Viewers and readers say they want more news about the economy. I suspect most journalists have no idea how much data they could mine that speaks directly to those readers/listeners/viewers. Look at this menu from the Labor Department’s Bureau of Labor Statistics website.
Let’s look at a few of the most quoted reports:
The Consumer Price Index: The CPI is a month-by-month data tracking of “changes in the prices paid by urban consumers for a representative basket of goods and services.” Pay attention to the language here. Did you notice the word “urban”? Rural consumers would be rightfully suspicious that their experiences may be different. The CPI comes in thousands of forms every month. You can see “all CPI” or the “urban” CPI or the CPI that excludes energy and food, just as examples.
If you do not include energy prices, or, say, drug prices, are you getting a real picture of inflation on the consumer level? Here are answers to common misconceptions about the CPI.
The CPI is not just some geeky goodness. It is the foundation of so many key pocketbook issues. Contracts may use “escalation clauses” — based on the CPI — to adjust payments for inflation. The Labor Department points out that among the agreements that use these clauses are “rents, wages, alimony, child support and other obligations that may be affected by changes in the cost of living. There is a fact sheet explaining how to use the CPI for escalating contracts.”
The Producer Price Index: The PPI “measures the average change over time in the selling prices received by domestic producers for their output. The prices included in the PPI are from the first commercial transaction for many products and some services.” In other words, this is the receiving end of what the CPI measures. The Bureau of Labor Statistics says, “The PPI sample includes over 25,000 establishments providing approximately 100,000 price quotations per month.”
The PPI is released during the second full week of the month. See this release calendar.
Get local and regional
The Bureaus of Labor Statistics not only releases the regular monthly national reports you hear and read about, but you can also get the regional reports that more closely reflect your local economy.
By choosing the “Products by State” tab, you can click on an interactive map and see the latest BLS data for major cities in your state.
You can get local in other ways, too. Look at building permits, housing starts and housing sales. Building permits are really interesting because it is not just the new construction that you should be looking at but renovation too. Pay attention to the difference between new home starts and home sales. Keep asking what the inventory of homes on the market is in your area. A big inventory will drive down sales prices and rents. Of course, foreclosure rates are also key.
Ask local utility companies about delinquent accounts year to year.
Rental truck activity can be an interesting economic indicator on the local level. Trucking and railroad companies also get moving when the economy picks up.
Sales tax incomes rise on the local and state level when the economy starts recovering. Hotel and car rental taxes respond quickly to economic changes.
When economies go sour, I like to look at traffic ticket incomes. It is interesting to see if cash-strapped counties ratchet up traffic enforcement.
Mistakes and Traps for Journalists
Nice street cred, but not about this. When journalists quote economists, they should be sure to ask the “expert” what exactly their area of expertise is. A pediatrician certainly knows something about heart health but probably not as much as a cardiologist. Sure, your expert may have a Nobel Prize, but what was the prize for? Is it in the same area about which you are quoting him or her?
I suspect you will always be able to find “experts” who will say nearly anything. Just because two experts agree doesn’t mean all experts agree. Don’t overstate the certainty of what may or may not be happening with the economy.
Math problems. If you don’t know the difference between mean, median and mode, it might be time to brush up. Use the right tool for the job. Does it really matter what the average price of homes is selling for if there is a huge difference in prices? If you have one house that sold for $100,000 and another that sold for $1,000,000 the mean price would be $550,000 which is not reflective of either house’s value. I would be a lot more interested in the “mode” — how often houses sold for one of those prices in the neighborhood.
- “Mean” is most similar to the “average” that we learned about in school. You add up all of the numbers in a set and divide by the total number of numbers. The mean figure can be thrown for a loop with just one way-out-of-line figure. Remember your days in high school when you bombed one test and it wrecked your semester mean?
