The Line: Consumer Prices Rose 0.4% in August

Today, we will cover two topics dominating the economic headlines these days: inflation and revisions to employment data. Let’s start with inflation.

Consumer Prices Rose 0.4% in August

The consumer price index was up 0.4% last month and is 2.9% higher than a year ago. The monthly increase was slightly higher than the 0.3% Dow Jones forecast, while the annual figure came in as expected. Core inflation, which excludes food and energy prices, rose 0.3% in August and was 3.1% higher than August 2024. Both those figures matched forecasts.

Here’s some of the other highlights of the CPI report:

• Housing costs rose 0.4% last month and continue to be the main driver of the monthly increase in CPI.





• Energy costs rose 0.7% in August, while food prices were 0.5% higher.





• Price increases for goods were led by used cars and trucks (+1.0%) and apparel (+0.5).

Not the best inflation report, but it shouldn’t be enough to stop the Fed from cutting rates next week. It also didn’t hurt that the producer price index data released on Wednesday showed a decline in wholesale prices last month. But perhaps the biggest reason rates will be cut is the weak hiring over the past few months, and the massive downward revision of hiring in the year ending March 2025. Let’s discuss that now.

Employment in March 2025 Revised Down by 911,000

As if we weren’t concerned enough about the massive negative revisions to job growth in the past few months, on Tuesday the BLS released their preliminary benchmark revision for employment from March 2024 to March 2025. What is a preliminary benchmark revision? That’s when the BLS uses data from state unemployment insurance tax records to update prior BLS jobs data.

They do this because the state data comes from forms that nearly all employers are required to file. Compare that to the BLS sample of just 121,000 businesses, and you can see why they use the more comprehensive data from the states to update their numbers.

Why don’t they just use that state data instead of their smaller sample? Because the Quarterly Census of Employment and Wages, or QCEW—thereport generated from the state unemployment insurance data—comes out with about a six-month lag. The data for the second quarter of 2025, which ended in June, is scheduled to come out on December 3rd.

Still with me?

By using the QCEW data from March 2024 to March 2025, the BLS found they overstated job growth during that period by a record 911,000. To be fair, that’s a revision of just -0.6% of the total employment, but that’s not thereal story here. The reality is that the labor market began to weaken a lot earlier than anticipated, which would certainly have changed the Fed’s mind sooner about cutting rates.

The Fed, financial markets, and you and I rely on accurate data to make important decisions. Based on the August jobs report and these benchmark revisions, we are all way behind the curve. How does this get fixed? In addition to the president replacing the commissioner of the BLS, the Labor Department’s Office of Inspector General is now reviewing the BLS’s data collection methods.

Let’s hope the BLS can make the necessary changes to bring back confidence in their data, which isn’t just limited to employment.