Housing inflation data mystery deepens as government says email to ‘super users’ was a ‘mistake’

“The staff member was replying to multiple inquiries for information about the CPI for rent and OER,” Jeffrey Hill, associate commissioner at the BLS, said in a webinar Thursday. He was referring to owners’ equivalent rent, which was a large factor behind the robust reading of the January consumer price index.

“To expedite a response, the employee blind-copied a number of requesters and referred to them as super users — this was a mistake,” Hill said, adding that the webinar will be posted on the BLS website and YouTube channel as soon as possible.

The BLS decided to host the webinar after this email, sent on Feb. 27, suggested the surge in OER at the start of the year — which was the biggest since April 2023 and had left analysts puzzled — was due to a shift in underlying calculations, rather than just a rise in prices. One recipient said the BLS tried to retract it and told them to disregard its contents.

Later in the week, the BLS attempted to quell the confusion with a notice on its website, revealing information normally kept secret: the change in how much weight single-family detached homes were given within OER, compared with multifamily units. However, economists still weren’t satisfied.

The email “suggested that the second component unit-level weight assigned to each unit was the primary cause,” of the advance in OER, BLS Assistant Commissioner Rob Cage said on the call. “While this is part of the story, it is not the complete story.”Play Video

Failed Adjustments

Cage went on to explain in very technical detail how the rent measure is calculated and the adjustments BLS makes — which fail often since the BLS’s sample isn’t totally representative of the housing market. The sample doesn’t have enough single-family detached homes, which most homeowners live in, compared to apartments.

He said it’s not clear how the OER measure will read for the rest of the year given the changes. “You can expect some volatility,” Cage said.

It’s “pretty unusual” for the agency to offer details on methodology that wasn’t previously publicly available, and such information has key implications for the Federal Reserve, said Ed Al-Hussainy, a rates strategist at Columbia Threadneedle Investment.

“It speaks to how important this year’s methodology and weight changes are for policymakers and market participants,” Al-Hussainy said. “The persistence of housing inflation is likely to play a key role in the start and the velocity of the Fed’s rate-normalization strategy this year.”