Bill Beach on the Future of United States’ Economic Statistics and Fiscal Position

Bill Beach is the former commissioner of the US Bureau of Labor Statistics and the current executive director of the Fiscal Lab on Capitol Hill. In Bill’s first appearance on the show he discusses a career in and around public service, the important niche his new organization fills, the frightening fiscal outlook of the United States, exactly how long we have before Social Security runs out, why he believes it will take lots of small changes instead of a big one to fix our fiscal outlook, the important role of the BLS, why our statistical methods needs reform, the most underrated economic statistical indicators, and much more. 

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This episode was recorded on April 15th, 2026

Note: While transcripts are lightly edited, they are not rigorously proofed for accuracy. If you notice an error, please reach out to [email protected]. 

David Beckworth: Welcome to Macro Musings, where each week we pull back the curtain and take a closer look at the most important macroeconomic issues of the past, present, and future. I am your host, David Beckworth, a senior research fellow with the Mercatus Center at George Mason University, and I’m glad you decided to join us.

Our guest today is Bill Beach. Bill is the executive director of the Fiscal Lab on Capitol Hill. Bill is also the former commissioner of the US Bureau of Labor Statistics, the BLS. Bill joins us today to talk about the fiscal health of the country as well as the best way to think about labor markets and how to measure them. Bill, welcome to the podcast.

Bill Beach: It’s just a great pleasure to be here. I remember this podcast when it got started, and I can’t believe I’m sitting here talking to you.

Beckworth: Yes, 10 years later. In fact, we started here about the same time. You were much more established and had done a lot of things already. You came from the Senate, but I started here in 2016. You did as well. Eventually, you became my boss right before you left for the BLS. I remember sending expense reports to you, and you had to sign off on them.

Beach: I did, every time.

Beckworth: You did. I was very gracious. You’re a great boss. You went on to greener pastures. You did amazing things. Tell us about your career path and how you ended up at the Fiscal Lab.

Bill’s Career

Beach: I was sitting in a cafeteria as a college student. College guys, they always sit around, and they say, “Well, what are you going to do in life?” It was a rural part of Kansas, so a lot of guys were going to go back and pick up what their dads were doing. I said I was going to make my life with my mind, and everybody around the table just said, “Well, good luck with that. It’s not going to happen.” For a while, it didn’t. I was warehousing and all that kind of stuff. Then college was finished and graduate school came. I found a job.

My first job was in the state of Missouri Office of Budget and Planning. I learned a lot about economics and government there. I was the pup economist working on things in the state of Missouri, things like floods and economic development and the taxes on beer and spirits and great stuff like that. 

Then I went to the Sprint Corporation. Probably the biggest thing that I’ve ever done was to help that company develop the first entirely fiber-optical communications system in the world. The competition with AT&T was extremely satisfying.

Then I got a call to come back to Washington and do something I simply never planned to do, but I really felt I should. That was to be the president of the Institute for Humane Studies. It was here at George Mason. It just moved. It needed some changes. I’d never managed an intellectual group or group of students before, but what the heck, right? My wife and I decided to come back for four years. It was 1991. We have not left. What’s the date now? 2026.

After five years, I went over to the Heritage Foundation and established the Center for Data Analysis. Now I’m back in economics, back in quantitative work, back in that connection between economics and politics that I first found so attractive when I did my very first job. You know how important your first job is. It’s really formative. I stayed at Heritage for a long time and did some really interesting things in the tax field, healthcare, modeling. We fought the war for dynamic scoring and we won that war, made some big changes.

I left then to go over to the Senate Budget Committee and become the chief economist because I wanted to see what it was like to work behind the curtain. It’s way different than in front of the curtain, I’ll tell you that much. 

Then Mercatus, they said, “Come over here. We got this new David Beckworth coming, we need a manager.” David, I came over here to sign your expense reports. I left in 2019. President Trump nominated me to be the commissioner of labor statistics. Absolutely wonderful job. I had a four-year term, served two years under President Trump and two years under President Biden.

That brings us then to here. 2023 is my last time. I have now branched out and founded a new organization called the Fiscal Lab on Capitol Hill. I’m doing a lot of work on reforming the statistical system. There you are in a thumbnail. It’s not that interesting. 

Beckworth: Oh, very interesting. I didn’t realize you worked on fiber optics in Sprint. You have some private sector experience, part of some creative destruction, as we would say.

Beach: Exactly, very creative. We really did destroy AT&T. Sorry for the AT&T people listening today.

Beckworth: That’s a great story. To be clear to the listeners and watchers of the video, you weren’t just signing my expense reports. You were the head of research, so all the scholars reported to you. Back then, we had a vast number of scholars, many different areas, trade, technology, immigration, monetary policy, financial regulation. You were a busy person here, so you had a lot on your plate even before you went over to the BLS.

