Business

The Bureau of Labor Statistics is a government agency that collects, processes, analyzes, and interprets statistical data concerning labor economics and statistics. The BLS provides information and disseminates reports on matters such as price levels, employment and unemployment, compensation, working conditions, and productivity. Additionally, the BLS provides comprehensive information pertaining to careers and jobs within the US. This paper will focus on one particular piece of statistical information, the Consumer Price Index.

The Consumer Price Index is a statistical measure of the average change in prices over time for a market basket of consumer goods and services (United States Department of Labor, 2010). In this way, the CPI is a time series analysis and measures change rather than a particular value at any given time. This characteristic makes the CPI the best statistical measure of inflation, as inflation is best defined as the average increase in consumer prices over time.

The CPI is calculated via the collection consumer survey data, in which individuals and families provide information on purchases and spending habits made in each quarter of the year. The products and services included in the market basket are derived from over 200 categories arranged into eight major groups, including food and beverages, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services (tobacco and smoking, personal services, etc). In each of the 200 categories of products, statistical procedures are employed to select representative products and calculate average prices.

Reading and interpreting the CPI requires an understanding of the base index. The CPI base index is set at 100 which is the average price level for the 36 month period ranging from 1982-1984. The index for any particular year can be compared to this figure and a percentage change can be easily determined. Percentage changes for any two years can similarly be interpreted, as can price changes over a range of years or monthly intervals. For example, the CPI for December 2009 increased by 0.1 percent from the prior month and increased by 2.7 percent over 12 months (United States Department of Labor, 2010). This indicates that inflation, or the average price of a market basket of consumer goods and services, increased by 2.7 percent over the past 12 months.