Inflation Numbers Are Worrying

April 19, 2007
Inflation Numbers Are Worrying

To see what was wrong with March's inflation number, you have to understand a little bit about how inflation statistics are calculated by the vast bureaucracy within the BLS — a division of the Department of Labor that is living up to its mandate, apparently, by employing as many economists as possible.

According to that sprawling army of men and women in green eyeshades, March's inflation number was kept low by apparel prices dropping 1%, and hotel prices dropping 2.2%.

But in reality, apparel prices rose by 3%. And hotel prices rose by 2.3%. But that's only in reality. In the bureaucrats' minds, their prices fell.

It's all part of an arcane process called "seasonal adjustment."

The idea is that at certain times of the year the prices of certain goods and services can be regularly expected to fluctuate up or down, for reasons that have nothing to do with inflation. So the BLS 'crats "adjust" those fluctuations away, with the idea of leaving us with a clearer view of inflation forces at work.