FOIAengine: Traders Had an Inside Track on the CPI. Journalists Used FOIA to Expose It.
Today’s story is about the Bureau of Labor Statistics, which calculates the all-important Consumer Price Index.
It’s also a cautionary tale about how a select few on Wall Street got special insider access at the secretive BLS – and how journalists exposed it, likely putting an end to the practice, with the help of the Freedom of Information Act.
The BLS affair is significant for two reasons: First, because special access to CPI data could give traders an unfair edge. And second, because FOIA requests from journalists revealed there was a broader scope to the special access than BLS first acknowledged.
Although the 2,100 economists, statisticians, and others at BLS toil in an anthill-sized agency within the Labor Department – they’re a mere 7/100ths of one percent of the federal workforce – the monthly BLS measure of inflation wields outsized influence over some of the most important things in everyone’s life: how much money we have, and how we spend it.
Even people who don’t know anything about the BLS usually know what “CPI” stands for, because inflation affects everyone. The monthly CPI has a direct bearing on payrolls, rent costs, investments, and anything else that has a dollar sign in front of it.
And the CPI has been front and center since 2021, when inflation took off. The CPI calculation is so important to economic decision making that the BLS keeps its monthly inflation report secret from everyone, even the White House and the Federal Reserve, until the moment the numbers hit the tape and the markets start gyrating.
Total secrecy.
Well, almost total secrecy. Recently, an email leaked out of the BLS, revealing that there was a select group of Wall Streeters called “Super Users” who had an inside track on how the BLS makes its CPI calculations. FOIA requests that turned up in FOIAengine sent an early and unequivocal signal of what was going on, and of the firestorm to come.
As the time for each CPI announcement nears, economists and analysts at some of Wall Street’s biggest institutions start calculating what they think the BLS-issued inflation numbers will be – and then the big players begin trading. Like anything on Wall Street, it’s a risky game. Traders make bets on huge batches of securities that are tied to inflation or interest rates.
Since the BLS has been at this for about 140 years, its basic methodology isn’t all that much of a secret. But an unexpected number, even if it’s just a hundredth of a decimal point higher or lower than the consensus forecast, can swing markets wildly. Because the CPI is a major influence on Fed policy, there’s big money to be made, and even subtle shifts can move markets. It’s a game Wall Street understands.
But traders were flummoxed in mid-February, when the BLS’s regular monthly CPI announcement revealed that inflation was running significantly hotter than Wall Street expected. This was also a big surprise to the White House, the Fed, and American consumers who were getting used to the idea that inflation was moderating.
On Wall Street, those who crunch the numbers were gobsmacked. They could tell something was not right. The big inflation driver was an unexpected rise in housing costs, so that’s what the economists focused on. Several emailed contacts at BLS, seeking to unravel the mystery.
Soon, they received their answer. In an email addressed to “Super Users,” a BLS employee explained that the agency had “materially” changed the weighting of single-family detached homes beginning in 2024. “All of you searching for the source of the divergence have found it. No additional information related to this question will be disseminated. We do not do diagnostic analysis of microdata.”
Reaction was instant. “In the minutes after it came out,” New York Times economics reporter Ben Casselman later wrote, “analysts at investment banks, hedge funds, and other asset managers scrambled to get a copy and to figure out how to trade on it.”
Casselman later revealed that there were about 50 “Super Users,” a tiny but influential universe of private-sector economists and analysts. He said the list included people from Barclays, Nomura, BNP Paribas, Millennium Capital Partners, Brevan Howard, and Citadel. Bloomberg filled in a few more “Super User” names: JPMorgan Chase and BlackRock.
Ninety minutes after that first email, the “Super Users” got a second email from BLS, asking them to disregard the earlier one. Later still, a senior BLS official called the whole thing “a mistake” and tried to walk it back in a webinar that cast doubt on the BLS economist’s original explanation about the housing bump. The official also denied there was ever a group of Wall Street “Super Users” who had special access to BLS and its data.
But the genie wasn’t going back into the bottle. Soon, FOIA requests were coming in.
The Times’ Casselman had already pinpointed the anomalous CPI housing data in a lengthy explainer on February 26. That may have prompted the BLS employee to send out his explanation to the “Super Users” the following day.
By the day after that, February 28, Bloomberg was on to the fact that someone within BLS had emailed “a group of analysts about a key factor behind the jump in January’s consumer price index before trying to take it back, raising questions about the validity of the figures.”
Bloomberg, in other words, by now knew about the “Super Users.”
