Bureau of Labor Statistics (BLS): What It Is and How It Works

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The Bureau of Labor Statistics (BLS) is the principal federal statistical agency for labor economics in the United States. It sits inside the U.S. Department of Labor and collects, analyzes and publishes data on employment, unemployment, wages, prices, productivity and workplace conditions. Its best-known releases include the monthly jobs report, which carries the unemployment rate and nonfarm payrolls, and the Consumer Price Index (CPI), the most widely cited measure of U.S. inflation.

What the BLS Does

The bureau publishes statistics on three broad areas: the labor market, prices and productivity. Releases go out at scheduled times so no group gets the numbers early, and each comes with documentation explaining how the figures were produced.

The main releases fall into a few families:

• Consumer Price Index (CPI): tracks the prices urban consumers pay for a fairly fixed basket of goods and services; the standard gauge of inflation and the cost of living.
• Producer Price Index (PPI): measures the average selling prices domestic producers receive for their goods and services.
• Import/Export Price Indexes (MXP): follow price changes for goods and services the U.S. buys from and sells to other countries.
• Current Population Survey (CPS): the monthly “household survey,” run jointly with the Census Bureau, and the source of the national unemployment rate and most U.S. labor force statistics.
• Current Employment Statistics (CES): the “establishment” or payroll survey of employers, which produces the nonfarm payroll count, average hourly earnings and average weekly hours.
• Job Openings and Labor Turnover Survey (JOLTS): reports job openings, hires and separations.
• Local Area Unemployment Statistics (LAUS): unemployment and labor force estimates for states, metro areas and counties.
• National Compensation Survey (NCS): wages and benefits across industries and occupations, including the Employment Cost Index.

The BLS also publishes productivity and labor cost measures, workplace injury statistics, consumer spending data and the Occupational Outlook Handbook, a career reference on pay, job duties and projected demand for hundreds of occupations.

How the BLS Collects Data

The bureau relies on surveys, censuses and administrative records. Household surveys such as the CPS ask a sample of households whether each working-age member worked, looked for work or stayed out of the labor force. Employer surveys such as the CES and JOLTS ask businesses and government agencies about payrolls, hours, earnings, openings and turnover. For price indexes, BLS staff record prices of specific items at stores, service providers and online sellers, while producers report the prices they receive.

Administrative records fill in the rest. The Quarterly Census of Employment and Wages (QCEW), for example, is built from the reports employers file with state unemployment insurance programs, so it covers nearly all jobs rather than a sample. The BLS uses it as a benchmark to correct the payroll survey once a year.

Interpreting BLS Numbers

Most BLS headline figures are estimates from samples. Turning them into published numbers involves three steps that matter when reading a report:

1. Weighting. Sample responses are scaled up to represent the whole population or economy.
2. Seasonal adjustment. Regular calendar patterns, such as holiday hiring or summer jobs for students, are removed so month-to-month changes reflect underlying trends. Most headline figures are seasonally adjusted; the unadjusted series are published too.
3. Revision. Later responses and benchmark data update earlier estimates. Payroll figures are revised in the two following monthly reports and again in an annual benchmark revision.

Two formulas sit behind many headlines. The unemployment rate is:

Unemployment rate = Unemployed ÷ Labor force × 100

The labor force counts people who are employed plus people who are unemployed, meaning they have no job, are available to work and actively looked for work in the past four weeks. People who are not looking are outside the labor force and do not raise the rate.

Inflation from a price index is the percentage change in the index level:

Inflation rate = (Index this period − Index a year earlier) ÷ Index a year earlier × 100

Hypothetical example. Suppose a survey estimates 160 million people in the labor force, of whom 6.4 million are unemployed. The unemployment rate is 6.4 ÷ 160 × 100 = 4.0%. Suppose also that a price index stood at 300.0 twelve months ago and stands at 309.0 today. Annual inflation is (309.0 − 300.0) ÷ 300.0 × 100 = 3.0%. These numbers are illustrations, not actual BLS readings. For the full CPI methodology, see what the Consumer Price Index measures.

