Pod Insights Odd Lots Some of America's Most Important Economic Data Is Decaying About this episode Gathering official economic data is a huge process in the best of times. But a bunch of different things have now combined to make that process even harder. People aren't responding to surveys like they used to. Survey responses have also become a lot more divided along political lines. And at the same time, the Trump administration wants to cut back on government spending, and the worry is that fewer official resources will make tracking the US economy even harder for statistical departments that were already stretched. Bill Beach was commissioner of labor statistics and head of the US Bureau of Labor Statistics during Trump's first presidency and also during President Biden's. On this episode, we talk to him about the importance of official data and why the rails for economic data are deteriorating so quickly. Read more:Houston, We Have a Data ProblemThe US Economy Is Fracturing Too Only Bloomberg.com subscribers can get the Odd Lots newsletter in their inbox — now delivered every weekday — plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlotsSee omnystudio.com/listener for privacy information.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Speaker 00 Finance is increasingly being built on digital rails. But as the adoption of virtual assets, tokenization and stable coins grows, can regulation not only keep pace but help accelerate it? Find out more later in the podcast.
0:16 Speaker 01 This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting
0:58 Speaker 01 and hiring practices, but according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.
1:41 Speaker 01 Bloomberg Audio Studios. Podcasts, radio, news.
1:57 Joe Weisenthal? Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.
2:02 Tracy Alloway? And I'm Tracy Alloway.
2:03 Joe Weisenthal? Tracy, I've said this a bunch of times, and we've sort of danced around this issue on the podcast before, but I've said this a bunch of times. I'm sort of fascinated by the degree to which we sort of take numbers on the screen for granted. Like, you know, we look at a price of a stock and it exists on the screen. It's like, where did that come from? How did that get there? Or like, the first Friday of the month, the jobs data flashes on the screen and we just start talking about what the data said, what the unemployment rate was, et cetera. But we don't really talk enough about like, what had to happen behind the scenes to get that number to the screen?
2:36 Tracy Alloway? Right. I find this really interesting as well, because obviously there's the data collection portion of this. Like, you have to go out and talk to people for certain surveys, certain data points. But also, there are so many qualitative and subjective adjustments that you can make to that data. So for instance, with CPI, I didn't know that CPI weightings are like different depending on what city you're in. So for instance, like food at home could matter a lot more in, I don't know, Minneapolis compared to Chicago. It's really interesting. And there's also qualitative adjustments. So if your fridge gets Wi-Fi connectivity, then that gets incorporated into the price as well. So it's really interesting.
3:20 Joe Weisenthal? It's super interesting. And like, I have, you know, this is the issue. We don't talk about data collection, but it's obviously some of the most interesting stuff there is because of course, you know, things like food at home in one city should be different than another city if you really want to collect a basket. And so it means that what you have is some of the most interesting economics work being done anywhere in a realm that virtually gets no attention. And when we talk about data collection, you know, you hear it a lot in politics, right? Surveys have gotten, you know, no one answers the phone. It's, you know, it's harder and harder to do high-quality surveys. I think you've written about this, like, response rates and just the actual cost of collection of all this data. Is on the rise.
4:02 Tracy Alloway? Yeah, so I have a bunch of thoughts on this. I'll just say, talking about the economic data might be timely as well, because we know that Trump doesn't really respect, I guess, a lot of official economic data. And he's also trying to cut back on costs or funding of a bunch of different government programs. So it's clear that, you know, entities like the Bureau of Labor Statistics could potentially be in the crosshairs here. But you're right, response rates, lower response rates have been happening for a long time. And it's really easy to look up like just how bad things have gotten. If you look at the BLS website, for instance, look at response rates on the housing portion of CPI, that's gone from about
4:45 Tracy Alloway? 70% back in 2015 to just 57% now.
4:51 Joe Weisenthal? Wow.
4:51 Tracy Alloway? Response rates on jolts have gone from, I think, 67% to just 30%.
4:57 Joe Weisenthal? Wow.
4:57 Tracy Alloway? So that's pretty amazing. And the other interesting thing here is, it's not just a US problem.
5:04 Joe Weisenthal? Right.
5:04 Tracy Alloway? Like, there's no US exceptionalism here. You see the same pattern in other economies, like the UK and New Zealand. And actually, in the UK, just last month, the Office of National Statistics said it wasn't going to publish PPI because of a data quality issue. And also, trade data had a problem because of errors in the data provided by HM Revenue and Customs. And now there's a task force to look at all of these mistakes and data problems at the ONS. So something that goes beyond the US here.
5:35 Joe Weisenthal? This is a really big deal, especially when you just consider how much economic activity is based on being able to look at high quality data and make decisions from it, obviously in the market, but also in just sort of the quote, real economy, etc. Anyway, without further ado, we really do have the perfect guest, someone who knows a lot about how the sausage is made and why making the sausage is getting more expensive. We are going to be speaking to Bill Beach. He was most recently the Commissioner of the BLS. And he knows all about this. He was the 15th Commissioner at the BLS, does research affiliated with the Economic Policy Innovation Center, and he's going to talk to us about all of these issues. Bill, thank you so much for coming on Odd Lots.
