SYLVIE DOUGLIS, BYLINE: NPR.
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STACEY VANEK SMITH, HOST:
Inflation - it is a huge concern about the economy right now. Inflation is just a fancy name for prices going up. And if prices start going up at a really fast pace, it can signal the beginning of a so-called inflationary spiral. That means prices going up out of control. So, like, your latte goes from $4 to $10 to $50. That can cause enormous destruction to an economy and, of course, to the savings of millions and millions of people.
DARIAN WOODS, HOST:
It's one of the most important indicators for any economy. It's measured using something called the Consumer Price Index, the CPI. It's a measure of the price of everything we buy. And it just came out today.
VANEK SMITH: Yes, it did. And it caused kind of a splash. So the rate of inflation as of the beginning of June was 5.4%, meaning consumer prices were up 5.4% in May compared to the year before. That is the fastest prices have risen since 2008. Of course, economists are quick to point out that June of last year was a really brutal time for the economy, so prices might have been a little bit lower than normal. But the CPI has a lot of people worried and wondering how policy will be affected by this news. But how did we come to get this news, actually? How is that number measured? That 5.4% - where does it come from?
WOODS: The process is meticulous, labor intensive, and it involves hundreds of people. It's also top secret. This data is closely guarded because it needs to be above suspicion and tampering. But the Bureau of Labor Statistics agreed to let us tag along for half a day.
VANEK SMITH: Yes, they did. All I had to do was sign, like, eight non-disclosure agreements...
VANEK SMITH: ...But totally worth it.
WOODS: We got into the belly of the beast - the inflation machine.
This is the INDICATOR FROM PLANET MONEY. I'm Darian Woods.
VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show - the inflation watchers. We go under the hood of the CPI and see how the government determines whether inflation is happening.
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WOODS: To get the inflation number every month, millions of data points are involved, gathered by around 450 dedicated workers.
EMILY MASCITIS: Hi. My name is Emily Mascitis, and I am an economist with the United States Department of Labor, Bureau of Labor Statistics.
VANEK SMITH: Every month, Emily and her colleagues go on a hunt, a hunt for inflation. To do this, they track the price of, well, just about everything - rent, haircuts, trucks, toasters, raincoats, boxes of wine, burgers to go, weddings, funerals, yoga pants.
MASCITIS: And my favorite saying is we follow prices on pretty much everything that is legal in the country.
WOODS: This is a huge job, and it starts with surveys taken by thousands of households - just everyday people all across the country who write down in really minute detail how they spend their money.
VANEK SMITH: Yeah, so they'll write down something like, you know, I bought butter at the store. And then inflation watchers like Emily will find, you know, a particular brand of butter at a particular store, and they will track the price of it for years.
WOODS: Everything has a code. Salted butter has one code. Unsalted butter has a different code. Butter in sticks - different code. Organic butter - that's also different. And this is true for every consumer product in the U.S.
MASCITIS: We have a 600-page manual for a reason (laughter).
VANEK SMITH: Really, it's 600 pages? Have you read it?
MASCITIS: There is a lot - I have.
VANEK SMITH: Really, every page?
MASCITIS: There is a lot to learn. I have, yep.
VANEK SMITH: Wow.
To check these prices, trackers like Emily used to drive around to stores, find a particular tub of unsalted butter or a 100% wool boatneck sweater in size 8 and look at the price tag for that particular item and then come back to that store to look at that same item month after month, which sounds really kind of old-school and needlessly labor intensive. But this data is just that important. It has to be accurate.
WOODS: Of course, COVID changed everything. In person was no longer an option. So now instead of walking into stores and checking price tags, now Emily's day is a lot of this.
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MASCITIS: Mr. Hart (ph), this is Emily Mascitis calling with the Bureau of Labor Statistics. How are you doing today?
UNIDENTIFIED PERSON #1: Hi. Good.
WOODS: Phone calls - dozens a day. First up, a sporting goods store in Delaware.
MASCITIS: So we are just doing the Consumer Price Index update on our pair of socks.
VANEK SMITH: Socks - of course, Darian, I cannot reveal the brand of socks because I signed a...
WOODS: It's OK (laughter).
VANEK SMITH: I signed a non-disclosure agreement. It's confidential. But these are white athletic socks. Of course, they are not just any white athletic socks, though.