Why the BLS Is Important

Policymakers use BLS figures to judge the state of the economy, and the Federal Reserve weighs employment and inflation data when it sets interest rate policy. The data has also supplied evidence in policy debates, including arguments over raising the minimum wage.

Some uses are written into law or contracts. Social Security cost-of-living adjustments are tied to the CPI-W, a CPI version for urban wage earners and clerical workers. Federal income tax brackets are indexed to a version of the CPI. Many leases, wage agreements and supply contracts include escalation clauses based on CPI or PPI. Inflation-protected Treasury securities (TIPS) adjust their principal using the CPI-U.

Businesses use wage data to set pay and economists use it to build forecasts. Market participants watch the release calendar closely because a jobs or CPI number that differs from expectations can shift interest rate expectations and, through them, bond yields and stock indexes such as the S&P 500.

Example of a BLS Report

A typical BLS release, such as JOLTS, opens with a short summary of the headline numbers for the reference month (job openings, hires and total separations) and whether each changed meaningfully from the prior month, followed by notable moves by industry or region. Summary tables follow, broken out by industry, establishment size and region, usually in both levels and rates. Charts and maps can follow a different schedule: state-level JOLTS data, for instance, is released separately and covers an earlier month than the national report.

Every release ends with technical notes on the data source, sample, survey method, coverage and reliability. Scope matters: nonfarm payroll figures exclude farm workers, the self-employed and private household employees. A reader who skips the technical notes can misjudge what a number represents.

Limitations of BLS Data

Sampling error. Survey estimates carry a margin of error. A monthly payroll change can look positive or negative while falling within the range that sampling variation alone could produce.

Response rates. Surveys depend on households and businesses answering. Lower response can make estimates less precise and lead to larger revisions.

Coverage choices. The CPI reflects spending by urban consumers, not every household, and its basket may not match any one person’s spending. The household and payroll surveys measure different things, so they can move in different directions in the same month.

Method debates. Adjustments for product quality changes and consumer substitution between goods are long-running sources of debate about whether the CPI overstates or understates the cost of living.

BLS vs. Related Agencies and Measures

• BLS vs. Department of Labor: The BLS is one agency within the DOL. The department also enforces labor standards, but the bureau’s role is statistical.
• BLS vs. BEA: Gross domestic product and the Personal Consumption Expenditures (PCE) price index come from the Bureau of Economic Analysis in the Commerce Department, not the BLS. The Fed’s 2% inflation target is defined using PCE inflation, while the CPI is the BLS measure most people quote.
• BLS vs. Census Bureau: The Census Bureau runs the decennial census and conducts the CPS fieldwork. The BLS analyzes and publishes the labor force results.
• Household vs. payroll survey: The household survey counts employed people and yields the unemployment rate. The payroll survey counts jobs on employer payrolls, so a person with two jobs counts twice there and once in the household survey.
• Jobless claims: Weekly initial unemployment insurance claims are published by the DOL’s Employment and Training Administration, not by the BLS.
• Headline vs. core CPI: Core CPI excludes food and energy prices, which tend to be volatile, to give a clearer view of underlying inflation.

History of the BLS

Congress created the bureau in 1884 as the Bureau of Labor within the Department of the Interior, with a mandate to collect information on labor and economic conditions. Its first commissioner, Carroll D. Wright, shaped its focus on impartial fact-finding. It became an independent Department of Labor without cabinet rank in 1888 and was folded into the new Department of Commerce and Labor in 1903. When that department split in 1913, the bureau moved to the new cabinet-level Department of Labor as the Bureau of Labor Statistics, and it has remained there since.

FAQs

The Bottom Line

BLS data matters to investors, workers, retirees and businesses because it drives Fed policy, Social Security adjustments, tax brackets and many contract escalation clauses. Readers should treat headline figures as sample estimates that are seasonally adjusted and revised later. Checking the technical notes and margins of error helps avoid reading too much into a single month's change.