices and other indicators of inflation.

Most importantly, the CPI needs to know how much the average U.S. household spends on both of those two food items in order to measure the impact different inflation rates have on total inflation. If everybody spent the same number of dollars on ice cream as they do on bacon, then you could just use a simple average of the two inflation rates to get a total. Here is where BLS’s Consumer Expenditure Survey comes in. It measures, in great detail, all the different goods and services consumers purchase in a year, and passes these numbers to the CPI to form a “market basket” — that is, a list of everything people buy and what percentage of their total spending goes to each item.

The latest spending numbers showed that the average dollar amount per year that all U.S. households spent on ice cream was $54.04, while the average amount on bacon was $39.07. That means that ice cream has a greater importance than bacon when tracking inflation, not only in the Henderson household, but in the CPI. In other words, the more people spend on an item, the more inflationary changes to its cost will affect the total inflation rate.

Policymakers, researchers, journalists, government bodies, and others use the CPI to make important decisions that directly affect American citizens. U.S. Census Bureau analysts use CPI data to adjust the official poverty thresholds for inflation, and it’s one of several factors the Federal Reserve Board considers when deciding whether to raise or lower interest rates. Employers may use it to determine whether to give cost-of-living increases, and policymakers use the CPI when considering changes to allotments for things like Social Security, military benefits, or school lunch programs.

I hope this deep dive into ice cream spending helps you understand why the Consumer Expenditure Survey is so detailed.

Some Interesting Numbers about the Oscars

The annual Academy Awards ceremony was held Sunday, February 26, to recognize excellence in cinematic achievements in the U.S. film industry. Impress your friends with these facts we’ve gathered about the Oscars and the motion picture business.

This year’s Oscar for Best Picture went to La La Land Moonlight.

  • Not all actors reach the top, but lots are trying: Actors in the U.S. can be found coast to coast with a total employment of 50,570. Almost one-third, or about 14,560, work in the greater Los Angeles metro area alone. Employment of actors is projected to grow 10 percent from 2014 to 2024, faster than the average for all occupations.

Walt Disney is the most Oscar-nominated person ever with 59 nominations.

  • Walt may be gone, but his legacy lives on: Today there are 30,240 multimedia artists and animators employed in the U.S. California employs about a third (10,110) with half of those in the greater Los Angeles area (5,830). Employment of multimedia artists and animators is projected to grow 6 percent from 2014 to 2024, about as fast as the average for all occupations.

Since 1945, the accounting firm Price Waterhouse (now called PricewaterhouseCoopers) has tabulated the Oscar ballots to ensure the secrecy of the results.

  • There are a total of 1,226,910 accountants in the United States, and California again has the largest employment with 144,540. Employment of accountants and auditors is projected to grow 11 percent from 2014 to 2024.

Oscar weekend is a boon to the beauty industry: Before walking down the red carpet, many use the services of a hairstylist – and house calls reportedly start at $500.

  • Nationwide, 348,010 hairstylists are employed. The five states with the most are California (26,340), New York (25,420), Pennsylvania (24,210), Florida (23,840) and Texas (22,050). The metropolitan area with the most hairstylists is New York-Jersey City-White Plains, NY-NJ, with 20,790. Employment of barbers, hairdressers, and cosmetologists is projected to grow 10 percent from 2014 to 2024.

The Academy of Motion Picture Arts and Sciences identified 336 feature films eligible for the 2016 Academy Awards.

The first Academy Awards ceremony was on May 16, 1929, at the Roosevelt Hotel’s Blossom Room with 270 attendees. The price of admission was $5, which included a broiled chicken dinner.

The Oscar statuette is 13.5 inches tall and weighs 8.5 pounds. A New York foundry casts them in bronze before they receive a 24-karat gold finish.

  • Workers who make these kinds of items are part of a small industry, known as “other nonferrous foundries, excluding die-casting,” with only 12,372 employees nationwide. About half are employed in three states: Michigan, Oregon and Ohio. Employment in the foundries industry is projected to decrease by about 17 percent from 2014 to 2024.

After the Oscars ceremony, you may be inspired to go to a movie. But did you know how much these prices have changed over the last 10 years?

  • Admission to movies, theaters and concerts is up 21 percent, carbonated drinks are up 19 percent, and candy and chewing gum are up 28 percent. We don’t track popcorn — sorry!

Editor’s note: Oscar-specific facts are from the official Oscars website, unless another source is provided.

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.