Beach: Right. It was such an honor to be here at Mercatus. Mercatus came out of a group of organizations that the IHS organized. Jack High was at the Center for the Study of Market Processes, several other small groups. Then those groups were merged to create Mercatus. I was there at IHS when that merger occurred. I thought, “Well, I was there at the beginning, and why not come back in a position?” It felt to me like a really good loop, a really good circuit. I thought this would be my last job. I really did. I was ready to stay at Mercatus as long as I could, but then I got this nomination.

I just felt, as an economist, to be the head of the top statistics organization in the world—because BLS has got that reputation. The Census Bureau, they do some great work. I don’t want to dispute that. They think they’re the top, but I think BLS is. Really, it was just such an obligation, a duty. Otherwise, I would have been here for a long time.

Beckworth: We appreciate your service to our country. It’s easy to forget that economists, civil servants, people who go and serve the country are providing a public good, something that the rest of us benefit from.

Beach: BLS produces, as I think probably everybody knows, BLS produces the jobs report, which is a monthly fever reading of where the economy is. In that report are just a host of statistics. A lot of people don’t realize that BLS is also responsible for the consumer price index, the producer price index, the import-export price indexes, as well as all of our measures of labor productivity. A lot of the inputs for policymaking at the Fed, within the Congress, and the administration come directly out of the survey work that’s being done at BLS and the fieldwork. It’s 3,000 people all across the country, most of them here in Washington, though, about half to two-thirds sometimes. It’s fascinating to see the production.

Then the chief economist retired in 2019. The White House thought that, “Well, since Bill’s been confirmed by the Senate, he could be the chief economist. Of course, we can’t pay him anything, but he can do that until we find another one.” I asked, “Well, is it two or three months?” He said, “Oh, yes, no problem.” It was two years and two months. I got to look at the whole statistical system.

Beckworth: Yes. It’s a great point that if you’re someone who’s doing policy at the Federal Reserve, majority of your input comes from the BLS. You get inflation, you get labor markets, and the dual mandate is informed by the work that you’re doing there at the BLS.

Beach: That’s right. We had a lot of things we needed to do to make the numbers better quickly. I came in 2019 with a big laundry list on the CPI. A number of things needed to be changed. Probably the biggest thing, we were not rebasing except every other year. That is, redoing the weights inside the CPI. With a rapidly changing economy, with globalization, the weights needed to be changed very frequently. I brought it down to a year, and we did 30 other major changes. Well, mostly major changes to the CPI. When the CPI was fully redone after the pandemic, in late ’21, it was a much more accurate and comprehensive and high-frequency look at prices.

I know that Chairman Powell was very pleased with that result. I think now the pressure’s on the BEA to make similar improvements to the personal consumption expenditure deflator and bring that up to speed.

Beckworth: Your passion for these statistics and your civic calling still continues to this day. We’ll talk about that a little bit later in the program. You’re now serving on two committees: the American Statistical Association, that is going to help shape the agenda for better statistics in the US going forward, right?

Beach: Hopefully, yes.

Beckworth: Hopefully. No, but the point is you’re still serving. You still have that calling, so kudos to you.

Beach: Isn’t that what we all have to do, really? I think economists, beyond their professional responsibilities of constantly doing good research and discovering things, they have a duty to work on those parts of the policy portfolio that affect people’s lives. They can do a lot of good. I think that just the fact that we have such a diversity of views in the economics profession is very fruitful. Through that debate between views, we can discover perhaps a new path, and I think that’s representative in your own work by looking at GDP a different way.

Fiscal Lab on Capitol Hill

Beckworth: Yes. Let’s talk about your work now at the Fiscal Lab on Capitol Hill. As you mentioned, it’s a new organization. I’ve seen your work. You’re very active. You’re very engaged. You are in the buildings in Capitol Hill. You’re actively consulting. Where do you fit? What is your value added? Because there are other think tanks and other organizations, many on Capitol Hill, doing tax-budget-related issues. What is your niche? What are you trying to do?

Beach: We are particularly focused on helping members [of Congress] see the quantitative impact of their ideas on the budget and on the economy. You think about measuring my impact. If I have a tax bill, it will raise so many more dollars in revenue. It could affect people’s lives and behaviors, but there is a quantitative budgetary impact there. How much more or how much less in revenue will the federal government receive? Then how does that particular policy change affect the overall economy?

Okay. Those are things that you would think the CBO, the Congressional Budget Office, and the Joint Committee on Taxation, the latter group having a specific mission to measure tax bills, that they would be presenting to all members. But that is not the case. Over time, CBO and JCT, if I could use those two things there, those two organizations have really just focused on leadership and the needs of the senior members. The host of junior members, where a lot of very great ideas are coming from to address our fiscal problems, don’t get a quantitative measure. Why is that a problem?

You can’t bring a bill to the floor of the House or the Senate unless it’s been scored or analyzed or given a number by CBO or Joint Tax. If you can’t get to those groups, you can’t bring your bill for a vote. That’s disastrous if we have a fiscal crisis, and the idea comes from a junior member from Iowa, let’s just say, and that junior member, she can’t get anything done by the CBO. I thought, “Well, other groups are doing this,” and I got to looking, and it’s not the case.