According to PoliScio Analytics’ competitive-intelligence database FOIAengine, which tracks FOIA requests in as close to real-time as their availability allows, the first FOIA request about Super Users was logged by BLS soon thereafter, on March 1. The FOIA request came not from the news media, but rather from Ed deHaan, a professor at the Stanford Graduate School of Business. DeHaan’s LinkedIn profile shows him to be an accounting and financial reporting watchdog.
Bloomberg kept the story going. There was a Matt Levine opinion column on February 29 that called the BLS’s behavior “weird.” Then came another opinion piece by Bloomberg columnist Jonathan Levin on March 1 titled “One Good Footnote Is Worth a Million CPI Guesses.” That was followed by a lengthy Bloomberg explainer about the furor on March 7.
By then, Reade Pickert, Bloomberg’s deputy Federal Reserve team leader, had also weighed in with two FOIA requests, both logged by the BLS on March 6. Pickert’s requests were broadly worded. One FOIA request sought access to “all records, such as emails, text messages, memos, analyses, briefing notes, talking points, presentation material, and meeting minutes, referencing or referring to the group of data users often called ‘Super Users’ since Jan. 1, 2021.” The second, according to the BLS logs in FOIAengine, sought “all records, such as emails, text messages, memos, letters, analyses, studies, directives, briefing notes, talking points, presentation material, and meeting minutes from Feb. 9, 2024 to March 6, 2024 including or referencing emails sent from the BLS.”
Next came two requests, logged on March 11 and 12, from the Times’ Casselman, whose explanatory reporting on the CPI and its impact on the markets is the gold standard. Casselman’s first request asked for “Communications with Data Users” – in other words, the Super Users. His second request asked for “all emails sent by [the] BLS employee involved.” Casselman appears to have identified the employee by name, although the name is not included in the BLS logs and neither Bloomberg nor the Times has named him. (Bloomberg has been referring to the employee by a male pronoun, and we are doing the same.)
Both Bloomberg and the Times obtained, through those FOIA requests, at least some of what they were looking for. And the results spoke for themselves.
The Times’ story hit first, on April 5. Casselman, sharing a byline with Jeanna Smialek, asserted that BLS hadn’t been forthright in its earlier denials.
“At the time,” the two wrote, “the Bureau of Labor Statistics said the email had been an isolated ‘mistake’ and denied that it maintained a list of users who received special access to information. But emails obtained through a Freedom of Information Act request show that the agency — or at least the economist who sent the original email, a longtime but relatively low-ranking employee — was in regular communication with data users in the finance industry, apparently including analysts at major hedge funds. And they suggest that there was a list of Super Users, contrary to the agency’s denials.” (BLS still denied there was an official list.)
Bloomberg came out with its story, also based on FOIA records, on April 9. The piece fleshed out more details about the Super Users, and concluded: “The latest revelation is likely to prompt a deeper look at the dissemination of economic information that has implications for how major assets trade, as well as Federal Reserve policy.”
To see all 224 requests made to BLS since 2022, and to search over 230,000 recent FOIA requests to other federal agencies, log in or sign up to become a FOIAengine user.
FOIAengine access now is available for all professional members of Investigative Reporters and Editors, a non-profit organization dedicated to improving the quality of journalism. IRE is the world’s oldest and largest association of investigative journalists. Following the federal government’s shutdown of FOIAonline.gov last year, FOIAengine is the only source for the most comprehensive, fully searchable archive of FOIA requests across dozens of federal departments and agencies. FOIAengine has more robust functionality and searching capabilities, and standardizes data from different agencies to make it easier to work with. PoliScio Analytics is proud to be partnering with IRE to provide this valuable content to investigative reporters worldwide.
Next from FOIAengine: What does the American Accountability Foundation want to know – and why?
John A. Jenkins, co-creator of FOIAengine, is a Washington journalist and publisher whose work has appeared in The New York Times Magazine, GQ, and elsewhere. He is a four-time recipient of the American Bar Association’s Gavel Award Certificate of Merit for his legal reporting and analysis. His most recent book is The Partisan: The Life of William Rehnquist. Jenkins founded Law Street Media in 2013. Prior to that, he was President of CQ Press, the textbook and reference publishing enterprise of Congressional Quarterly. FOIAengine is a product of PoliScio Analytics (PoliScio.com), a new venture specializing in U.S. political and governmental research, co-founded by Jenkins and Washington lawyer Randy Miller. Learn more about FOIAengine here. To review FOIA requests mentioned in this article, subscribe to FOIAengine.
Write to John A. Jenkins at [email protected].
