A key but overlooked issue with the Consumer Price Index (CPI) is the deteriorating quality of data imputation. An increasing percentage of missing data points are being filled using less-similar items ("different cell" imputation). This degradation in methodology introduces a hidden risk to the reliability of the headline inflation numbers.
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The recent government shutdown will create a permanent void in crucial economic data for October. While statistics like payrolls might be collected retroactively, survey-based data such as the Consumer Price Index (CPI) and household unemployment figures are likely lost forever due to recall bias, creating a black hole in the historical record.
A significant portion (30-50%) of statistics, news, and niche details from ChatGPT are inferred and not factually accurate. Users must be aware that even official-sounding stats can be completely fabricated, risking credibility in professional work like presentations.
Beyond budget cuts, a major threat to data reliability is a staffing crisis at the Bureau of Labor Statistics, where one-third of senior leadership positions are vacant. This loss of experienced personnel erodes institutional knowledge and resilience, increasing the risk of un-caught errors.
Senator Warren highlights a critical omission in standard economic calculations: the cost of servicing debt. Expenses like credit card interest and student loan payments are often left out, meaning official data doesn't capture the full financial pressure American families are facing.
Private firms like ADP have business incentives that may conflict with the public's need for consistent economic data. ADP's recent decision to stop providing weekly data to the Fed during a government shutdown highlights this tension and the irreplaceability of official government statistics.
Despite official CPI averaging under 2% from 2010-2020, the actual cost of major assets like homes and stocks exploded. This disconnect shows that government inflation data fails to reflect the reality of eroding purchasing power, which is a key driver of public frustration.
Policymakers can maintain market stability as long as inflation volatility remains low, even if the absolute level is above target. A spike in CPI volatility is the true signal that breaks the system, forces a policy response, and makes long-term macro views suddenly relevant.
Former BLS Commissioner Erica Groshen explains that data revisions are a designed feature, offering users a choice between fast but less precise initial data and slower but more accurate final data. It's an intentional balance between timeliness and accuracy.
Large, negative revisions to economic data often occur around major economic turning points. This is because companies hit first by a downturn are more likely to delay reporting their data, which makes the initial economic reports appear stronger than reality.
The longevity of above-target inflation is a primary concern for the Fed because it can fundamentally alter consumer and business behavior. Historical models based on low-inflation periods become less reliable. Businesses report being surprised that consumers are still accepting price increases, suggesting pricing power and inflation expectations may be stickier than anticipated.