Some groups, when I was at Heritage—including Heritage’s Center for Data Analysis, we did that kind of work, and we helped members understand—and then they would take our score to the CBO and say, “Well, look, here’s what CDA said, and this is how they did it. Why don’t you replicate this or try to get it close or whatever?” No, it’s not being done. I thought, well, we’ve got a terrible fiscal crisis. It’s getting worse all the time. It can’t be solved by will, that is, just by hoping that something will occur. 

Let’s give members this arsenal of quantitative models, of spreadsheets, of calculators, and help them see the impact, help them improve their bill by seeing the impact and say, “Well, we’ve done a lot of good. We’ve been keeping some ideas off the table,” and then they can take our scores to CBO and say, “Here’s what the Fiscal Lab did.” I like the notion of lab because I want the members, House and Senate, to see this is a safe space to experiment. We’re all day right behind the scenes. We’re not in front of anybody. We’re not putting our work out. 

People say, “Well, I haven’t seen anything. Fiscal Lab doesn’t do anything.” Well, no. We’ve done hundreds of bills since we started on September 15th of last year. Literally everyone is coming to us, Democrat and Republican. We’ve got some very interesting work we’re doing for some key Democrats right now who are just as concerned as Republicans on the fiscal landscape. They have different ideas, different approaches. The lab, in short, is there to educate members and their staff about economics and the budget, and then to score their bills so that no good idea dies from lack of analysis.

Beckworth: That is so interesting. You’re filling a niche. You’re filling an untapped area that could be filled with great ideas, but no opportunities if they don’t have a score to go with it.

Beach: We have two big competitors other than CBO and the Joint Tax, which we like to say we’re competing against these groups—we’re six people, and the Congressional Budget Office is 257—anyway, that’s The Budget Lab at Yale University, and then the group at the University of Pennsylvania Wharton School that has what’s called the Penn Wharton Budget Model. They have very different missions. They have different approaches, but the Yale organization is at Yale. It’s a think tank there that produces policy papers, much like Mercatus produces.

Then what Kent Smetters and his group are doing at the Wharton School is training people on public policy analysis. They will produce a lot of analytical product on specific types of policy changes. We’re the only ones that I know of, other than perhaps a few of the think tanks, maybe Tax Foundation, maybe Center on Budget and Policy Priorities, who are on the Hill on a daily basis.

Beckworth: You’re in the trenches, fighting the good fight, pressing the big fiscal disaster on the horizon. I guess you could say even it’s not on the horizon, it’s here upon us.

Beach: I’m sorry, we’re in it right now.

Beckworth: We’re in it. Yes, we’re in the middle of this fire called the fiscal deficit as large as 6% of GDP. That’s great. You’re doing this work. You don’t see it online on your website as much because it’s work behind the scenes, which is an important point to stress.

Beach: That’s very important too, David. We go into the office and we say to a member, “We will do things behind the scenes. We will not be public.” Then we are behind the scenes. We are not public. That gives them confidence to experiment. That’s the whole point, right? We’re so deep into our fiscal crisis now that there are very few things we can do that are big. We can do small things, but the big things are almost off the table. That’s why it’s so important to encourage a host of small ideas that will tell the financial markets we’re serious about this.

Beckworth: I guess for me as I’m listening to you, that’s amazing. I imagine when you’re doing fundraising and stuff like that, sometimes it’s nice to have all these visible deliverables. We did this, we did that. You have to say, “Well, I can’t share it with you.” You’re doing the Lord’s work. Sometimes the Lord’s work goes unnoticed, but we are recognizing it here today on the podcast.

Beach: Thank you very much.

Beckworth: I want to mention to those who are watching the video, here in front of us, we have both our regular nominal GDP targeting mugs, which Bill can drink as he gets thirsty, but also we have here these caps, the Fiscal Lab on Capitol Hill cap. Bill has brought me my own, so thank you, Bill.

Beach: You’re welcome. Wear it daily. 

Fiscal Challenges of the United States

Beckworth: I will wear it daily as I think about the fiscal challenges facing this nation. Let’s just briefly go over those challenges. We’ve discussed them before on the show. Bill, walk us through our fiscal challenges.

Beach: We have spent a long time increasing what’s called mandatory spending and means-tested spending, and have not really thought maybe these are not programs that are sustainable. Of course, people did begin to think about those at some point, but the will to change them was not there. Over the course of time, Social Security, Medicare, the means-tested programs like housing support and food support and so forth, where you qualify by having a means test, that’s what that means, they’ve been expanded. They have been funded with little reform.

Social Security is the one people know about, so let me just talk about that. It’s a program that was not designed to be explicitly as a poverty program, but it was designed to allow everyone to have a retirement income. If you were low-income, you could have a retirement income, but you were also supposed to save your own money and maybe work for a company that had, at that time, a pension plan, and it would be combined with that.

Over time, it became a larger and larger percentage or part of people’s retirement planning. For people in the lower third of the income distribution, it probably is the only thing they have. It seemed that really we couldn’t do anything. We needed to raise taxes so that we could expand it further. Of course, the baby boomer generation, of which I am a member, was a very large generation. It is now retiring. The people who succeeded us were just not as numerous. The tax stream began to be insufficient to pay our benefits.

