Odd Lots Podcast Episode Summary: "Some of America's Most Important Economic Data Is Decaying"

Release Date: April 30, 2025
Hosts: Joe Weisenthal and Tracy Alloway
Guest: Bill Beach, Former Commissioner of the Bureau of Labor Statistics (BLS)

Introduction

In this enlightening episode of Bloomberg's Odd Lots podcast, hosts Joe Weisenthal and Tracy Alloway delve into a pressing issue facing America's economic infrastructure: the deterioration of critical economic data collection systems. Titled "Some of America's Most Important Economic Data Is Decaying," the episode explores the intricate processes behind the numbers that shape our understanding of the economy and the alarming challenges threatening their reliability.

Taking Numbers for Granted

Joe Weisenthal opens the discussion by highlighting a common oversight: the unquestioned trust in economic figures displayed daily. He muses, "We sort of take numbers on the screen for granted... But we don't really talk enough about what had to happen behind the scenes to get that number to the screen" ([01:06]).

Tracy Alloway echoes this sentiment, emphasizing the complexities involved in data collection and the qualitative adjustments necessary to maintain accuracy. She shares intriguing insights, such as how Consumer Price Index (CPI) weightings vary by city, affecting items like "food at home" differently in Minneapolis versus Chicago ([02:23]).

Declining Response Rates and Global Implications

The conversation shifts to the declining response rates in economic surveys, a trend not confined to the United States. Tracy Alloway points out, "Response rates on the housing portion of CPI have gone from about 70% back in 2015 to just 57% now" ([03:54]). She further notes similar declines in other countries, citing the UK's Office of National Statistics struggling with data quality issues ([04:00]).

This decline poses a significant threat to the reliability of economic indicators, which are foundational for market decisions and policymaking. Joe Weisenthal underscores the gravity of the situation: "This is a really big deal... Without high-quality data, the real economy is at risk" ([04:37]).

Interview with Bill Beach: Inside the BLS

Understanding the Data Collection Process

Bill Beach provides an in-depth look at how essential economic data, such as the monthly jobs report, is gathered. He explains the dual-survey system involving approximately 400,000 firms and 60,000 households to generate employment and unemployment figures ([05:26]). The meticulous process includes data collection, weighting, and revisions to ensure accuracy.

Notable Quote:

"The Commissioner plays no role whatsoever in massaging the data or multiplying the survey results" ([05:50]).

Rising Costs and Budget Constraints

Beach highlights the escalating costs of conducting these surveys, exacerbated by inflation and stagnant budgets. From 2019 to 2023, the household survey's expenses surged by nearly $5 million annually, straining the BLS's ability to maintain data quality ([15:04]).

Notable Quote:

"Our surveys, but especially the Current Population Survey, are dying. They're in very serious trouble unless we modernize." ([15:42]).

Modernization and Innovation Needs

To combat data decay, Beach advocates for modernizing survey methods by integrating electronic data collection and leveraging private sector data sources. He stresses the necessity of legislative support and increased funding to overhaul the statistical system fundamentally.

Notable Quote:

"Change is required. It has to happen. Congress needs to fund modernization, not continuation, of the current system." ([28:32]).

Trust and Data Revisions

Addressing skepticism towards government data, Beach explains the rigorous revision processes that enhance data accuracy over time. He shares an example where preliminary job estimates aligned closely with actual figures after thorough revisions, reinforcing the BLS's credibility ([40:19]).

Notable Quote:

"When we compare our numbers to the sampling frame, we sometimes find we're spot on, and sometimes we're off by 2 or 3 percent." ([40:19]).

Qualitative Adjustments in Inflation Metrics

Beach delves into the nuanced work of adjusting CPI and Producer Price Index (PPI) figures to account for product changes and quality improvements. He illustrates this with the example of potato chips, where reducing the number of chips per bag necessitates a "price per chip" adjustment to accurately reflect price stability ([42:41]).

Notable Quote:

"We train these people to observe changes and work that into their evaluation of the product when they're in the store." ([42:41]).

Implications for the Economy and Policy

The decline in data quality and response rates threatens the integrity of economic indicators that inform critical decisions across financial markets, government policies, and business strategies. Without reliable data, the ability to assess economic health, craft effective policies, and make informed investment decisions becomes severely compromised.

Joe Weisenthal poignantly remarks on the foundational role of government data: "It's really interesting to think about government high-quality government data as like this public good... The thought of that going away is alarming" ([48:48]).

Concluding Thoughts and Future Directions

In closing, both hosts reflect on the indispensable nature of robust economic data systems. Tracy Alloway emphasizes the loss of data granularity, which hampers the ability to understand regional and social economic disparities ([46:37]). They underscore the urgent need for systemic reforms and innovative approaches to sustain the integrity of economic statistics.

Notable Quote:

"The statistical system runs our country. There's no economy without the Bureau of Economic Analysis and the GDP numbers." ([48:48]).

Key Takeaways

1. Critical Importance of Economic Data: Reliable data is fundamental for informed decision-making across various sectors.

2. Challenges Facing Data Collection: Declining response rates, rising costs, and budget constraints are undermining the quality of essential economic indicators.

3. Need for Modernization: Integrating electronic data collection and private sector data sources is imperative to revitalize the statistical system.

4. Trust and Transparency: Robust revision processes and transparent methodologies are vital to maintain trust in government data.

5. Impact on the Economy: The deterioration of economic data infrastructure poses significant risks to economic stability and policy effectiveness.

Final Remarks

This episode of Odd Lots serves as a crucial wake-up call to the vulnerabilities within America's economic data collection frameworks. By featuring insights from Bill Beach, listeners gain a comprehensive understanding of the complexities and urgent challenges facing the Bureau of Labor Statistics. The discussion underscores the need for immediate action to preserve the integrity of economic data, ensuring its continued role as a cornerstone of the nation's economic health.

For more detailed discussions and insights, listen to the full episode on Bloomberg's Odd Lots podcast.