6:19 Speaker 04 It's great to be with you and Tracy. Thank you very much. It's a great topic.
6:23 Joe Weisenthal? It's a great topic. I don't know like when the process begins, but it's like I get this number. It says what the jobs report. It says how many jobs were created that month. How did that number get onto my screen or onto BLS.gov?
6:39 Speaker 04 And it gets there every month.
6:40 Joe Weisenthal? Yeah, every month, every month. It's never missed, except maybe once in like a hurricane or something. Anyway.
6:46 Speaker 04 So the first, yeah, the first Friday report, the jobs report, which comes out at 8:30 Eastern Time on the first Friday. It consists of two surveys. So let me talk about the first one, which is the one you just mentioned, the number of jobs.
7:00 Joe Weisenthal? Right.
7:01 Speaker 04 That is a survey of about 400,000 firms out of 11.3 million firms in the United States. About 400,000 of them have agreed voluntarily to send in a pretty complex survey response every month. They send that survey to electronic collection centers. There's one in Chicago. There's one in Atlanta. And that survey has to contain the 12th day of the month. If it is a workday or the closest workday to that 12th of November or whatever. And the reason for that is we want to get at least one pay period in the report. Okay.
7:45 Speaker 04 So they submit that, that, that data continues to be collected through almost the end of the month. Not quite, but almost the end of the month. It goes from regional offices, these regional collection centers, to the national headquarters in Washington where about 40 people, sometimes less, out of the 2,000 people that work there, massage the data, which means that they, they take the data, which is in the survey. It's a sample. It's just a fragment of the total population. And they multiply the responses by what are called weights. And that gives us the national number. So that number is all done pretty much by Tuesday night preceding the Friday.
8:33 Speaker 04 And on Wednesday, the commissioner gets to hear the data. The commissioner, by the way, plays no role whatsoever in massaging the data or multiplying the survey results times the weights. Then I would brief the White House. The White House would then brief the Federal Reserve Board Chairman, the Secretary of the Treasury on Thursday, that Thursday night usually. They're sworn to secrecy. And then at 8 o'clock in the morning, I would walk over to the Department of Labor because BLS's headquarters is about a 20-minute walk from the Department of Labor. I would brief the Secretary of Labor.
9:15 Speaker 04 And for an hour, from 8:30 to 9:30, the Secretary of Labor and his staff had to remain quiet. And then at 9:30, they could answer questions of the press. So that basically is the process for the jobs report. There's another survey there. Interrupt me at any time, but that's where we get the unemployment rates called the Household Survey. And that's a survey of 60,000 households selected out of a sampling frame. We can talk about that term to be representative of the entire United States by demographic segments. You know, how many people are in a certain age group, male, female, the racial and ethnic compositions and geographic locations.
9:58 Speaker 04 So it's a complex sample. That sample is done usually by Monday of the week prior to the release on Friday. And then again, I get to see the results. So the commissioner gets to see the results on Wednesday. So that's kind of the calendar. Both the Household Survey and the Employment Survey cover the same two-week period in the month. Now, there may be a day or two, you know, switch there. Sometimes the Household Survey has a few more days in it than the establishment survey, but they all have that 12th of the month because we're trying to get the middle of the month. By the way, that's real important because if you have a natural disaster
10:41 Speaker 04 that happens prior to the 12th or after the surveys are closed, that does not affect the results, even though you would think, since it happened in the month prior, that, you know, the hurricane might have affected employment results.
11:08 Speaker 00 What's next for virtual assets? I'm Jacob Rees, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.
11:24 Speaker 05 We're seeing a lot of institutional players come in, digital asset dedicated hedge funds, high-frequency traders and that sort of thing, and folks who service institutional clients.
11:33 Speaker 00 As more capital enters the market, adaptive regulation is likely to become increasingly key. Rees-Merrick of Ripple says.
11:41 Speaker 06 A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.
12:00 Speaker 00 Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.
12:10 Speaker 01 This is the Bloomberg Tech Minute, brought to you by ChatGPT. I'm Carol Muster. Millions of Americans are taking peptides, short strings of amino acids that can act as biological signals for cells. Peptides like insulin can occur naturally in the body, or they can be synthetically introduced to induce a biological process, as happens with semaglutide, the active ingredient in Ozempic. Now, Bloomberg's Anika Inamputi reports peptides may be exploring their next frontier: the brain. People are taking peptides for mental clarity and cognitive benefits as alternatives to psychiatric medications and to gain a competitive edge or stave off the effects of aging. Both insulin and semaglutide are approved by the U.S. Food and Drug Administration.
12:54 Speaker 01 Because importing or selling unapproved peptides for human use is not legal in the U.S., many people turn to online forums for guidance and overseas vendors with questionable credentials to obtain them. Unapproved peptides, which are marketed as research chemicals, have been circulating in what's become a billion-dollar gray market. Market amid the rise of do it yourself medicine as people increasingly turn to social media or artificial intelligence for medical help. Doctors warn against self experimentation and advise talking to providers before trying any new therapies. That's the Bloomberg Tech Minute brought to you by Chat GPT. Get started at Chat GPT.com.