The sum of it all is that within about five years, we will have insufficient resources to pay the benefits. The trust fund will be fully exhausted. I can talk about that. It doesn’t exist, but there are IOUs there. Congress has, in legislative language, said, “Look, when that happens, there has to be a reduction in the benefit payments to equal the revenues coming in.” We think that’s now about a 26% reduction in benefit outlays. That’ll be a big hit to people who are dependent.

We should have reformed this program a long time ago. Now, five years? Actually, not really. You’re not going to reform it during an election year. That takes three years off. You really only have two years. Are the Republicans going to hold the House next time? If we have a Senate and a House divided, then there’s no way. Social Security is almost beyond reform. If we do a few things, like, for example, take the Cost of Living Adjustment (COLA) Index and move it from the CPI-W to the CPI-U, that’s really technical, but that’s just what I’m talking to members about. That will reduce the amount each year that people are getting because of price changes because the CPI-W, a very arcane and insufficient price index, produces a higher COLA than the CPI-U, but the CPI-U is the one that everybody uses. Little steps like that can, if we were to uncap the tax lid, which is currently around $142,000 in income, and let the taxes be imposed on all incomes above that, that gives us a little more revenue.

But nothing fixes Social Security. We have to wean our way from Social Security to some new modern system that will be sustainable. That’ll take time, but we just don’t have much time. We’re in a crisis. When I said we’re in it, Medicare has some very systemic problems that cause there to be great difficulty in changing them, and they’re built into physical things like hospitals. We have too many assets that are in the wrong direction and too few in the right direction. Medicaid, we expanded it rapidly during the COVID crisis, and now we have to say to people, “Well, you’re no longer eligible because you’re working and your income is higher than a certain level.” That’s hard politically.

All these decisions are right in front of the very members that we’re talking to. I go in and they say, “Well, what’s your idea? How do we solve Social Security?” I say, “We don’t. We don’t solve it, but let’s do a few good things right now to soften it up so that we can have a few more months, maybe another year.” We’re right at that point.

Beckworth: I’ve had guests on the show before who have made this point that other solutions proposed from both the left and the right just won’t cut it. On the left, they’ll say, “Just raise taxes, more progressive tax system,” but even if you do that won’t be sufficient; it won’t be sufficient to cover the needed gap that will emerge. As well as there’ll be more distortions, and we can talk about that as well. On the right, it’s, “Well, let’s cut down more on this discretionary part,” but that’s getting smaller and smaller. There really is no fix other than actually looking at and dealing with entitlement reform itself.

Beach: You have to. We’re looking at mandatory and means-tested programs being two-thirds of the current outlays.

Beckworth: It’s amazing.

Beach: We’re looking at two “discretionary programs,” one of which we know is a program, and it’s called the Defense Department, and the other which we hate is called interest payments on the debt, being 50% of discretionary spending. You’re left with saying, “Well, we don’t need the Department of Justice. Let’s get rid of Treasury and some other expensive things out there.” That’s ridiculous, right? Those are the fundamentals of a government. We have to do that. Here’s one interesting idea. As every cohort of 17-year-olds become 18, they are taken off of Social Security for their life, and yet they continue to pay taxes into Social Security.

The private sector is given an opportunity to essentially buy that stream of income and to pay the government right now its net present value. By doing that, the 18-year-olds are assured a private annuity when they retire, and it’ll probably be very good. That could be administered by the Department of Labor. That money which, say, these firms are getting, this stream of income that they get now to invest, they pay this to the Treasury, and the Treasury then can use it to pay Social Security.

Over the course of just a few years, the liabilities of Social Security, of course, dramatically fall because you don’t have 18-year-olds on there. They’re now on a private system that they’re paying into. Over time, the payroll taxes of these 18-year-olds fall to the point when they’re about 50 years of age, they no longer are paying payroll taxes because it’s all taken care of. That’s a very difficult pill to swallow for members of Congress, that we might have to say goodbye to Social Security, or we might have to so change the eligibility criteria for the younger generation as to make it a different program entirely. We are at that point. We need to re-engineer it.

The issue is, what do we do in the five-year timeframe before we have this pretty big cut? Seniors are a big part of the voting public, and they’re not going to take kindly to a reduction like that.

Beckworth: Seniors are not going to want changes to Social Security. Where’s the opposition to Medicare reform? Is it the medical institutions and folks, or is it the elderly there as well?

Beach: I think it’s institutional in a lot of respects. Let’s just take one step back. I think the baby boomers are pretty well off financially. Social Security plays a role in about 40% of the baby boomers’ income portfolio, which we would call dominant. As you move up, you get some very well-asseted seniors. They have a lot of assets that are not liquid, but they have a lot of assets. They’re going to pass those assets on to the next generation. It’s not entirely clear to me that they would oppose Social Security reform if there were guarantees that those who really need it are fully protected.