- But “median” is very different. Median is the “middle” value in the list of numbers. So the median of 2, 4, 6, 13, 14 is 6. Two numbers are larger and two are smaller. But the mean is 7.8. If you have an even number of values in the set, take the two middle numbers and average them. For example: 1, 2, 4, 7. So, to get median we do this: (2 + 4) ÷ 2 = 3 Three is the median.Some time back, British media learned this lesson when misreporting the nation’s income trends. It happened because they used mean rather than median incomes. Outlying low or high figures can throw the whole calculation out of whack, but median looks for the center. The trend of the center is a more reliable reflection of the trends of the masses.
- The “mode” is the value that occurs most often. If no number is repeated, then there is no mode for the list. For example, a list with 2, 4, 4, 6, 7, 8, the mode would be 4.
Get the numbers in context. Just as climatology is about the long term study of the earth’s weather, not just today’s conditions, economics is most useful when we use today’s figures and compare them with the long-term view. So, when you use a percentage, as in a 15 percent increase, tell us more so we can understand when the trend began.
Big numbers cause confusion. If you report stories in the trillions or billions of dollars it is hard for me to know what that means. But if you can break the number into a smaller figure, what it means to me, I start to understand. Per-capita is a nice way to do that. It also is a great equalizer. If I compared Texas’ education budget with Montana’s education budget it wouldn’t be as useful as if I compared what Texas and Montana spend per student (per capita) or per taxpayer.
Look for reasons behind pop-up “trends.” If car sales are way out of line, let’s ask why. Did a tsunami interrupt imports? Did a hurricane wash away a port? Did the government offer a cash-for-clunkers program? Was the weather particularly nasty in big cities last month? Same is true year-to-year.
Adjust for Inflation. The CPI inflation calculator allows people to calculate the value of current dollars in an earlier period, or to calculate the current value of dollar amounts from years ago. For example, in 1977, I earned $8,700 in my first TV job. I usually tell my kids that when I complain about how I toughed it out when I was their age. But adjusted for inflation, I didn’t have it so bad. Don’t tell my kids. I can’t imagine where I spent that much money back then.
The Cronkite School posted a wonderful resource page in conjunction with the McCormick Foundation on how to cover local economic stories. Here are links to some of the presentations.
- “County and Economic Business Patterns” by Sarah Cohen, Knight Chair, Duke University
- “Hometown Economic Data” by Dennis Cauchon, USA Today
- “Digging Deeper on Local Unemployment Data“ by Paul Overberg, USA Today (Video)
Other key reports you could mine for stories:
- Advance Monthly Sales for Retail and Food Services
- Advance Report on Durable Goods (“A measure of the number of orders for a broad range of products—from computers and furniture to autos and defense aircraft—with an expected life of at least three years.”)
- Construction Put in Place
- Gross Domestic Product (GDP is a comprehensive measure of the economic health of the nation. It represents the total value of the country’s production and consists of purchases of domestically produced goods and services by individuals, businesses, foreigners, and the government.”)
- Manufacturers’ Shipments, Inventories, and Orders
- Manufacturing and Trade: Inventories and Sales
- Monthly Wholesale Trade (“A report of the tally of sales and inventories of U.S. merchant wholesalers.”)
- New Residential Construction (“Also known as “housing starts and building permits,” this report comprises data on the construction of private residential structures, such as single-family homes and apartment buildings.”)
- New Residential Sales (“A report of the number of newly constructed homes with a committed sale during the month.”)
- Personal Income and Outlays (“A report of the income that households receive from all sources, such as wages and salaries, employer contributions to pension plans, rental properties, and dividends and interest.”)
- U.S. International Trade in Goods and Services
- U.S. International Transactions
- Construction Spending (“ A measure of the dollar value of new construction activity. Includes data on residential projects (such as homes and apartment buildings), nonresidential projects (such as privately funded office buildings), and public projects (such as schools and highways funded by the local, state, or federal government”)
- Current Account Balance (“Also known as the “current account deficit,” this report is a measurement of net U.S. trade in merchandise, services, and certain financial transactions.”