13:33 Tracy Alloway? So one thing you mentioned is companies voluntarily responding to these surveys. And one thing I always wondered about is how, how I guess onerous or resource intensive is responding to these surveys. So do I have to have like a person who's dedicated to doing this every month? Does it consume resources? How long is this going to take me? And then also, does the BLS ever try to fact check some of these self-reported data points?
14:05 Speaker 04 Those are great questions. So the survey is, is not just one or two questions. It takes about 30 minutes to fill it out completely. We do get responses that are incomplete and we accept those incomplete responses. The survey is usually filled out by someone who can access the company's data on wages, on total employment, on employment by supervisory or non-supervisory job functions. In other words, it's a person usually in the operations office of a company. Now, we ask companies that are very large, you know, like the big box retailers, all the
14:44 Speaker 04 way down to really small corporations or small firms. And it becomes a more and more of a difficulty for the smaller firms. And we're very cognizant of that. So BLS has reduced the scope of the survey to get it as small as possible and as free of burdensome compliance as possible. It's also an electronic survey so that they can fill it out on their computer screens and hit a submit button, which, which greatly, greatly improved our response rate, by the way. So that survey is not so hard now to fill out, though I think it still takes about 30 minutes, maybe more if you have to dig out the data if you're not in possession of it. The household survey is a totally different beast.
15:29 Speaker 04 It is a long survey. It consists of over 120 questions. It really is hard to fill out if you kind of don't know the terminology. Let me just give you one. We asked the question on employment. Are you working or have you looked for work in the past four weeks? That's the key question. We've been asking that question for, since 19, I think, 1943. If they answer, I'm working, then they are considered employed. We'll, we'll have follow-up questions about that, about their industry, about their tasks and so forth. If they say, no, I'm not working, then we say, well, did you look for work in the past four weeks? And they'll say, well, you know, maybe, I thought about it.
16:13 Speaker 04 Well, thinking about it's not, not enough. You can look for one day in the past four weeks and be considered in the labor force, but unemployed. So that sometimes we have to have a verbal follow-up rather than they're just, you know, just filling out a form. There has to be a conversation. That's why we don't do more than 60,000 households because it is, it's burdensome for the person who's the questioner.
16:39 Joe Weisenthal? This, this leads right into, I think, what I was about to ask you, which is, you know, we're having this conversation, April 2025. You, your term of office at the BLS ended March 2023. So you were actually under both the two recent presidents, under the first Trump administration, then Biden. But let's say, okay, so let's say it's March 2023. How much costlier is that process of communicating with the households than it was, say, in 2013 or 2003?
17:09 Speaker 04 It was more, more costly, certainly. And that's because of inflation and how inflation affects, affected the wage bill for the survey.
17:19 Joe Weisenthal? Okay.
17:20 Speaker 04 The survey is taken by the Census Bureau under a contract by BLS. So we pay the Census Bureau to take this, to go out in the field and conduct the survey.
17:30 Joe Weisenthal? Okay.
17:31 Speaker 04 Here's an idea of how much more expensive it was. In 2019, which is the first year of my term, I didn't have to find any additional funding. For the household survey, it might have been just small amount, but but nothing significant. By 2023, we were having to find almost four million, five million dollars more. So the costs of the survey.
17:54 Joe Weisenthal? Is that per year, per month?
17:56 Speaker 04 That would be for the entire year.
17:58 Joe Weisenthal? Okay, okay.
17:58 Speaker 04 The the cost of the survey went up significantly. Now, your listeners will be thinking about the federal budget, which is in the trillions of dollars. And say, oh, that's not very much money. But the Bureau's budget hadn't has not really changed for almost a decade. And and our costs have gone up, you know, progressively, especially during the period of significant inflation, which we had starting in 2021. So that, you know, finding additional money is really hard. During the pandemic, I found millions of dollars of couch money, unused conference fees, unused travel fees. So I could apply that couch money, if it were, you know, to purposes like
18:41 Speaker 04 buoying up the CPS or building a data. We we built a brand new data center out in the suburb of of Washington. But once we were back in business and fully using our entire budget, it was very difficult to find those dollars to fill the hole. And I think you could safely say, I've been arguing this now for over two years. Our surveys, but especially this, the current population survey, the one that gives us the unemployment rate, the labor force data, are dying, they're decaying, they're in very serious trouble. And we will have, if unless we modernize that survey, we will see a time when we will be like the British, right?
19:23 Speaker 04 Unable to to publish portions of it that just don't have sufficient sample for statistical release.
19:31 Tracy Alloway? Okay, I'm going to ask the obvious question here. But why have costs of conducting these surveys, gathering this data, actually gone up? And I understand, you know, building data centers is probably an expensive process. But on the other hand, you know, going electronic instead of mailing out thousands and thousands of surveys. In theory, I would imagine maybe that saves you some money. So what exactly is causing the increase in expenses here?
