Bureau of Labor Statistics Reduces Data Collection, Raising Concerns for Social Security COLA Accuracy

The Bureau of Labor Statistics (BLS) has reduced its data sample collection, which could impact the accuracy of inflation numbers and potentially result in a smaller Cost-of-Living Adjustment (COLA) for Social Security beneficiaries. The BLS has stopped collecting data from three cities due to staffing shortages, raising concerns about the quality of recent and coming inflation reports. The formula to determine the COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), and a smaller COLA could leave retirees with less buying power.

The Bureau of Labor Statistics (BLS) has recently announced a reduction in its data sample collection, a move that could potentially impact the accuracy of inflation numbers and, consequently, the Cost-of-Living Adjustment (COLA) for Social Security beneficiaries. This reduction, stemming from staffing shortages, involves the cessation of data collection from three cities, raising concerns about the reliability of recent and upcoming inflation reports.

The COLA is a crucial component of the Social Security system, providing a yearly adjustment to benefits to help seniors keep up with rising costs of living. The formula for determining the COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures the increase in the price of a theoretical basket of goods weighted for the average spending of a working-age city dweller, encompassing everything from housing to groceries to clothing to recreation.

With the BLS reducing its data collection, there is a risk that the CPI-W could be less accurate, potentially leading to a smaller COLA. This would have significant implications for retirees who rely on Social Security benefits, as a smaller COLA would mean less buying power and a harder time keeping up with the rising costs of housing, healthcare, and groceries.

Historically, the COLA has been determined by the average year-over-year increase in the CPI-W for the third quarter of the year. The BLS typically releases the September CPI-W numbers in early October, allowing the Social Security Administration to announce the following year's COLA. Given that it is already July, looking at recent historical data can provide insights into what to expect for next year's COLA.

Economists have warned that tariffs could cause an inflation surge, but as of July, there is little evidence of that in economic data despite significant tariffs already collected by the Treasury [1]. The tariffs are paid by U.S. importers, such as Walmart and other retailers, when goods cross the border into the U.S. It takes time for higher prices to work their way into the system and influence overall price levels in inflation measures. The mystery of why tariffs haven't yet shown up in the inflation numbers is a topic of debate among economists, with various theories ranging from the timeframe being too short to businesses stockpiling inventory [1].

While the immediate impact of the BLS data reduction on the COLA is uncertain, the potential for a smaller adjustment should be a concern for Social Security beneficiaries. The BLS's data collection reduction highlights the importance of maintaining accurate and comprehensive data collection for reliable economic indicators.

References:
[1] https://fortune.com/2025/07/13/who-pays-tariffs-inflation-trump/
[2] https://www.nasdaq.com/articles/wondering-what-expect-next-years-social-security-cola-heres-what-history-says-could-be-1