Trump's Potential Hiring Freeze May Impact Social Security COLA Adjustments
The ongoing hiring freeze at the U.S. Bureau of Labor Statistics (BLS) has led to a reduction in data collection for the Consumer Price Index (CPI) from certain cities, causing concerns about the accuracy of inflation data and its impact on Social Security Cost-of-Living Adjustments (COLA).
The BLS, which gathers inflation data from thousands of businesses across the U.S. for various inflation metrics, including the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), has temporarily halted collecting inflation data in three U.S. cities: Lincoln, Nebraska, Provo, Utah, and Buffalo, New York. This cutback stems from staffing shortages exacerbated by the hiring freeze, which forces the BLS to rely more on estimation methods for price changes rather than direct data collection.
The impact of this on the accuracy of the CPI is twofold. While the BLS itself claims the effect on the overall national CPI-U (Consumer Price Index for All Urban Consumers) and CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) indexes will be minimal, economists and advocacy groups like the Senior Citizens League (TSCL) have expressed concern that the lack of data from specific cities could increase volatility and inaccuracies in regional or item-specific inflation measures. If cities with potentially higher inflation are excluded, it could lead to an understatement of inflation nationally, thereby lowering the CPI estimates.
Regarding Social Security COLAs, which are based on changes in the CPI-W, any underestimation of inflation due to incomplete data could result in COLA increases smaller than actual inflation, reducing retirees' purchasing power. Reports indicate that the share of CPI data points based on estimates rather than direct price quotes increased from about 10% to nearly 30% due to the freeze and staffing shortages, potentially increasing the risk of underestimating inflation in the short term relevant to COLA calculations.
Analysts currently project a 2026 COLA around 2.5%, similar to recent years and historical averages, but these estimates carry some uncertainty because of the data limitations. If there's an increase, the Social Security Administration (SSA) rounds it to the nearest one-tenth of 1% to set the COLA for the next year.
The TSCL, which conducted a recent survey finding that 80% of seniors thought the inflation rate for 2024 was more than 3%, has highlighted potential problems for retirees due to President Trump's hiring freeze at the BLS. TSCL Executive Director Shannon Benton stated that cutting back on measuring economic changes could lead to inaccurate or unreliable data in the CPI.
The potential issue with Social Security COLAs, as perceived by TSCL, could spell problems for American seniors. If the CPI data is inaccurate or unreliable, the COLA could be lower than actual inflation, potentially costing seniors thousands of dollars over their retirement. The TSCL emphasized that while streamlining the federal government is a good thing, it shouldn't involve cutting back on our ability to measure how our economy is changing.
In conclusion, the BLS hiring freeze compromises the completeness of CPI data gathering, especially at the city level, which could lead to less precise inflation figures. This inaccuracy raises concerns that Social Security COLA increases may be lower than warranted by actual inflation, potentially harming retirees by eroding the real value of their benefits. The TSCL urges the BLS to address these concerns and ensure the accuracy of inflation data for the benefit of American seniors.
- The ongoing hiring freeze at the U.S. Bureau of Labor Statistics (BLS) and its impact on data collection for the Consumer Price Index (CPI) from certain cities has led to worries about the accuracy of inflation data, particularly in relation to Social Security Cost-of-Living Adjustments (COLA).
- The Senior Citizens League (TSCL) has expressed concern that the lack of data from specific cities due to the BLS's hiring freeze could increase volatility and inaccuracies in regional or item-specific inflation measures, potentially leading to an understatement of inflation nationally and smaller COLA increases.
- The TSCL urges the BLS to address the concerns surrounding the accuracy of inflation data, as it could significantly harm American seniors by potentially costing them thousands of dollars over their retirement due to lower than warranted Social Security COLA increases.