19:59 Speaker 04 The problem is not with the electronic surveys. They will eventually be very costly. There, we're suffering from a different problem, which is just public support for the electronic surveys. So the jobs report, that is, that portion of it that's electronically captured by these collection centers in Chicago and Atlanta, I think those are going along all right for the time being. Our real problem is in the surveys, the data of which is collected by people, survey, survey field, survey people. They go out and they talk to the households, and there the cost is the obvious one. It is the wage bill.
20:42 Speaker 04 These people are highly skilled interviewers. They are not high school graduates, and I have nothing against high school graduates, but they're educated, very trained, oftentimes economists who will go out and speak to people and do follow-up interviews. My gosh, and they'll spend hours and hours doing this. Well, okay, fine, that's great, but it costs a lot to keep those people employed. They have other opportunities, so we have to have competitive wages. The wage bill is driving that. Collection costs are a little bit higher, that is, the processing costs, but the big part of that is the wage bill. And the wage bill is not going to go away.
21:24 Speaker 04 That's just going to continue to go up. So what we need to do with the household survey, what we have done with the establishment survey, the firm survey, and that is modernize it so it is more electronically collected. And then we also need to integrate data which can be obtained through the Internet on households. Households maybe go on to a platform with a tablet or something and supply, you know, maybe we go to a million households and they supply five or six questions, and we combine that or blend it with person-to-person collected data. That's what we call modernization. It may not sound so innovative to your listeners.
22:09 Speaker 04 But it is very innovative for the statistical system. Unless we do that, the cost will continue to rise. The response rates, by the way, are continuing to decline. So that's public support. And we will be, we just won't have these surveys in the future. They're too expensive.
22:26 Joe Weisenthal? I want to get to the modernization in a second. But just talk to us about, I mean, I think you said these, the surveys dying, which is pretty dramatic, given the centrality of this. Between the response rates, the increased wage bill, et cetera. How severe is this crisis? How much time are we talking about? Because I imagine it gets harder and harder to find that couch change to keep it going.
22:51 Speaker 04 Yeah, actually, we're out of time. We have to cut down on the sample. And I'll give you, I'll give you the evidence. My successor, the current commissioner of labor statistics, announced at the end of last year that we would have to reduce the sample in the CPS, that's the household survey, by 5,000 households in order to just publish the rest of the sample. Okay, by, by cutting back on the sample, you cut back on publishing details in the current report. You may not have enough to publish on teenagers anymore. On certain demographic groups,
23:34 Speaker 04 you may not be able to publish details on certain age intervals, like everyone between the ages of 55 and 60, or 65 and 75. Every time you reduce the sample, or your response rate falls and it kind of reduces it for you, we can, we can talk about that next. You, what suffers are the details. Let's go to the CPI, which BLS also does. The CPI is a very big survey, a very important survey. But it is oftentimes the case that we don't have details for certain parts of the basket of goods. And so we will average across the months and publish for another month based on averages
24:17 Speaker 04 of prior months, but then we run out of the integrity of that average and we can't publish the bread price or something like that. That happens more and more because we're getting less and less cooperation by retailers that to allow our surveyors into their stores and to go around grabbing the potato chip bag and counting the number of potato chips in the bag. So, so we're, we've had to innovate on the CPI, on the producer price index, on the import-export price indexes. I hope you haven't noticed the innovations because you're not supposed to, but, but those innovations have saved, absolutely saved the import and
25:00 Speaker 04 export price. We, we had response rates down in the 20 percentiles, completely unpublishable detail. During the time I was commissioner, we went to using data from the Commerce Department that is collected by the customs officials and it's working out just great. So we completely left the surveys there. The PPI has problems just like the British are having now, not as bad. And we're using more and more data from private companies that who will give us their data, from the internet where we collect that data and we combine that with the survey data to keep the, to keep the things alive. On the CPI, it's very interesting,
25:41 Speaker 04 we get our, all of our retail gas prices now from an aggregate, a private company that aggregates gas prices for the retail gasoline industry. And it's a very good source. A lot of our housing prices now, you mentioned housing, we're going to more and more to aggregators, a private aggregator. So we, there are strategies for saving the survey by blending in private data with the survey data. That is not the case with the household survey of the labor force. It, it, nobody really collects that data except BLS. And that's why these demographic surveys, Census has a bunch of them, health, the health department, the Department of Health has a lot. They're in very serious trouble.
26:27 Tracy Alloway? So I take the point about innovations, but one of the things that's been happening recently is we have been seeing bigger and bigger revisions in a lot of the data. Is that because of the response issue? So more late responses mean that you're going to get revisions later on as those responses are incorporated? And the reason I ask is, I remember speaking to someone at the BLS, and here, shout out to the people working at the BLS, because you can actually just call them and ask questions. They're really, really responsive, amazingly. Like, the only government department that I really know where they'll just pick up the phone and talk to you about methodology.
