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What happens to prices when data collection is cut?

The Bureau of Labor Statistics is no longer gathering data from parts of New York, Nebraska, and Utah.

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Limiting where data on inflation is collected could impact the reliability and accuracy of government data.
Limiting where data on inflation is collected could impact the reliability and accuracy of government data.
Charly Triballeau/AFP via Getty Images

Back in June, the Bureau of Labor Statistics announced it was cutting back on some of its data collection, specifically, the kind that helps us understand what prices are looking like for consumers.

But in some cities like Buffalo, New York, Lincoln, Nebraska, and Provo, Utah, the BLS has stopped gathering data entirely. Folks in these areas undoubtedly want to be seen and reflected in governmental data that’s used to make important decisions.

What does this mean for the reliability of government stats? Can we trust them, or is our economic data in jeopardy? How does the reduction of sample areas impact the overall CPI data?

For more on this, Marketplace’s David Brancaccio spoke with Russell Weaver. He’s the research director at Cornell University's School of Industrial and Labor Relations. Below is an edited transcript of their conversation.

David Brancaccio: What's your sense of why the Bureau of Labor Statistics is going to now bypass places like Buffalo, Lincoln, Nebraska, Provo, Utah? Do you have any sense of why they're picking on those places?

Russell Weaver: Well, interestingly, there was no justification. There was a supplementary release a couple of weeks after the initial notice saying that researchers at the bureau had engaged in statistical simulations. The claim was basically made that research had been done that showed in Buffalo, [New York] Lincoln, [Nebraska] and Provo, Utah, that actual numbers through data collection did not differ very markedly from the numbers that they were imputing for that same time period using their statistical techniques.

Brancaccio: And so we fully understand this affects consumer price index, or more than the CPI?

Weaver: The CPI mainly is where the cuts have been made, but it is going to affect the Housing Survey as well as the Commodities and Services Pricing Survey. And so that is a little bit of a problem, because inflation is a huge issue right now, as everybody is well aware. And so not collecting in Buffalo is probably going to present some problems, because that's one of the largest population centers in this region at which the numbers eventually get summarized. And so we're going to be missing a good component there.

Brancaccio: Now, I use this data in our work in financial journalism all the time, and you do too. But is it so terrible if we cut some corners or scrimp a little bit on our statistical modeling?

Weaver: If we're not capturing that inflation accurately, that has a lot of meaning for folks who are receiving, say, Social Security payments through the government, which is another program that's under attack. Social Security payments are adjusted for a cost-of-living index based on CPI. And so if we're not capturing really the dynamism of CPI and how prices are changing because we're not collecting in regions that could potentially reveal something useful to the eventual estimates, that's going to affect people's bottom line and ability to survive who are dependent on wage increases or Social Security benefit increases that are generally tied to cost of living changes.

But maybe the longer-term and bigger picture issue here is that through a lot of these changes that we're seeing — we're starting to get a lot more skepticism about the quality of federal data, and federal data underlie effectively all policy-making and decision-making at all levels of governments in the U.S. So if we're going to weaken the federal statistical system, that's going to create maybe even more tension, divisiveness, and polarization in society, because we'll be arguing about whether or not we can trust the numbers.

Brancaccio: I mean, maybe at the personal level, too. I have a lot of friends and relatives by marriage in the Buffalo area. These are folks who want to be seen, statistically speaking. They want a consumer price index in their image. I worry that they're going to feel, I don't know, marginalized by this.

Weaver: Not only do we want representation in these data sets, but we acknowledge that because of the data collection protocols and processes, we need to collect this information from a ton of different locations inside of a region, with the goal of capturing information that looks common or typical for that region. And so by not having that representation in the CPI, you know, we in Buffalo can sit and watch all the headlines that inflation might be easing or prices might be coming back down, but that might not be the reality for a lot of folks who are living here.

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