Planet Money – Indicator exploder: jobs and inflation

Intro

In this episode of Planet Money, titled “Indicator exploder: jobs and inflation,” the hosts delve into the intricacies of measuring inflation and jobs growth. They explore the processes involved in collecting data for the Consumer Price Index (CPI) and the monthly jobs report, highlighting the importance of accurate data collection and its impact on the economy. Join them as they uncover the secrets behind these crucial economic indicators.

Main Takeaways

Measuring Inflation: The Consumer Price Index (CPI)

• Inflation is a measure of prices going up and is a big worry for the economy.
• It can cause destruction to an economy and the savings of millions of people.
• The Consumer Price Index (CPI) is used to measure inflation and involves meticulous and top-secret calculations.
• Millions of data points are involved and tracked by around 450 dedicated workers.
• The process starts with surveys taken by thousands of households who write down in detail how they spend their money.
• The Bureau of Labor Statistics collects data on the Consumer Price Index (CPI) by surveying households on their spending habits.
• COVID-19 forced the Bureau to switch from in-person visits to phone calls for data collection.
• The CPI tracks both products and services, including daycare rates and athletic socks.
• The price of daycare has increased by 5%, indicating inflation.
• The price of unsalted butter initially appeared to have increased by 25%, but it was actually on promotion for a lower price than the previous month.
• Accurate data collection is crucial for measuring inflation.
• Inflation rate influences markets, policymakers, and even the price of gold.

Jobs Growth: The Monthly Jobs Report

• Jobs growth is a direct measure of how the economy is going and has a tangible effect on everyday people.
• The monthly jobs report is put together from two main surveys: one surveys households for unemployment and the other surveys businesses and government agencies for job numbers.
• The establishment survey interviews about 130,000 employers every month, covering about a third of all non-farm workers in the country.
• The job numbers are important for town planning, business decisions about relocation, and big decisions at the Federal Reserve.
• The Federal Reserve has two mandates: getting price inflation down and keeping employment high.
• Erica builds a strong relationship with the people she calls, remembering birthdays and special occasions.
• Erica’s soft skills are critical for getting hard numbers correct.
• The Bureau of Labor Statistics revised the numbers up after tracking down missing responses.
• Erica makes one call to a corporate office in California to get ahead of the clock.
• Erica collects 298 responses before the deadline, including a massive 115 calls in one day.

Summary

Measuring Inflation: The Consumer Price Index (CPI)

The hosts explain that inflation is a major concern for the economy as it can have destructive effects on both the economy and people’s savings. To measure inflation, the Consumer Price Index (CPI) is used, which involves meticulous calculations conducted by around 450 dedicated workers. The process starts with surveys taken by thousands of households, where they detail their spending habits. The Bureau of Labor Statistics collects this data, tracking millions of data points. Due to COVID-19, the Bureau had to switch from in-person visits to phone calls for data collection. The CPI tracks various products and services, including daycare rates and athletic socks. Accurate data collection is crucial for measuring inflation as it influences markets, policymakers, and even the price of gold.

Jobs Growth: The Monthly Jobs Report

The hosts highlight the significance of jobs growth as a direct measure of the economy’s performance and its impact on individuals. The monthly jobs report is compiled from two main surveys: one that surveys households for unemployment and another that surveys businesses and government agencies for job numbers. The establishment survey interviews approximately 130,000 employers, covering a significant portion of non-farm workers in the country. The job numbers play a crucial role in town planning, business decisions, and the Federal Reserve’s policymaking. The Federal Reserve has the dual mandate of reducing price inflation and maintaining high employment. The hosts also shed light on the role of Erica, who builds strong relationships with the people she calls for data collection, showcasing the importance of her soft skills in obtaining accurate numbers.

Conclusion

Measuring inflation and tracking jobs growth are vital for understanding the state of the economy. The Consumer Price Index (CPI) provides insights into price increases, while the monthly jobs report offers a snapshot of employment trends. Accurate data collection is crucial for both indicators, as they influence various aspects of the economy and inform important decisions. By delving into the processes behind these economic indicators, this episode provides valuable insights into the complexities of measuring inflation and jobs growth.