27:07 Tracy Alloway? Anyway, I was asking about revisions to PPI for mayonnaise, of all things, and the data there had been revised from like 5% to 10%, which is a pretty big change in the space of a couple of months. And he was talking about how the PPI is subject to revision up to four months after it's published, and it gets updated as new replies come in. So I imagine if response rates are going lower, then maybe that's contributing to some of the revision issue.
27:36 Speaker 04 By and large, our issues have to do with response rate. You're absolutely right. And before I go further, I'm very, very happy you said that about BLS, because BLS prides itself in being responsive. And transparent, by the way, so that's a good thing. So I think there are two sources of this problem. The first is really hidden, and no one talks about it, so let me just mention. When we refresh a survey, and you have to do this because people are asked to give their survey responses only for a few months, right? And then they drop out, and you have to find new people. The regional offices, there are six of them in the United States for the BLS, they have
28:17 Speaker 04 people who go out and do what's called "initiate a new survey respondent." It's getting more and more difficult now to initiate that respondent. Well, people are saying, "We just don't have time." You know, "Oh, my gosh, there's so many important things to do." "We don't want to give you our data, because if we give you our data, then the IRS is going to be after us, or we're going to have some kind of OSHA." You know, we don't... BLS's data is completely protected from the law enforcement aspects of the federal government. It's absolutely only for statistical purposes. That does not prevent people saying, "Oh, it's gonna happen," you know? So if your initiations are dropping, and it's harder and harder, no wonder the response rates are dropping.
29:00 Speaker 04 Because people are less enthusiastic, even if they say, "Yeah, I'd love to be a part of it," they're not as enthusiastic as they were a generation ago. So the real problem starts at the initiation level. And we're seeing that not only in the household survey and in the price area, but we're also seeing that in another survey we haven't talked about, the National Compensation Survey, which is a wonderful survey on how much people are getting in union houses, union households and non-union households, and northeast and southwest. It's terrific about that. The Joltz Report, the job openings and labor turnover survey that you mentioned at the
29:41 Speaker 04 opening, its response rate has fallen dramatically, and it's largely because people are less enthusiastic generally about participating in government surveys. It's gonna be hard to stem that tide, and I think the only way we can do it is by going to these platformed surveys, that is, surveys that use the internet as the main platform, integrating a lot of private data and being highly original in the way we think about preparing a statistic for public use. We're just not going to be facing a different world overnight of really happy people wanting to give all their data to the government.
30:22 Joe Weisenthal? It's really a fallen world sometimes. I'll say that, you know, "Oh, we won't let you in the store to, you know, look at the price of bread." Anyway, what would it take to get there? Can this be done unilaterally within the BLS, this sort of big upgrade? Would it need to be something involved with Congress? Would it need a budget allocation that would come from Congress? What would need to happen to get this sort of modernized statistical collection system that you would like actually in place?
30:48 Speaker 04 I think we have to approach this like we might approach roads and bridges, right? Once Congress becomes aware that there's political liability in ignoring a problem, they generally focus on it until it's fixed. And that was the case with our national highway system, still is the case with our national highway system. We still have a lot of problems. When I go to Congress and I talk about the CPS and response rate, how we're going to lose the unemployment rate, I get immediate response. And nobody, you know, the communists, no one's ever said that to me. Okay, oh, let's fix it. So in the last congressional continuing resolution, which was passed a few weeks ago, BLS got
31:28 Speaker 04 six million more in funding just to fill that hole that we've been talking about on the wage bill. And that was an amazing thing to get in a continuing resolution, an increase in funding. So I think Congress presented with a plan, or the administration, President Trump is wide open to disruption and change. I think if we develop an aggressive, bold, comprehensive plan about how to rebuild the statistical system, so that we're using our resources much more efficiently, perhaps combining some agencies together, instead of having the 24 separate statistical agencies, maybe we ought to have just a handful.
32:09 Speaker 04 And then going from there to a highly innovative, different way of collecting and disseminating data, then our roads and bridges, statistically speaking, won't be disintegrating or decaying. We will have new concrete, we'll have new structures, and you can see a future for the statistical system. I think right now, speaking as a former director of an agency, one of the most important statistical agencies, if not the most important statistical agency in the world, I, that, that future looks grim to me. And I, and so change is required. It has to, it has to happen. And I think that's what we have to do, present it with a plan, let Congress see what we're going to do, and have them fund modernization, not continuation of the current system.
32:49 Tracy Alloway? This is a little out there, but could you, if the problem is the response rates and incentivizing people to actually answer these surveys, could you potentially pay them to do it?
33:03 Speaker 04 Tracy, we've tried that. It's been tried a lot. Good suggestion, yeah, you know, pay them dollars, okay? Tried that, didn't make much of a difference. Then we thought, well, maybe they'd like to have these cards you can take to retailers and buy anything you want, right?
33:21 Tracy Alloway? Gift cards.
