Cox: Response rates are falling, making CPI data less reliable

Key Concepts:

• Consumer Price Index (CPI)
• Bureau of Labor Statistics (BLS)
• Data imputation
• Response rates
• Data reliability
• Political influence on economic data
• Market overreaction

Data Reliability Concerns with CPI:

• BLS Data Collection Issues: The Bureau of Labor Statistics (BLS) is facing challenges in collecting accurate data for the CPI due to low response rates from businesses and individuals.
• Data Imputation: To compensate for low response rates, the BLS is increasingly relying on data imputation, which involves estimating or "guessing" price data, raising concerns about the reliability of the CPI figures. Example: "guessing at what the price of bread is in New York."
• Antiquated Methods: The BLS uses outdated data collection methods, such as phone calls and paper surveys, which contribute to low response rates.
• Goldman Sachs Research: Goldman Sachs research suggests that the unreliability of CPI data may cause markets to overreact to surprises in the data, both on the upside and downside.

Political Implications:

• Accusations of Manipulation: There have been historical accusations from politicians, including President Trump, that the BLS manipulates data to favor the party in power.
• Lack of Wall Street Support: The speaker states that he has not encountered any economists on Wall Street who believe that the BLS data is being manipulated for political purposes.
• Conscientious BLS Employees: The speaker emphasizes that, based on his experience, BLS employees are generally conscientious and dedicated to their work.

BLS Modernization:

• Pressure to Modernize: There is pressure on the BLS to modernize its data collection methods to improve response rates and data accuracy.

Conclusion:

The main concern surrounding the CPI data is the reliability of the data due to low response rates and the BLS's reliance on antiquated data collection methods. While there have been accusations of political manipulation, the speaker suggests that these concerns are not widely held within the economics community on Wall Street. The BLS faces pressure to modernize its data collection processes to improve the accuracy and reliability of the CPI.