The same with Medicare. We made this first step with Medicare Advantage and some of the other Medicare opt-out programs. If you were to expand those from the consumer standpoint, I think you’ve got some solutions in front of you. The institutional barriers are pretty big. Hospitals have been built around not only the Medicare program, but the disproportionate hospital payment system of the Medicaid system. That has created this healthcare industry, which is so huge. Insurance companies are a big player in the reform effort, and they generally oppose reform. There’s a lot of self-seeking that goes on there.

Beckworth: That was my question because healthcare is such a large part of GDP, large part of the economy. There’s going to be self-interested rent-seeking and people like, “Oh, we can’t rock the boat. You go over there and fix the other problem, not us. We’re not the problem.” There’s all kinds of reforms that are needed in that industry. We’ve got real issues. As you mentioned, we’re paying now as much interest on our debt as we do for national defense. It’s challenging. I didn’t realize it was five years until judgment day, if you want to call it that, when we’re going to have to face consequences.

Beach: I think that’s the trigger. I honestly think we have more moving pieces in the medical side—Medicaid, Medicare. More moving pieces is good if you’re looking for more reform than we have in Social Security. Social Security is built around a simple formula. That’s not good for reform. It might be good for understanding the program, running it, and so forth. You’ve got so many taxes, you get a payment, and there’s a COLA adjustment, and they’re qualification-rooted.

The medical side, David, is more reformable. There are some first steps that have been made in the Big Beautiful Bill. We began to address the over-eligibility issue of Medicaid, the expansion of Medicaid. We’re slowly bringing that back. We have to be careful there because many states built a lot of their hospital infrastructure, as well as nonhospital infrastructure, around Medicaid expansion and the COVID-era payments they were getting. Unwinding that has to be done carefully, but it will be definitely an improvement to our fiscal condition once the unwinding has occurred.

Beckworth: One last question on this, and we’ll move to labor measures and labor markets. Would a simplification of this problem be, and this may be too much of a simplification, but will it be, the tension is going to be that we have some intergenerational, I don’t want to say war, but intergenerational unfairness? We’re going to come to a place where young people realize they are paying for the elderly people disproportionately, and they’re not going to get that same benefit. It’s going to be old versus young, and it just won’t be sustainable. Regardless whether you’re left or right, it’s going to be a generational conflict.

Beach: I think we are there now. The transfer payments which are occurring from people under 50 to people over 50 are substantial. They will just grow unless we can change the system fundamentally. That’s unfortunate because we’ve also, through, I think, public policy errors, caused other prices to rise. Our housing is over-regulated and under-supplied. That affects people coming into their first dwelling. They’re out of college looking for a good rent, or maybe they’re married now, so they can’t afford a house, they can’t afford that opportunity to work with a mortgage.

The cost of education has risen substantially since I was in college, largely through two things. There are definitely improvements in the quality of education, and so we pay for that. There also has been this subsidy system through the student loan programs and other kinds of programs like that which have encouraged colleges to raise their prices. That has made a real new problem that I didn’t face. I had $700 in student loans when I graduated, and that’s not the case now.

Surveys from Bureau of Labor Statistics

Beckworth: Let’s switch gears and go to your work at the BLS on labor market statistics. Let’s start with a real easy question. Actually, it’s not easy. All these things are complicated, but one that I think a lot of people do think about here in this space. There’s two monthly reports. There’s the employment survey. We see that. That’s like the headline one we get.

Beach: Yes, first Friday.

Beckworth: How many net jobs were created? We should be clear. I think that’s something that’s also missed. There are millions and millions of jobs created and millions and millions of jobs lost. That number, if let’s say it’s 150,000, that’s net creation. We look at that, and that’s often what markets respond to, what the Fed responds to. There’s also the household survey, and we get the unemployment rate from that.

Beach: That’s right.

Beckworth: You get unemployment rate from a survey that’s different from the job number survey. You could also go to the household survey and look at employment from that. Sometimes they’re different.

Beach: They are.

Beckworth: How did you, as a BLS director and commissioner, how do you make sense? How do you navigate between those two reports?

Beach: The two reports are measuring different things. The jobs report is measuring the employment changes in our businesses and establishments. The way to think about it, you’re looking at payroll activity, we call that nonfarm employment. We get payroll employment on the one survey, 11 million firms in the country. On the other hand, we’re looking at the labor conditions of households. They’re quite distinct. We ask, on the one hand, that is on the job side, on the establishment side, we ask, “How many people are working here, and what are you paying them, and what kinds of jobs do you have?”

It’s a little more complicated than that, but that’s basically the survey. It’s collected from 160,000 firms in roughly 300,000 locations. It’s electronically collected into two big collection centers, one in Chicago, one in Fort Walton Beach, Florida. The survey is adjusted or rebased for two months after the initial numbers come in. We get revisions. For example, the March survey, which we just announced in early April, will be revised in April and will be revised in May.