33:22 Speaker 04 Yeah, gift cards. So we tried that. That's not the issue. It's not. I think you could pay people a lot of money, say a thousand dollars a month, and they might participate because that's a lot of money. But we can't afford that. That's not there for the statistical system. So inducements may help at the margin, but they don't change the trend line, which is going negative on the response rate. I think we're going to live at that response rate for a while. I do believe it's generational. I think you can see in the really young kids now, not the ones that are under five, but in the ones that are in their teens, kind of a return to doing things together, having
34:05 Speaker 04 more social events, maybe, I wouldn't say the bowling leagues are coming back. And maybe that's a cultural change that leads to a more, a greater sense of participation and support of public institutions. One could hope.
34:18 Tracy Alloway? I like the idea of all the kids coming together to answer surveys from the BLS. That's great.
34:25 Speaker 04 I think you'd get some really interesting answers there. But yes, short of that, we have to be innovating. We have to change. We have to think outside the box. Otherwise, this infrastructure, which we all need, you know, it runs our country. There's no economy without the Bureau of Economic Analysis and the GDP numbers. They don't grow on trees. That's going to be either going to go away or become less reliable.
35:08 Speaker 01 This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Millions of Americans are taking peptides, short strings of amino acids that can act as biological signals for cells. Peptides like insulin can occur naturally in the body, or they can be synthetically introduced to induce a biological process, as happens with semaglutide, the active ingredient in Ozempic. Now Bloomberg's Anika Inampudi reports peptides may be exploring their next frontier, the brain. People are taking peptides for mental clarity and cognitive benefits as alternatives to psychiatric medications and to gain a competitive edge or stave off the effects of aging. Both insulin and semaglutide are approved by the U.S. Food and Drug Administration.
35:52 Speaker 01 Because importing or selling unapproved peptides for human use is not legal in the U.S., many people turn to online forums for guidance and overseas vendors with questionable credentials to obtain them. Unapproved peptides, which are marketed as research chemicals, have been circulating in what's become a billion-dollar gray market amid the rise of do-it-yourself medicine as people increasingly turn to social media or artificial intelligence for medical help. Doctors warn against self-experimentation and advise talking to providers before trying any new therapies. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at ChatGPT.com.
36:31 Joe Weisenthal? You know, something that strikes me while listening to you talk and like, oh, you found a way to allocate, you know, unused travel spending so that you could keep the surveys going after the wage bill went up, et cetera. Keep rustling the couch change. And I think about this in, you know, you mentioned, okay, well, maybe the new president is, is, you know, theoretically open to shaking things up and doing things a different way, which you argue pretty persuasively is necessary. On the other hand, you have the sort of Doge kick, which is sort of premised on this idea that every agency in the government somehow is just egregiously wasteful, that all of these agencies. Must be so wasteful that you could cut aggressively and you almost certainly
37:14 Joe Weisenthal? aren't actually going to hit any bone. Seems to be a sort of premise of some of the cutting. It doesn't sound like to me, when you described the BLS in 2019 through 2023, that this was an agency that was just, you know, larded up and had plenty of, uh, plenty of, uh, fat that can be trimmed off.
37:34 Speaker 04 No fat, no fat at all. But you know, this is the age old conflict, right? Between the entrepreneur and the accountant.
37:42 Joe Weisenthal? Sure.
37:42 Speaker 04 The entrepreneur always looking for innovation and change and higher return on investment. And the accountant is always looking for waste and abuse. Are we using our pencils until they're only three inches long? I think that's a fruitful thing. I think you have to have both of those forces working all the time and over time. Right now, I don't doubt for one second that a lot of the federal government could use a thorough scrubbing on the things that Doge is looking at. The statistical system has unfortunately, in my opinion, but fortunately now, been through that scrubbing over the past 15 years. No, no real increase in budgets and yet an increase
38:23 Speaker 04 in responsibility. So efficiencies have been gained there just from the brutality of living year after year after year with the same dollar amount while your costs are going up, while inflation is changing. Don't mind that because, you know, efficiencies can't occur and we can do more with fewer dollars. That's, that's okay. Innovation, on the other hand, has to be kind of funded by your retained earnings and we don't have that in the statistical system. Congress has that. So we're not getting the dollars necessary to innovate and secure the future. That's the problem I want everybody to kind of focus on.
38:58 Tracy Alloway? So you mentioned earlier that you had used internet data to try to make up for the lack of a certain data point or a certain response from the surveys. And I'm curious, there is the sense nowadays that everything we do is tracked and recorded somewhere. Could you potentially use some of that type of data instead of voluntarily reported responses?
39:24 Speaker 04 So to an extent, you can use that. If you have an unambiguous signal and you can capture that unambiguous signal month after month, why not capture it? Why not capture, for example, certain pay bans or other things that are happening in the labor force or with wages or with working conditions? The restraint there is that not everything we want to know about the world is unambiguously signaled every month. And I go back to this seemingly easy question. Are you working or looking for work? You would be surprised at the number of people who say, "I'm working." But then we make that query, "Did you work for pay?" "No." "Okay, I did the dishes." "Okay, fine."
