Jobs Data Integrity at Risk in Prolonged U.S. Shutdown
The integrity of U.S. data on joblessness, one of the main measures of the strength of the economy, is at risk the longer some government agencies remain closed, according to former Labor Department officials.
Workers at the Census Bureau this month would normally begin canvassing households, starting on Oct. 13, to ask people if they were employed during the previous week. A delay caused by the partial government shutdown means Americans will be reaching further back into their memories to come up with answers, raising the possibility that some responses used to derive the unemployment rate will be inaccurate.
“I’m really worried not just about possibly missing data, but I’m worried about muddying the signal even after we are back to collecting the data,” Katharine Abraham, commissioner for the Bureau of Labor Statistics from October 1993 to October 2001, said in a telephone interview. “If you collect the information too late, you know the information is not going to be reliable.”
Any suspicion about the dependability of the figures and the likely economic damage caused by an extended shutdown gives Federal Reserve officials reason to delay trimming their $85 billion-a-month in bond purchases, said Dean Maki, chief U.S. economist at Barclays Plc in New York, and a former Fed researcher. Central bankers have cited the unemployment rate as one of the thresholds they’ll use to determine when to stop pumping more money into the economy and eventually raise their benchmark interest rate.
“The Fed is making a big point that it’s data-dependent, but data dependence only works if there are data releases coming out,” Maki said in an interview. “The data vacuum could push the Fed to wait. It could conceivably affect a December taper if the shutdown were to last long enough.”
Stocks rose, after the benchmark index’s biggest two-day slump since June, amid speculation lawmakers will reach a deal to raise the debt ceiling. The Standard & Poor’s 500 Index increased 0.1 percent to 1,656.4 at the close in New York.
Census workers query about 60,000 households a month, either in person or by telephone, to find out how many family members 16 years or older were working or looking for a job during the week that includes the 12th of the month, making the October reference period this week.
Staff typically begins contacting Americans on the Sunday after the survey week ends, in this case Oct. 13. The information is then shared with BLS analysts, who use it to calculate the size of the workforce and the jobless rate.
Quality issues aside, once the Census Bureau reopens, it will be able to gather the information quickly, said Abraham, who was the BLS commissioner during the last government shutdown that lasted from Dec. 15, 1995 to Jan. 6, 1996.
“The Census Bureau folks were just amazing” the last time around, said Abraham, now a professor of economics and survey methodology at the University of Maryland in College Park. “They are so committed to getting out and collecting the data.” The amount of time it takes to gather the information usually lasts a little more than a week, she said.
The October data aren’t the only concern for Keith Hall, the BLS commissioner from January 2008 to January 2012, and now a senior research fellow at the Mercatus Center at George Mason University in Fairfax, Virginia.
Analysts from the BLS probably completed most of the work on September household figures before their offices closed Oct. 1, he said in a telephone interview. That means some at the agency already know last month’s jobless rate, said Hall. The former head of the BLS recalled wandering into the secure area, where the analysts crunch the numbers, days before a release to get an early read.
“There are people running around right now who know what the unemployment rate was for September,” Hall said. The report, originally scheduled to be released on Oct. 4, has been postponed indefinitely.
The BLS website says that during the shutdown, the agency will not collect data, issue reports or respond to public inquiries.
Research by economists at Goldman Sachs Group Inc. in New York last year showed the jobless rate and payroll figures were among the three pieces of economic data that had the biggest impact on stock and bond markets. The other was the Institute for Supply Management’s factory index.
There is precedent for releasing economic reports out of concern for a data breach. In a memo detailing contingency plans for the government shutdown, BLS Commissioner Erica Groshen cited the 1995 lapse in appropriations, which she said “occurred after the consumer-price index estimates had been prepared but before they were released to the public.”
“The risk of disclosure of the CPI data during a shutdown was deemed to be unacceptable and releasing the CPI report was deemed to be part of the orderly cessation of activities,” she said in the memo. As a result, the Office of Management and Budget authorized retaining some staff to release the data.
Fed Chairman Ben S. Bernanke said in June the central bank would probably end its bond-buying program when the jobless rate was around 7 percent. Policy makers had pledged since December they won’t consider raising the interest rate on loans between banks as long as unemployment exceeds 6.5 percent. The rate unexpectedly dropped to a more than four-year low of 7.3 percent in August as Americans left the labor force, the last available figures showed.
The BLS also surveys employers representing almost 560,000 worksites to calculate changes in payrolls, hours and earnings. Those results will probably be less subject to error because of the government shutdown, Abraham and Hall agreed. Businesses and government agencies will just review tax records for the pay period covering the 12th of the month, taking guesswork out of the equation, they said.
Nonetheless, a delay may still have consequences, Abraham said. Employers are prompted to respond online, something they may not be able to do if government websites are shut down, she said.
Concern over the soundness of economic data won’t go away once the government reopens, said Abraham. The need to cut federal spending will keep pressure on statistical agencies to trim budgets and take shortcuts.
“I’m worried about this acute problem of the shutdown, but I’m also worried about this chronic problem of the cuts in funding,” said Abraham. “These cuts are undermining the quality of the data.”
To contact the editor responsible for this story: Christopher Wellisz at email@example.com