>Why do people use CPI instead of labor

How would one differentiate real and nominal wage/salary increases?

>housing

Shelter expenditures presently constitute 33.2% of the CPI basket.

>housing or stock prices

Asset prices are only very loosely associated with inflation.

>On a similar note, why would anyone trust the federal reserve's numbers given how the federal reserve has lied in the past?

lol. (Also, BLS calculates CPI, not the Fed.)

People actually in the field don't trust the CPI number as gospel. We all know its shortcomings. However, the CPI print does move the market, so while it is good to keep track of the real inflation number by our own methodologies (which generally involves a different weighing scheme since the real CPI already accounts for most consumer products), you hardly trade on it.

For example, people have been shouting that inflation has already screamed past the Federal Reserve's target (of 2%) if the weight to medicare costs was increased to reflect the true spending of an average consumer(i.e. medicare is a bigger % of expenses of the avg consumer than reflected by the CPI weight). However, the fed refutes that argument and says that its current measure isn't perfect but neither is the solution proposed.

Currently they are looking at something called the Stock Watson model to see if it provides a better gauge. So by no means is it a settled science.

CPI is computed by the Bureau of Labor Statistics, not the Federal Reserve. As for why labor, housing, and stock prices aren’t included in the CPI, I would guess because: labor is sticky and are only indirectly related to consumption via pricing, housing is a durable good (people don’t buy it week to week nor does rent change with such frequency), and stock prices don’t affect consumption.

You could make the argument that a better inflation indicator could take these into account, but it wouldn’t be the CPI then.

>...housing is a durable good (people don’t buy it week to week nor does rent change with such frequency),

Rent (and "owner occupied rents") are a part of the bundle used in calculating the CPI.

The owner occupied rent is a calculation of what the rent would be if the owner had paid rent on the house they own. For some background on this:

https://www.philadelphiafed.org/-/media/research-and-data/pu...

It is easy to calculate. A gallon of milk today is essentially the same as a gallon of milk 100 years ago. Same with gasoline and cans of beans.

That's not accurate. CPI adjusts both in basket composition and the more nebulous hedonic quality adjustment. The TV you bought for $500 today is not the same as the one you bought for an equivalent price 30 years ago.

it is actually very interesting to see the variations in CPI baskets.

I recall, for example, when the standard basket in Italy used to contain Sambuca[0], and was updated in the '00s to instead include Limoncello[1] due to changed consumer habits.

[0] Anise-flavoured liquor, often added to coffee https://en.wikipedia.org/wiki/Sambuca

[1] Lemon-zest flavoured liquor https://en.wikipedia.org/wiki/Limoncello

Much of what people label as inflation is either what is better known as "Baumol cost disease", or instead the market-distorting effects of near-invisible tax-evading overseas billionaires searching for safe assets and trampling your property market in the process.