40:09 Speaker 04 Well, that doesn't... Now, see, in the mind of the respondent, work is defined differently than it needs to be defined in the statistics. "Are you looking for work?" "Well, yeah, I'm looking for work." "When did you look for work?" "Last year." "Okay." "All right." See, that doesn't count as the key determinant of whether or not you're in the labor force. You're in the labor force if you're working or looking for work in the past four weeks. So that seemingly simple question is not going to be unambiguously signaled by somebody answering an internet question because of the many different ways we think about our lives and about what work is. We find this particularly true as our country becomes, I think it's a good thing, more
40:54 Speaker 04 and more culturally diverse. People come in with very different views of what is work, of what is pay, of what is a family, of, you know, of what is a household. And we have to work harder and harder and harder to make sure that their responses fit this continuous, since 1943, continuous stream of data that allows us to do these wonderful time series analyses. That's the issue, Tracy, with using internet data. Some of it can be used and blended in. Some of it from the private sector can be used and blended in. But some cannot. You you still have to have that survey instrument out there asking the hard questions, doing the follow ups.
41:39 Joe Weisenthal? You know, there are some people who simply do not believe the statistical agencies are honest, or they believe they, you know, they do not trust when academic economists explain why data gets revised a year later, or something like that. And they assume that there is political influence of some sort, or they believe it. And, you know, it goes back years. And I remember 2000, what year, 12 years ago, Jack Welch, the Chicago guys will do anything, can't believe these jobs numbers, etc. You were appointed in 2019 by President Trump, and you crossed over into Biden. What do you say to people who do not believe that they can trust these numbers?
42:19 Speaker 04 Well, I I I can't dislodge their suspicions without going to some factual basis. So I I take them through the simplest revision process, which is the jobs revision. That, you know, we had 818,000 preliminary estimate of a decrease in employment that was announced last August. And everybody, President Trump was running for at the time, and he just said, look at this, this totally dishonest BLS. Okay, so this happens every every year. We we compare our numbers to the a sampling frame with all than all the people who work in the entire country. And we say, is our is our estimate of total employment based on a much smaller sample than all the firms, is it accurate? And when we we go up there
43:04 Speaker 04 and we compare it every March to this total universe, we sometimes find we're spot on, you know, less than one tenth of a percent off. And sometimes we find we're as much as 2% or 3% off. That we're off more often when the economy is either diving into recession or growing rapidly out of a recession, or has a period of really bad time happening. So when I take them through the revision process, they usually come out and say, you know, I never knew that. And and so there the next time they they think about, oh, the BLS is lying, they'll have that in their mind that really there's we do this every year. It's the same way. And we're pretty good with those numbers.
43:45 Tracy Alloway? So I want to ask you about qualitative adjustments because I find these so interesting. And the example I used was fridges that now have, I don't know, new and interesting features. And my understanding is that if a company is selling a basic refrigerator for like $1,000 and then the next year it sells this new advanced refrigerator for $1,150 and then it's also spending additional money, so like an extra 100 or whatever, to make the more advanced fridge. In cases like that, the BLS would use a qualitative adjustment and then the year-on-year PPI would
44:24 Tracy Alloway? be something like, I don't know, it would be 5% instead of the 15% change in the actual price. How do you actually go about making those qualitative adjustments? And I imagine they must have been getting harder as things become more technologically complex.
44:41 Speaker 04 Well, you're absolutely right. It is very difficult to do that, but we do a lot of training. A lot of people don't know that at the national headquarters, there is a training suite. I think it's on the second floor, at least before we moved out of that building. And so people from the regions who are the CPI and PPI field teams that go out and do the survey, they come to the BLS for training. And in these training rooms are kitchens, there are grocery store aisles, we've recreated kind of the inventory you might find in a grocery store or a warehouse. And we will train people from time to time on the changes in the items in the CPI, the
45:26 Speaker 04 200-plus items in the CPI, or the items that we're surveying at the producer price level. So if there is a change, all the way from the number of potato chips in a bag, which is a very important thing, and when we do the, we will look at fast foods and potato chips and so forth, all the way to the technology involved in diamond cutting, we will be training people to observe the change and work that into their evaluation of the product when they're in the store, when they're in the warehouse. So the field person will literally pick up a jar of, if I could say, Pringles, right? And they'll say, well, last month had thirty six Pringles in here.
46:10 Speaker 04 And it's this month, it's the same price, but we only have thirty two Pringles.
46:16 Tracy Alloway? Wow. True granularity.
46:20 Speaker 04 Yeah, so that that fits into now.
46:23 Joe Weisenthal? PPP, the price per Pringle. Keep going.
46:25 Speaker 04 Exactly. But but it has to be that way because what happened is the retailer will keep the or the producer will keep the price at the same level, but decrease the item count in the in the product bag. And that means that the product has actually gone up in price, not not just have the same price. Let me just say one more thing. Great question, Patricia. We have, that's the reason why we can't go to the Internet and get all of our prices. Because when you go to the Internet, you can't sometimes see the quality adjustments that are there. You can't see that the fact that the the hot dogs are just a little shorter than they used to be, or the apples a little smaller than they used to be.