The household survey is a very different survey. It’s a survey of 60,000 households. We ask people survey questions like, “Are you working? Are you looking for work? What kind of work are you doing? How many people in the household work? How many people don’t? What are the ages?” All that kind of stuff. We look at ethnicity, race, your age. It’s a detailed look at the labor force. Out of that, we get the really important statistic, which is the unemployment rate. These are people who have looked for work in the past four weeks. We get this notion of total employment, and that definition is larger than payroll employment.

You could be, for example, a self-employed person. You wouldn’t be picked up in the survey that I started talking about. You could be a person who’s working for your family, a family business, and that firm will not be picked up in the employment survey because it’s not part of the unemployment system. There’s a lot of additional firms that are picked up. That’s why we get usually a lot more jobs in the household survey than we get in the other survey. You asked me how do I reconcile that, and I don’t. What I try to do is I try to follow the trends in both. They both should be pointing in the same direction. Sometimes they don’t, but over time they usually do.

I think when people think about those two surveys and stop trying to combine them and think of them as different snapshots of the labor scene in any one month, then they’ll be a little happier. Their life will be happier. They won’t have as many disturbing dreams. What’s going on here?

Beckworth: Let’s go to the household survey because it’s used. There’s multiple measures. You mentioned unemployment rate, but there’s multiple measures that come out of it, where you can get a measure of slack or how much excess or shortage of labor demand there is. Unemployment rate, but even from the unemployment rate, there’s different versions. There’s U3, U6. You can get broader measures, narrower measures. You can also construct the employment ratio. I guess if I had to ask you, what do you think is the best overall measure of the business cycle in terms of the labor market? Is it prime age employment rate? Is it some broader measure of unemployment?

Beach: That’s a good one.

Beckworth: Where would you land? At least the people I follow, a lot of them are big fans of the prime age, so 25, I believe, to 54 employment to population ratio. They’re basically able-bodied. You don’t want to get really old or really young. Get the able-bodied workers.

Beach: I like that. I like that. I surprise people by answering the question by saying, it’s really deeper down in the report that you really get the febrile heartbeat of the economy. It’s called “part-time for economic reasons.” It’s a measure that most people don’t look at, but BLS has a statistic where a person says, “Yes, I’m working.” We follow that, “How many hours a week are you working?” They’ll say, “Well, not very many.” We say, “Would you consider that part-time?” “Yes.” “Did you choose to be part-time?” “Oh, no. I couldn’t find a full-time job.” We call that “part-time for economic reasons.”

When that number starts to spike—it’ll spike sooner than the unemployment rate—then the labor force participation rate, changes in the prime-age male or prime-age female, it’s the first to go. There’s a related one in there, which is discouraged workers. These are people who have given up looking for work. They haven’t looked for work within a year. They might start again after a year, but they’re just discouraged. When that number rises, these are people who are not picked up; they’re not unemployed because they haven’t looked for work in the past four weeks. They would like to have a job, but they just don’t think a job is out there. 

They’re really not out of the labor force like a retiree. They’re not out like a dad who is just going to take some time to be with kids, right? They’re out because they’re discouraged. When “part-time for economic reasons” jumps up, when discouraged workers jumps up, then we begin to look more like, “Oh gosh, we’re entering something here we don’t want to go into.” 

It isn’t often that the US economy goes into recession. We used to have a lot more frequent recessions, but we’re much more capable of handling economic change than we used to. I think we’re a much more vibrant economy and a much more resilient economy, agile economy. Despite all the things that we talk about, we complain about the economy all the time, especially economists like you and me. Recessionary activity is unnatural to begin with. There’s no such thing as a business cycle. It’s something that just happens because of policy errors and some other things, maybe wars and so forth and so on. We do see some early signs of weakness, and I think that’s one of the areas that we see it in.

Beckworth: Recently, going back to the payroll report or the number of jobs created, recently the numbers have been really low. The net numbers have been low. A lot of revisions. Now, one could say, “Oh, the economy’s weakening, labor demand’s soft,” or one could say, “Hey, it’s just the reality. We have less immigration coming in.” I guess that’s where it’s useful to go to the household survey and look at some of these measures we talked about. How do you make sense of those low numbers in the payroll report?

Beach: We’re in a very interesting time from a labor standpoint. You always have to be open to the variety of things that are happening in the economy. We too frequently generalize, “Oh, well, GDP is down.” Okay, but GDP is up for some. It’s up and it’s down. Jobs haven’t been too bad. Look at those numbers and you say, “What’s Beach talking about?” It’s in certain areas where you’ve seen slackness, particularly in an area which used to routinely give us 75,000 to 100,000 jobs per month just like clockwork, and that’s professional and business services.

We began to really wonder what’s happening in this area. As we looked at it closer and closer, it was happening in an area where growth had been double-digit for years, and that’s computing, computing design, and data center construction. The big gains. That’s in this big super sector called professional and business services. Well, some people said, “Well, it’s just that we hired too many programmers, and so we’re going through this big change in there because we had a huge drop in the number of people who do computing,” and that affected the overall number. It was so big, it affected the overall number.