MASCITIS: Just verifying some specifics on the item, it's knee-length. Is that correct?
UNIDENTIFIED PERSON #1: Yes.
MASCITIS: And then I have that it is 85% acrylic and 15% nylon.
UNIDENTIFIED PERSON #1: Yes.
MASCITIS: OK, great. And I have that it has moisture wicking. Is that correct?
UNIDENTIFIED PERSON #1: Yeah, it repels moisture.
MASCITIS: OK, great.
WOODS: Emily makes a note of all of this. She gets to the right code. And now the moment is here - the price.
UNIDENTIFIED PERSON #1: They're $7.99.
WOODS: Seven ninety-nine for the socks - turns out the price hasn't changed since last month.
VANEK SMITH: So the sock indicator, Darian, telling us inflation isn't happening - but that is just one product in one store, and you cannot measure inflation using just one pair of socks. And Emily has at least 30 more price checks ahead of her today.
WOODS: And it's not just products like socks. The Consumer Price Index tracks services too - haircuts, car repair, workout classes.
VANEK SMITH: Day care - in this case, the weekly rate for a 2-year-old at a day care in Philadelphia.
WOODS: For this one, Emily checks the price on the day care's website. She does a lot of that these days.
MASCITIS: So I have older toddler here, and the weekly full-time tuition is $320. That changed - $306, so inflation in action.
VANEK SMITH: Inflation in action - the price of day care is up 5%, about $14 a week. And that adds up. It's around $700 a year.
WOODS: So there it is. We've seen some evidence of the dreaded inflation.
VANEK SMITH: Yes. As you can imagine, Darian, I got very worked up about this. I was like, here it is; inflation in the flesh. And Emily was like, OK. Like, let's look at a few more prices. Let's make some more calls. So she let me tag along to a couple more phone calls, including to a little corner store in Philadelphia to check...
VANEK SMITH: ...The price of butter.
MASCITIS: It's butter. It's not that exciting (laughter).
VANEK SMITH: (Laughter) We will be the judge of that.
MASCITIS: I am just calling to do our monthly check on butter for the Consumer Price Index.
WOODS: Specifically, a box of four sticks, unsalted.
UNIDENTIFIED PERSON #2: Four thirty-five.
MASCITIS: Four thirty-five.
UNIDENTIFIED PERSON #2: Yes, ma'am.
MASCITIS: OK, so that's gone up 25%. It looks like the last time, it was $3.49. Do you happen to know why it's increased so much?
VANEK SMITH: See; butter is exciting. But Emily gets very focused here because this is potentially a really big moment in the inflation hunt. Price rising by that much actually requires filling out a special form. I mean, it could be evidence of spiraling inflation.
WOODS: But Emily's been doing this for years, and her Spidey sense is going off. So before she fills out that special form, she asked the store owner to double-check the price of that butter.
VANEK SMITH: The store owner puts the phone down. We wait for a minute. He comes back on.
MASCITIS: OK, so it's not $4.35 right now.
UNIDENTIFIED PERSON #2: No, it's two for five.
VANEK SMITH: So it turns out he was looking at the wrong brand of butter. And in fact, the particular butter Emily's been tracking is part of a promotion this week - two for $5. So one package costs $2.50, which is actually less than it cost last month.
MASCITIS: OK, I was ready to say that's a huge increase for butter, huh? Guess you stock up on it (ph) (laughter). I'm glad you took the time to look that up for me. That - I appreciate it.
VANEK SMITH: This is why it's so important to be so precise. All of the details matter. That 5.4% inflation rate we saw this morning that pushed markets down, that has policymakers issuing statements and the price of gold rising - that number comes down to this, a woman calling a supermarket in Philadelphia to check the price of butter and then double-checking to make sure the data is right.
This episode of THE INDICATOR was produced by Julia Ritchey with help from Gilly Moon. It was fact-checked by Michael He. THE INDICATOR is edited by Kate Concannon and is a production of NPR.
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MICHAEL HE, BYLINE: Hey, my name is Michael. I'm the current intern at THE INDICATOR. We're looking for an intern this fall and winter. It will be a joint internship with PLANET MONEY. If you're interested in work like fact-checking, pitching, technical production, please reach out to us. Visit npr.org/internships - npr.org/internships.
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