47:08 Speaker 04 I don't know about the apple thing, but the but the shorter hot dogs is the definite case. So you have to, we train these people, they're highly trained. That's they're also very expensive because they're highly trained people. And they can see and know when to look and when to check for quality improvements. Electronics, definitely, you know, but a lot of times the producers of the electronics will heavily advertise the changes, make it known to everybody because that's that's what you're selling, new and improved. It's on these other items that it's more subtle. And, you know, housing, housing is a big deal. Because the house is more valuable if it has improvements in it. And some of those improvements are completely invisible.
47:49 Speaker 04 So so we're we're very conscious of the fact that quality governs the price structure.
47:57 Joe Weisenthal? Bill Beach, that was a fascinating conversation. I feel like some of these areas, like even just like talking about the the art of actually conducting an interview, to see if someone's in the labor force, really fascinating stuff. Really appreciate you coming on. There's something we want, we've wanted to talk to you, to talk to someone a long time. So appreciate you joining Outlaws.
48:17 Speaker 04 It's been, it's been a pleasure. Thank you very much.
48:20 Tracy Alloway? Thank you so much. That was great.
48:36 Joe Weisenthal? Tracy, I thought that was great.
48:37 Tracy Alloway? I'm so glad we finally did that.
48:38 Joe Weisenthal? Yeah.
48:39 Tracy Alloway? A couple of points. So first of all, I did not know that hot dogs have been getting shorter.
48:43 Joe Weisenthal? Me neither.
48:44 Tracy Alloway? And it's being incorporated into the inflation data. So all the
48:47 Joe Weisenthal? This is good to know.
48:48 Tracy Alloway? All the people complaining about shrinkflation, I guess, you know, it is mitigated.
48:52 Joe Weisenthal? They're aware of it.
48:53 Tracy Alloway? Yeah, exactly. And then the other thing I would say is I thought the point Bill was making about the loss of granularity in the data
49:00 Joe Weisenthal? Yeah.
49:01 Tracy Alloway? was really important. So the idea of getting to like the tails of the distribution or certain minorities. And the reason I say that is because we've been seeing a lot of regional and social variation in a lot of these consumer surveys, right? So obviously, people who are poorer have been feeling terrible during the days of high inflation and people who are rich feel, you know, pretty good. But also inflation in Florida has been higher than elsewhere in the country. So I think it does become more important to get really, really specific with some of these statistics as we see those differences increase.
49:40 Joe Weisenthal? It's really interesting to me to think about government, high quality government data as like this public good and try to imagine
49:50 Tracy Alloway? Infrastructure, right?
49:51 Joe Weisenthal? Infrastructure and try to imagine the amount of economic activity that exists because this thing is offered for free that we don't, that people don't have to pay for. And obviously, in the investing world, there's a tremendous amount of interest in all this, but it's obviously not just, you know, the investing world. And so all of these questions, whether you're starting a business or whatever it is, you know, on some level, you can do because there is consistent trustworthy data. And the thought of like that going away. And what I imagine would happen is, yeah, sure, you'd have like private versions of varying quality that would try to replace it. And that exists today. You know, there's private measures of inflation, et cetera.
50:32 Joe Weisenthal? But like that would like start to deteriorate the idea of like there being a gold standard. And so then you hear it's like, oh, here's Here's like, oh, we needed to find a few more million dollars to pay the budget of the survey collectors. Like, how many billions are riding on that few extra million?
50:48 Tracy Alloway? Oh, yeah, totally.
50:48 Joe Weisenthal? Right? Like, how many hundreds of billions in activity? So it's just really interesting. And then his thing, explanation at the end, why, like, survey collection for something like this is a, makes sense to do as a trained job, right? And even like the subjectivity of like, are you working? And what does that mean? And et cetera. It's really interesting to think about why it's not trivial to just send out a survey, or send out a high schooler, or send out a volunteer, or something like that.
51:14 Tracy Alloway? Absolutely. Also, I just love the idea of someone at the BLS counting how many potato chips are in a bag.
51:20 Joe Weisenthal? I know.
51:21 Tracy Alloway? Or a tube.
51:21 Joe Weisenthal? You know what I'm imagining? Like, I don't know, like, someone with like a monocle?
51:26 Tracy Alloway? Yeah, that's right.
51:26 Joe Weisenthal? Or something like in their eye.
51:27 Tracy Alloway? A magnifying glass, examining for chips, seeing how big they are.
51:31 Joe Weisenthal? We have the, yeah, we're having the same image in our mind, I'm sure, right now. Yeah.
51:35 Tracy Alloway? All right. Shall we leave it there?
51:36 Joe Weisenthal? Yeah, let's leave it there.
51:37 Tracy Alloway? This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
51:43 Joe Weisenthal? And I'm Jill Weisenthal. You can follow me at thestalwart. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashil Bennett at Dashbot, and Kale Brooks at KaleBrooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have all of our episodes and the daily newsletter. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.
52:05 Tracy Alloway? And if you enjoy Odd Lots, if you like it when we talk about how these statistics sausage actually gets made, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.
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