I think in looking at it now, we’re in the transformation in that sector of AI. AI is transforming that sector. I just did a report. It’ll come out, I hope, tomorrow or the next day, from the day whenever this is being recorded. It shows that employment is coming back in that sector, and I think it’s coming back in that sector because it’s been transformed. It’s been restructured. We do have things happening in the economy like that. There are a lot of firms that tried to come back from COVID in the leisure and hospitality sector, very large sector for jobs, and didn’t come back.

Despite the efforts to create tariffs and to put us in a hole, globalization and value chains are coming back, and that is changing some of the flows of jobs. We have a fairly steady inventory of unmet employment opportunities. It’s right around 6 million jobs per month are open. We get that in the job opening and labor turnover, the JOLTS report. We know that the level of job openings hasn’t really dropped. It’s dropped a little bit from 7 million to 6 million. It’s a little in the high fives, if you will. We’re in a transformation, on the one hand. I think, on the other, we are slowing down. You saw this in the GDP report that came out last week when the revision went from 1.5 to 0.5.

That slowness may be due to a number of factors. I don’t discount the fact that we have crowd-out in investment because of the high borrowing needs of the federal government. I think that’s an element. We’ve had tremendous dislocation because of the tariffs. We are still in a situation where the bottom half of the population is suffering from a higher inflation rate than the top half is. The very top, say the top 10%, have a very low inflation rate because of the basket of goods that they consume. Consumption expenditures are slow because the middle class isn’t consuming as much. There’s a number of reasons why we’re slowing, but we can’t discount the fact that we’re also transforming at the same time.

Beckworth: The structural change happening, I guess, going back to my original idea of immigration, could immigration be a factor as well? We just had a fewer people coming into the country, so that matters.

Beach: Immigration affects a lot of things. We used to have about 2.5 million new jobs per year. We are now about a million less than that. Not quite, but close. That is largely because we’ve had this significant reduction in the growth of the labor force because we have fewer immigrants coming in. The labor force is done by the household survey. We just talked about that. That’s where we go into a household, and we never ask them citizenship. We never ask them anything like that. We just say, “How many people are in this household?” We’re picking up the immigrants. Whether they’re documented or not documented, they go into the labor force.

The labor force has really slowed down significantly. It used to be that we needed about 150,000 jobs per month to keep the unemployment rate steady. Now it’s closer to 70,000 jobs per month to keep the unemployment rate steady. When we say we’ve gotten fewer jobs per month, part of that’s because there’s just fewer jobs. It doesn’t even mean the economy is really slowing or that we’ve got some really deep problem. Maybe we do. I don’t know. I think the first thought would be, “Well, what’s happening with the labor force?” It’s gotten to a lower growth rate than we’ve seen in recent times.

Challenges to Survey Work

Beckworth: There are a lot of moving parts here—immigration, AI, structural change, declining fertility rates. That’s also going to be a long-term factor in this. Now, in the time we have left, I want to go to another area that’s a challenge for measuring labor markets. That’s how many people respond to these surveys? How many respond to the knock on the door? It’s not a knock on the door, but to the inquiries given to the households.

I’ve heard you talk about this on another podcast, how if you wanted to develop a more robust system, you would actually need to start it simultaneously while you’re running the current one. You wouldn’t want to just to stop and try something. You’d want to run it side by side, make sure it works, work out the kinks and then the issues, but you’d have to get extra funding to do that. Maybe talk about that as well as what would be your ideal vision of it. Then if you want to also tie in the work you’re doing with the committees about the future of US stats.

Beach: The problem we’re trying to address is a lower or declining response rate to our surveys. Household survey, we just talked about this, this is where the unemployment rate comes from. 60,000 households, but now the response rate is right around 70%, not 100%. We’re only talking to 49,000 households.

Beckworth: Can you tell us, how do you reach out to them? It’s on the phone, it’s digital?

Beach: It’s mainly on the phone, and there’s a digital response as well. They’ve agreed to be in the survey. They’re not chosen at random. They’ve agreed, we’ll all be in the survey for six months, religiously. And if they don’t respond, then we have to go and give them a call or maybe even go to the house.

Beckworth: There is a knock on the door, potentially.

Beach: It could be. It’s very expensive. We have a declining response rate, increasing costs, and so it’s a very unsustainable system. The probability survey, which was largely popularized in the 1950s, was the savior of the statistical system, has now clearly indicated that it won’t be around all by itself and be the basic thing we do much longer. It’s too expensive, and the survey response rates are falling. Not only for the household survey, for every survey in the federal government and around the world. It’s a worldwide phenomenon of don’t bother me, don’t call me, I don’t want another survey.

What do we do to save the statistical system? That’s what we’re talking about. Since the statistical system is like roads and bridges, we’ve got to save it because people everywhere use these numbers to make big decisions. Well, I think the thing we should do is to continue the survey, but now join it or blend it with internet-based data. This is called a blended data system or some other readily low-cost, readily accessible, big dataset that we can line up with this survey.

BLS has fully experimented with this. We’ve got a great plan. It just needs to be run simultaneously with the current system so that we make sure everything is fine. Then after about two years, we can implement that new system. Now, that is something that Congress needs to fund because BLS is a government body, so Congress has to fund it through appropriated funds. It would cost about $5 million to appropriate the R&D necessary for those last two years running simultaneously. Then about another $10 million on top of that to deploy it.

Thereafter, it’s a system that will use a lot of data. I’m talking 500,000 households, 800,000 households, with this survey, which will be the detailed thing, giving us a guidepost for these larger data that are coming in on a lower number of questions. We can use that in survey after survey. Blended data, our new 21st-century solution, is the way to go. We’ll have a sustainable system, and then you’ll have your CPI forever. 

Beckworth: Fantastic. Is there any interest in this? Are you finding any uptick in like, “Hey, let’s talk about this on Capitol Hill?”

Beach: They’re shocked. They say, “We didn’t know there was a problem.”

Beckworth: Oh, wow.

Beach: It’s the same problem we have with the bridge, right? You go over it and go over it and over it, and the only time that the mayor says, “Is there a problem on the bridge?” is when the bridge has a hole in it, or somebody loses a tire on that bridge. It’s exactly the same phenomenon. I work with members on this. I talk to the appropriators, and they are now thankfully really getting alert to this problem. It is not an expensive problem. We can address the entire statistical system and modernize it for around $200 million. Not $200 billion, not $200 trillion, just $200 million. I know that’s a lot of money. That’s a lot of money.

Beckworth: That’s over a number of years, right? 

Beach: It’s over a number of years, and it is also an investment that is highly leveraged if you think of the decisions that are made on this data.

Beckworth: Yes, so this would be a great return on the investment if you think of all the entities, not just the Federal Reserve or the federal government, but those are important, but private businesses—

Beach: Oh, private, especially.

Beckworth: —planning your sales, planning your budgets. This is something that America Inc. needs to flourish.

Beach: Absolutely. We talked a little bit about my work with Sprint, and what I did at Sprint many years ago was mergers and acquisitions. I would help buy companies. I didn’t myself, but I would do what’s called the hurdle rates. That is, we’ll buy it if we can get over this hurdle. That hurdle was how much taxes, what’s the risk involved, so forth and so on. I would calculate that. Well, I was down in Miami about two months ago with a bunch of international financial people who wanted to know about the CPI, and they brought me and my predecessor, Erica Groshen, down there to talk to them about data.

These are people who are making deals all the time, and they’re big deals. What were they interested in? They were interested in the increased risk in the CPI. We said, “Well, there’s no risk.” They said, “Oh, no, there’s a big risk because you are collecting the CPI with fewer and fewer people in fewer places, so we’re putting a risk premium around your point estimate. That risk premium is preventing us from doing certain deals. We want you to make changes that will reduce that risk premium so that we can go back to the point estimate.”

I was completely unaware that this discounting was going on. If it’s going on for something as small as just having fewer people collecting in the sample areas for the CPI, the entire risk premium is just growing around all parts of the statistical system. I think the costs right now of having a poor statistical system are substantial, and it could be holding back a lot of investment.

I just think if we make these changes, that will be the first thing you’ll sense as an economist. You’ll sense, oh, where did that increased investment come from? Where did that direct foreign investment come from? Where did that deal that shouldn’t have happened in Montana come from? It’s little things that we do to improve our statistics, like little things we do to improve our fiscal outlook, that make a huge difference.

Beckworth: We believe in capitalism. We believe in markets. We believe in economic growth. We want it to flourish. Let’s make this happen. All the listeners out there on Capitol Hill, the administration, White House, let’s fund this endeavor and let markets flourish.

Beach: I’m helping or chairing two committees of the American Statistical Association, one of which will publish its plan for how to modernize the whole system, probably in next May or early June. Then there are five other funded groups from the Brookings Institution to some other think tanks that are doing similar sorts of planning, and their proposals will come out about how to save the statistical system. Congress will have plenty of material to look at.

I just think if we don’t, then we’ll be in a position someday of having to say, “Well, the jobs report, which is supposed to come out on Friday, maybe next week, the unemployment rate, that’s a pretty good idea since 1947, but we just don’t have the survey sample for it this month. Sorry, we’ll do it next month.” It won’t ever get that bad, but parts of it will. Parts of those surveys will get that bad. We won’t be able to publish because of insufficient sample.

Beckworth: Bill, this is a great call to action. Again, I encourage our listeners, take heed and follow Bill’s words of wisdom here. That is our show. Our guest today has been Bill Beach. Bill, thank you so much for coming on the program.

Beach: Thank you, David. It’s my pleasure entirely.

Beckworth: Macro Musings is produced by the Mercatus Center at George Mason University. Dive deeper into our research at mercatus.org/monetarypolicy. You can subscribe to the show on Apple Podcasts, Spotify, or your favorite podcast app. If you like this podcast, please consider giving us a rating and leaving a review. This helps other thoughtful people like you find the show. Find me on Twitter @DavidBeckworth and follow the show @Macro_Musings.